PERU Law and Practice Contributed by: Percy Castle, Violeta Moncada, Angel Quispe and Dayana Evangelista, Casahierro Abogados
3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Trusts (Fideicomisos) Trusts, regulated by the General Law of the Financial and Insurance System (Law No. 26702), are a legal arrangements whereby the settlor ( fideicomitente ) transfers fiduciary title ( dominio fiduciario ) over cer - tain assets to a trustee ( fiduciario ) to create an inde - pendent trust estate ( patrimonio fideicometido ). This estate is administered to achieve a specific purpose for the benefit of either the settlor or a third party ( fide - icomisario ). Its primary legal effect is the creation of an autonomous estate that is legally separate from the personal assets of the settlor, the trustee and the beneficiary. The most commonly utilised structures include: • administration trusts, under which the trustee manages the assets in accordance with the terms established in the trust agreement, including the management of inherited property; and • testamentary trusts, through which a testator appoints a licensed trustee via a will to administer their estate upon death. Notwithstanding the foregoing, trusts remain subject to the mandatory provisions of Peruvian succession law, specifically the forced heirship rules set. Foundations Under the Peruvian Civil Code, a foundation is a non- profit legal entity established through the permanent allocation of one or more assets to pursue religious, charitable, cultural or other purposes of public or social interest. Accordingly, unlike in certain other jurisdictions, Peruvian foundations were not designed as estate or wealth planning vehicles. Their legal pur - pose must serve a public or collective interest, and they may not be established primarily for the exclu - sive benefit of a particular family or a defined group of individuals. Peruvian investment funds and trusts are treated as transparent (non-opaque) entities for income tax pur -
poses, with applicable tax rates determined by the specific nature of the income earned. Foreign foundations, foreign trusts and similar vehi - cles are not expressly recognised in Peru; nonethe - less, they are subject to the Peruvian CFC regime, through which resident individuals may be subject to income tax on certain types of passive income obtained by non-resident entities (ie, dividends, inter - est, royalties, capital gains and leases) even though it does not distribute dividends. Other Structures Another commonly used succession and wealth plan - ning structure is the establishment of a family holding company to hold equity interests and other strategic assets. Through this structure, families may central - ise ownership, exercise indirect control over operat - ing companies, facilitate intergenerational succession, strengthen corporate governance and preserve the continuity of the family business. Company structures entail tax costs, as Peruvian corporations are subject to income tax on their prof - its, plus an additional 5% upon dividend distribution. Foreign companies classified as non-resident con - trolled entities fall under Peru’s CFC regime. Under this regime, resident individual shareholders may be taxed on certain types of passive income earned by non-resident entities – such as dividends, interest, royalties, capital gains and rental income – even when those entities do not distribute dividends. 3.2 Recognition of Trusts Peruvian civil law does not expressly recognise or reg - ulate the concept of a “trust” as understood in com - mon law jurisdictions. However, the closest function - al equivalent under domestic legislation is the trust, which is governed by the General Law of the Financial and Insurance System (Law No. 26702). In this regard, pursuant to the Peruvian Civil Code and Directive No. 007-2008-SUNARP-SN, the transfer of assets to the trust estate ( patrimonio fideicometido ) results in the transfer of legal title in trust ( dominio fiduciario ) to the trustee. Such transfer may be regis - tered with the relevant public registry, depending on the nature of the assets involved. Accordingly, once
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