This content is from: Local Insights

Indirect sale of stocks and shares

Jose Talledo Vinces

Law No 29663, published on February 15 2011, amended the Peruvian Income Tax Law to include, as taxable income from Peruvian source, any capital gain that non-domiciled shareholders obtain from the indirect transfer of ownership of the shares or participations issued by companies domiciled in Peru.

This indirect transfer will be deemed to happen if:

in any of the 12 months previous to the transfer, the market value of all direct or indirect ownership in companies domiciled in Peru represent 50% or more of the market value of all the shares issued by the non-domiciled company (regardless of the fact that only a minority part or the control of the Peruvian company is transferred); and

the non-domiciled company which owns the shares issued by the Peruvian company is domiciled in a "tax haven".

Peru-domiciled companies must communicate to the Peruvian tax authority, the Superintendencia Nacional de Administración Tributaria (Sunat), issues related to transfers and cancellation of stocks, as well as indirect sales.

If the transferor is not domiciled in Peru, the Peruvian company issuer of the shares that are indirectly transferred will be jointly liable before Sunat for the payment of Peruvian income tax levied on the capital gains derived from the direct transfer of the shares issued by the non-domiciled company (which resulted in the indirect transfer of ownership of the shares or participations issued by companies domiciled in Peru).

There are some problems regarding this new regime. First, in an indirect transfer, transfer of control should be verified in order for capital gains to apply. Second, the market value of stocks of non-domiciled companies may be conformed by investments in other countries different to Peru.

Therefore, the aforementioned 50% value rule should only take in account Peruvian wealth. Third, there is no rule to determine the tax basis of the shares issued by the non-domiciled company which are going to be transferred directly. Finally, the liability rule is too general and should be made more precise. If it is not, the application of the rule may affect the domiciled company and its stockholders.

Jose Talledo Vinces

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