Peru establishes carryforward rule for losses incurred during fiscal year 2020

08 May 2020

The legislative decree extends the period for which 2020 losses may be carried forward to offset 100% of profits.

On May 8, 2020, Peru's Executive Power issued Legislative Decree 1481, which establishes a special rule for carrying forward losses incurred during fiscal year 2020. The legislative decree responds to the COVID-19 crisis.

Generally, a Peruvian company may carry losses forward in one of two ways:

System A: Losses incurred in a year may be carried forward to offset 100% of profits obtained in the following four years, beginning with the year following the year in which the losses are reported.
System B: Losses incurred in a year may be carried forward indefinitely to offset 50% of profits in future years.

According to Legislative Decree 1481, companies that opt for System A may carry losses incurred in tax year 2020 forward for five years instead of four, counted from tax year 2021.

Legislative Decree 1481 will go into effect on May 9, 2020.

———————————————

Contact Information
For additional information concerning this Alert, please contact:

Ernst & Young Asesores S.C.R.L, Lima
• Roberto Cores (roberto.cores@pe.ey.com)
• Ramón Bueno-Tizón (ramon.bueno-tizon@pe.ey.com)
Latin American Business Center, New York
• Ana Mingramm (ana.mingramm@ey.com)
• Pablo Wejcman (pablo.wejcman@ey.com)
• Enrique Perez Grovas (enrique.perezgrovas@ey.com)

Document ID: 2020-1257