The department of Economy and Finance of Peru has made some modifications to the country’s existing Income Tax Regulations which are effective from 7 November 2013.
According to the amendments a joint responsibility will be imposed on a Peruvian entity for the payment of income tax on the direct and/or indirect transfer of shares to a nonresident entity if they were related entities for the prior 12 months from the disposal date.
For entities to be considered as related parties the nonresident entity will have to own more than 10% of the equity of the resident entity directly and/or indirectly or through a third party. The entities would be related parties if both have a common shareholder with 10% of the equity of each entity. They would also be deemed as related parties if they hold common directors, administrators, managers or any other executive with powers of attorney related to financial, commercial and/or operative agreements.
The entities will be related parties from the time of the administrative decision through the end of the following tax year.
According to the new rule the cost basis of the transferred foreign shares will be restricted to the percentage of equity the nonresident seller has in the Peruvian entity which is going to be indirectly transferred.
Also a new procedure to distribute passive income produced in MILA by a CFC individual resident owner has been established.
