The Peruvian Government enacted Legislative Decree 1663 on 24 September 2024, amending the Income Tax Law to introduce rules for determining the fair market value (FMV) of non-listed securities in related-party transactions. This closes a gap in the law, which previously only addressed transactions between non-related parties.
The new rules will come into effect on 1 January 2025.
The decree outlines four methods for calculating FMV: discounted cash flow, comparable multiples, equity value, and appraisal.
However, the discounted cash flow method cannot be used if the transferor owns less than 5% of the Peruvian entity’s shares or if the entity’s net income from the previous year is below 1,700 Peruvian tax units (approximately USD 2.3 million).
Any FMV determined through these methods must be supported by a technical report, which must be provided to the Peruvian Tax Authority upon request during a tax audit.
