This content is from: Local Insights

Stock options in Peru

Sandro Núñez
Stock options are a kind of option right granted to employees. They allow those employees, within a specified term, to acquire equity in the employing company at a price agreed on the date of the call option.

Stock options are created with the purpose of securing an employee's long-term commitment to the company, either as a part of a compensation plan, as a standalone agreement with a key employee, or as part of an M&A transaction where the selling parties intend to stay as part of the company's management.

In Peru, there is no specific regulation governing stock options. However, although the grant of such rights is not forbidden by law, certain points need to be analysed from a tax and labour standpoint when considering their implementation.

The key issue under Peruvian law is that once stock option rights are exercised, the benefits they carry may be considered part of the applicable employee's remuneration package. This means they could be considered as part of the basis for calculation of the labour, social security and tax (income tax) obligations payable by the employer with respect to that employee.

The consequences for employers who consider implementing stock options in Peru can be significant, in terms of payment obligations to employees (or purchasers in the case of M&A transactions). These options should, therefore, be carefully analysed from a labour and tax perspective in each individual case.

Sandro Núñez

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