The Supreme Decree incorporates into the regulations the amendments made to the Real Estate Investment Trust (REIT) Law. Taxpayers should review the changes to determine how their operations are affected.

On December 30, 2018, Peru's Minister of Economics issued Supreme Decree 336-2018-EF, which amends the regulations on the tax treatment of REITs in Peru. The regulations now conform to the provisions that were amended in the REIT Law. The Supreme Decree went into effect on January 1, 2019.

Background

In Peru, the REIT tax regime applies to trusts and funds that invest in real estate and meet several regulatory requirements.

Taxpayers may transfer real property to REITs and have the tax deferred. They will be liable for capital gains tax and real estate transfer tax once the REIT property is transferred to a third party or when the certificates of participation are transferred, whichever occurs first. Special provisions have been established for determining the tax basis and the fair market value of the real estate.

Income from a property lease or another form of assignment to use the real estate is subject to: (1) a 5% withholding tax on the gross income of nonresident individuals; and (2) a 24% withholding tax on the gross income of nonresident entities.

Also, under the REIT regime, a tax exemption applies for capital gains from January 1, 2016 through December 31, 2019, for REIT certificates traded on the Lima Stock Exchange. If a REIT certificate is not traded on the Lima stock exchange, a 5% rate applies to the capital gains resulting from the transfer of a certificate through the Lima Stock Exchange.

Supreme Decree 336-2018-EF

The Supreme Decree incorporates into the regulations the provision establishing that the withholding tax for leases or another form of assignment to use the real estate is 5% of gross income.

The Supreme Decree also incorporates into the regulations the provision allowing taxpayers to sell part of the certificates of participation, resulting in deferred profit on the portion of the certificates sold.

Additionally, the Supreme Decree establishes that the procedure for allocating income other than income from leasing or another form of assignment for the use of real estate is the procedure contained in the rules for investment funds and trusts established in the Peruvian Income Tax Law and its regulations.

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