Consolidated Text of the Income Tax Law, approved by Supreme Decree No. 179-2004-EF and amending regulations
Article 5-A.—Transactions involving financial derivatives shall be subject to the following provisions, among others, set forth in this Act:
a) Definition:
Financial Derivatives are contracts involving parties who hold long (buy) or short (sale) positions, the value of which derives from changes in the price or value of an underlying asset. They do not require an initial net investment, or, if they do, such investment is typically minimal, and they are settled on a predetermined date.
The financial derivatives referred to in this subsection are those that, in accordance with generally accepted financial practices, are entered into under the following names: forward contracts, futures contracts, option contracts, financial swaps, combinations of the foregoing, and other financial hybrids.
b) Hedging Financial Derivatives:
Hedging Financial Derivatives are those contracted in the ordinary course of business, enterprise, or activity with the objective of avoiding, mitigating, or eliminating the risk arising from future fluctuations in the prices of goods, commodities, exchange rates, interest rates, or any other benchmark index, which may affect:
b.1. Assets intended to generate income subject to tax and that are specific to the business or line of business.
b.2. Obligations and other liabilities incurred for use in the course of the business, enterprise, or activity.
Financial derivatives entered into by persons or entities exempted from or not subject to the tax with respect to their assets, property, obligations, or other liabilities are also considered to be entered into for hedging purposes when such instruments are intended to fulfill their objectives or carry out their functions. A financial derivative is considered to be for hedging purposes when the following requirements are met:
1) It is entered into between independent parties. Exceptionally, a financial derivative shall be considered a hedging instrument even if it is entered into between related parties, provided that the transaction is conducted through a recognized market.
2) The risks it hedges must be clearly identifiable and not merely general risks of the business, company, or activity, and their occurrence must affect the results of said business, company, or activity.
3) The tax debtor must have documentation that identifies the following:
I. The financial derivative entered into, how it operates, and its characteristics.
II. The counterparty to the derivative financial instrument, which must be the same as the company, person, or entity seeking the hedge.
III. The specific assets, property, and obligations being hedged, detailing the quantity, amounts, terms, prices, and other characteristics to be hedged.
IV. The risk sought to be eliminated, mitigated, or avoided, such as price variations, exchange rate fluctuations, market variations related to the assets or property being hedged, or interest rate fluctuations related to obligations and other liabilities incurred that are being hedged.
Taxpayers, as well as individuals or entities not subject to or exempt from the tax, who enter into a hedging financial derivative must notify SUNAT of this fact in the manner and under the conditions specified by SUNAT in a supervisory resolution, expressly stating in said notification that the financial derivative entered into is intended to hedge risks from the time the instrument is entered into.
This notification shall constitute an affidavit and must be filed within thirty (30) days from the date the financial derivative was entered into.
c) Financial derivatives not considered for Hedging Purposes:
Financial derivatives not considered for hedging purposes are those that do not meet any of the requirements set forth in subparagraphs 1) through 3) of the preceding paragraph.
Likewise, it is deemed that a financial derivative does not meet the requirements to be considered for hedging purposes when:
1) It has been entered into outside recognized markets; or
2) It has been entered into with parties that are residents or permanent establishments located or established in non-cooperative countries or territories, or in countries or territories with low or no taxation; or with parties or permanent establishments whose income, revenue, or profits derived from such contracts are subject to a preferential tax regime.
d) Financial derivatives entered into by Entities in the Financial System:
Financial derivatives entered into for financial intermediation purposes by entities within the Financial System regulated by the General Law on the Financial System and the Insurance System and the Organic Law of the Superintendency of Banking and Insurance—Law No. 26702—shall be governed by the specific provisions issued by the Superintendency of Banking and Insurance regarding the following aspects:
1) Classification as hedging or non-hedging.
2) Recognition of income or losses.
In all other respects and with regard to financial derivatives entered into for purposes other than financial intermediation, the provisions of this Act shall apply.”
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Article 10.—Without prejudice to the provisions of the preceding article, the following are also considered income from Peruvian sources:
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d) Income arising from the execution of financial derivatives obtained by persons domiciled in the country.
In the case of financial derivatives entered into for hedging purposes, the proceeds obtained by residents shall be considered income from Peruvian sources when the assets, property, obligations, or liabilities to be hedged are intended to generate income from Peruvian sources.
Income derived from the contracting of financial derivatives by non-resident individuals with resident individuals, where the underlying asset relates to the exchange rate of the domestic currency against another foreign currency, shall also be considered income from Peruvian sources, provided that the effective term is shorter than that established by regulation, which shall not exceed one hundred eighty days.
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Article 32.—In cases of sales, contributions of property, and other transfers of ownership; the provision of services; and any other type of transaction for any purpose, the value assigned to the property, services, and other benefits, for tax purposes, shall be the market value. If the assigned value differs from the market value, whether due to overvaluation or undervaluation, the National Superintendency of Tax Administration (SUNAT) shall adjust it for both the acquirer and the transferor.
For the purposes of this Law, market value is defined as:
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5. For transactions involving financial derivatives executed on recognized markets, market value shall be determined in accordance with the prices, indices, or indicators of such markets, except in the case provided for in paragraph 4 of this article, in which case market value shall be determined as set forth in that paragraph.
In the case of financial derivatives entered into outside recognized markets, the market value shall be that corresponding to the underlying asset on the date on which any of the events referred to in the eighth paragraph of subsection (a) of Article 57 of the Act occurs, whichever occurs first. The market value of the underlying asset is determined in accordance with the provisions of paragraphs 1 through 4 of this article.
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Article 44.—The following are not deductible for the purposes of determining third-category taxable income
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q) Expenses and losses arising from the execution of financial derivatives that meet any of the following conditions:
1) If the financial derivative has been entered into with parties who are residents or permanent establishments located or established in non-cooperative countries or territories, or in countries or territories with low or no taxation; or whose income, revenue, or gains from such contracts are subject to a preferential tax regime.
2) If the taxpayer maintains symmetrical positions through both long (buy) and short (sale) positions in two or more financial derivatives, the deduction of losses is not permitted until income from such contracts is recognized.
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Additionally, in accordance with the third paragraph of Article 50 of this Law, losses of Peruvian source arising from the execution of financial derivatives that are not intended for hedging purposes may only be deducted from gains of Peruvian source arising from the execution of financial derivatives that serve the same purpose.
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Article 50.—Taxpayers domiciled in the country may offset the total net third-category loss of Peruvian source that they record in a taxable year, in accordance with any of the following systems:
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Additionally, under both systems, losses of Peruvian source arising from financial derivative contracts entered into for purposes other than hedging may only be offset against net income of Peruvian source arising from the execution of financial derivatives entered into for the same purpose. The provisions of this paragraph do not apply to financial institutions regulated by the General Law on the Financial System and the Insurance System and the Organic Law of the Superintendency of Banking and Insurance—Law No. 26702—with respect to income arising from derivative financial instruments entered into for the purpose of financial intermediation.
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Article 57.—For the purposes of this Law, the taxable year begins on January 1 of each year and ends on December 31; in all cases, the fiscal year must coincide with the taxable year, without exception.
Income is allocated to the taxable year in accordance with the following rules:
a) Income in the third category is considered to have been earned in the fiscal year in which it accrues.
For this purpose, income is deemed to be accrued when the substantive events giving rise to it have occurred, provided that the right to receive it is not subject to a condition precedent, regardless of when it is collected and even if the precise terms of payment have not been established.
However, when the consideration or part thereof is determined based on a fact or event that will occur in the future, the income is recognized when such fact or event occurs.
Additionally, the following should be taken into account:
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In the case of financial derivatives, gains and losses are considered to be recognized in the fiscal year in which any of the following events occurs:
1. Physical delivery of the underlying asset.
2. Cash settlement.
3. Closing of positions.
4. Letting the option expire on the expiration date without exercising it.
5. Transfer of the contractual position.
6. Date specified in the financial swap contract for the periodic exchange of cash flows.
In the case of financial derivatives whose underlying asset is exclusively the exchange rate of a foreign currency, gains and losses are recognized at the end of each taxable year, even if the contract’s maturity date falls in a subsequent year. For this purpose, the provisions of Article 61 of the Law apply.
In the case of financial derivatives entered into for financial intermediation purposes by companies in the Financial System regulated by the General Law on the Financial System and the Insurance System and the Organic Law of the Superintendency of Banking and Insurance, Law No. 26702, gains and losses are recognized in accordance with the provisions of paragraph 2) of subsection d) of Article 5-A of this Act.