Percy Castle, Casahierro Abogados, Lima, Peru

Foundations and Trust
Buying Companies
and
Investing in Peru
(Miami - May 2012)
Percy Castle

Peru - Numbers

Infrastructure investment gap in public
service infrastructure
=
USD 38,760 million
=
Peru - Numbers
30% of GDP in 2008

TOPICS
Peruvian Foundations and Trusts: Legal and Tax
Main Issues.
International Foundations and Trusts: Tax
Treatment.
Buying and Investing in Peru by International
Foundations & Trusts.

INCOME TAX
VAT
Peru - Numbers
TAX TAX BASES RATES
Resident Individuals
15% of their annual net
income up 27 Tax Units
(UIT); 21% between 27
and 54 Tax Unit (UIT);
and 30% on the excess
Resident and Non Resident Legal Entities 30%
Dividends 4.1%
Interest
credits
from external
4.99%
Non Resident Legal Entities Royalties 30%
Technical Assistance 15%
Other revenues 30%
Sales of goods in the country; construction contracts; the
first sale of real property made by the builders; services
rendered or used in the country; imports of goods.
16% + 2% (Municipal
Promotion Tax) = 18%

Legal Entity
Ruled by Peruvian Civil Code
Foundations in Peru
(Legal Framework)
Non-profitable (filantropic, cultural, educational,
assistential services)
Supervised by a Government Entity

Foundations in Peru
(Tax Framework)
Not subject to Income Tax, except to non-
purpose activities.
Not subject to VAT, except non-purpose
activities.
Subject to all other kind of Peruvian tax or
government contribution (Real State, Banking
Deposit and Withdraw Tax and Labor Taxes)

Peruvian Trusts
(Legal Framework)
Agreement
Special mercantile or commercial nature
Fiduciary mandate nature
Caracteristics:
Settlor
Trustee
Trust Transference
Trust Equity
Ruled: (i) Peruvian Banking and Financial
Law; (ii) Secutiry Market Law

Income Tax:
Peruvian Trusts
(Tax Framework)
Kind of Trusts
– Banking Trust, Securitization Investment
and Trust in Warranty
Taxable stages
– Settlement (capital gain)
– Execution of Activities
– Termination and Liquidation

VAT:
No clasification
Taxpayer = Trust Equity
Taxable stages
– Settlement (capital gains)
– Execution of Activities
Peruvian Trusts
(Tax Framework)
– Termination and Liquidation

International Foundations
(Peruvian Tax Treatment)
Consider as NON-DOMICILED
LEGAL ENTITIES for INCOME
TAX and VAT with no difference
treatment from other non-domicile
legal entity

Foundations
(Buying and Investing in Perú)
Use of Peruvian Foundations:
As real Non-Profitable Legal Entities
Use of International Foundations:
Allowed and useful for tax planning
Subject to Non- Domicilied Legal Entities rules
– No Transparency for Peruvian Tax Purposes
– Dividends, 4.1% withholding
– Capital Gains 30% or 5% withholdings
– Interest 4.99% or 30% (related and tax heavens)
– Applicable Transfer Pricing, thin capitalization and tax
heaven rules

Use of Peruvian Trusts:
Relevant experience in:
– Financing aquisitions
– Project finance investments (Private or Government).
To expensive for indivudal or family tax planning
structures.
Use of International Trusts:
Family and individual structures
Trusts
(Buying and Investing in Perú)

Financial Disclousure
Taxation over Indirect Transference of Shares
Valid Since 2011
Indirect Transference depends in ownership based
on market value of the shares
Issuer: Tax responsible if the transferor has
control
US FATCA
Current Issues
(Buying and Investing in Perú)