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June 13, 2023

Peruvian Tax Authority clarifies methodology for determining FMV of listed/unlisted shares in indirect disposal scenario

  • A Tax Authority ruling in Peru provides guidance on how to determine the fair market value of shares in an indirect transfer of shares between a foreign and a Peruvian entity.
  • This Tax Alert provides background and highlights the new guidance.

On 25 May 2023, the Peruvian Tax Authority issued Ruling 64-2023, addressing how to determine the fair market value (FMV) of shares in an indirect transfer scenario if the shares of the nonresident entity are listed on a stock exchange and the shares of the Peruvian company are not listed (or vice versa).


For purposes of determining the FMV of the foreign shares and the Peruvian entity's shares transferred in an indirect transfer scenario, the following methodologies must be applied in numerical order (i.e., if number 1 does not apply, move on to number 2, and so on):

  1. Higher quotation value — when shares are listed in any stock exchange
  2. Discounted cash flow — when the entity under analysis foresees future flows or has elements such as licenses, authorizations or intangibles that allow future flows to be anticipated
  3. Equity value — based on the last balance sheet closed within 90 days prior to the disposal
  4. Appraisal — established within the six months prior to the date of the transfer

To determine whether an indirect transfer is triggered as a taxable event in Peru, the following procedure must be used:

  • Determine the percentage of ownership that the nonresident entity holds in shares of the Peruvian entities
  • Multiply this percentage by the FMV of the Peruvian entity
  • Divide the result above by the FMV of the foreign entity
  • Multiply the result by 100; if that result is 50 or higher, an indirect transfer is triggered as a taxable event; this result is also used for purposes of calculating the tax to be paid

The methodologies outlined above did not seem to address (i) situations in which the nonresident entity shares are listed on a stock exchange and the Peruvian shares are not listed or vice versa, or (ii) whether it was possible to combine two different FMV methodologies.

Ruling 64-2023

According to Ruling 64-2023, the Peruvian Tax Authority concluded that in cases of indirect transfer of shares, the FMV methodology to be used will depend on the particular characteristics of the entity under analysis. This means that if the shares of the entity are listed, the FMV will be determined by applying the highest quotation value methodology; meanwhile, for the entity whose shares are unlisted, the other valuation methodologies provided in the Peruvian Income Tax Law (discounted cash flow, equity value or appraisal, as appropriate) will be come into play.

Therefore, it will be possible to combine two different FMV methodologies for purposes of the procedure to determine whether an indirect transfer is triggered, along with the associated tax liability.


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

Ernst & Young Asesores Empresariales S.Civil de 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

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


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