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January 4, 2023
2023-0017

Peru extends temporary capital gain tax exemption for securities transferred through Lima Stock Exchange subject to certain restrictions

  • The temporary exemption from capital gain tax (CGT) for transfers of securities carried out through the Lima Stock Exchange (LSE) has been extended until 31 December 2023 and additional requirements have been included to qualify for the exemption.

On 30 December 2022, Peru's President enacted Law 31662 amending the temporary tax exemption for capital gains derived from the transfer of securities through the LSE.

Background

In 2015, Peru enacted Law 30341, which temporarily exempts from CGT the transfer of securities listed and traded through the LSE until 31 December 2022, if the below requirements are met:

  1. Securities must be listed and traded through the LSE.
  2. In any given 12-month period, the taxpayer and its related parties must not transfer more than 10% of the shares issued by the company whose shares are sold. In the case of ADRs and GDRs, it should be considered the underlying shares.
  3. Securities should meet the liquidity threshold to be considered as "stock market securities."

Law 31662

Law 31662 establishes new conditions, in addition to the abovementioned requirements, for the application of the CGT exempton, as follows:

  • The exemption is now only applicable for individuals.
  • The exemption granted now for individuals is only up to 100 Tax Units (approximately US$130,260). Any excess over this threshold is taxable in Peru.

Consequently, foreign or domestic institutional investors will be subject to Peruvian taxation as from January 2023. It is important to note, however, that transactions executed for foreign institutional investors within the LSE will be subject to a 5% CGT. In addition, off stock transactions executed by foreign institutional investors will be subjected to a 30% CGT.

The tax exemption is valid until 31 December 2023.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Asesores S.C.R.L, Lima

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

 

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