PERU Law and Practice Contributed by: Camilo Maruy, Maite Colmenter, Roberto Polo and Llanet Gaslac, Rebaza, Alcázar & De Las Casas
planning, asset protection, securitisation and invest - ment management. Peruvian trusts are governed primarily by the Peruvian Finance and Secure Law along with the applicable tax laws. They are considered legally valid vehicles capable of holding and managing assets on behalf of beneficiaries according to the terms set forth in the trust agreement. From a Peruvian perspective, the tax and regulatory rules do not contain specific provisions regarding trusts established abroad, however, foreign trust are legally recognised in Peru. The tax treatment of such trusts must be analysed based on general tax princi - ples and the facts and circumstances of each case. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation Under Peruvian tax law, individuals who are benefi - ciaries of a foreign revocable or irrevocable trust are not subject to income tax on the distributions they receive, provided such distributions qualify as gratui - tous transfers. According to Peruvian Income Tax reg - ulations, gratuitous transfers (ie, liberalities) received by individuals are not considered taxable income. Additionally, income generated through foreign revo - cable trusts may be subject to Peruvian CFC rules, provided certain conditions are met. In such cases, the income could be attributed directly to the Peruvi - an-domiciled settlor for tax purposes. In contrast, irrevocable and discretionary trusts are generally not subject to the Peruvian CFC rules, as the assets and income are no longer deemed to be under the control or ownership of the settlor. The mere act of serving as a fiduciary of a foreign trust, foundation or similar structure does not itself trigger specific tax consequences. However, such a role may give rise to reporting obligations, particu - larly under ultimate beneficial ownership (UBO) rules, which require the disclosure of the structure and its stakeholders to the tax authorities. Planning opportunities may arise in structuring foreign trusts, taking into account the specific circumstances
of each individual and the nature and location of the assets involved, provided that the conditions trigger - ing the application of the Peruvian General Anti-Avoid - ance Rule (GAAR) are not present. 3.4 Exercising Control Over Irrevocable Planning Vehicles Since irrevocable fideicomisos do not represent addi - tional tax benefits under Peruvian tax law, their use is not common in Peru. Regarding irrevocable or discretional foreign trusts, the latter may imply additional tax benefits under Peruvian law. However, any flexibility in control by the settlor or beneficiaries that could alter or challenge the irrevocable and discretionary nature of the foreign trust could impact Peruvian tax benefits. It is common in this type of structure to grant broader powers to third parties, such as a protector, board of director or investment manager, including the authority to terminate the trust, change the trustee or remove/ incorporate beneficiaries. 4. Family Business Planning 4.1 Asset Protection Set out below are the most popular methods for asset protection planning in Peru. • Foreign trusts or local fideicomisos these have become the most popular method, provided they create an autonomous estate separate from the assets of the settlor, the trustee or the beneficiar - ies. In addition, under Peruvian law, the assets held in a fideicomiso can be unenforceable and unseizable by third parties. Creditors cannot claim the nullity of the assets transferred in trust due to creditor fraud as long as certain formalities are met (ie, appropriate registration in public registries and publication in an official newsletter). • Incorporation of holding entities in jurisdictions where Peru has strong bilateral investment trea - ties to protect assets from any political risks (eg, Luxembourg or Spain). • Separation of assets as patrimonial regime: as is common, this method will protect the assets in
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