2.2 Appeal in cassation

1

Appeal No. 29645-2023—Lima (published May 22, 2024)

Related to RTF No. 00626-9-2019

Although the appellant refers to “highly probable transactions” as a type of transaction that may also be covered by financial derivatives for tax purposes (in addition to assets, liabilities, or firm commitments), her analysis addresses this as if it were a degree or type of risk (“highly probable risk”), thereby leaving unchallenged the appellant’s claim that the tax administration and the Tax Court mistakenly failed to consider such transactions, although the explanatory memorandum of Legislative Decree No. 970—which serves as the basis for Article 5-A of the Income Tax Law—expressly recognizes such transactions as assets eligible hedging under financial derivatives.

On the other hand, although the judgment on appeal concludes—without providing sufficient clarity regarding the reasoning used to reach that decision—that even in the case of highly probable transactions, the relevant documentation demonstrating coverage of that present or future risk must be available prior to entering into the financial derivative, it follows that, by failing to sufficiently justify the relevance of including or excluding highly probable transactions as assets eligible for hedging for tax purposes, the appellant’s challenge regarding the reasonableness of requiring evidence to meet the same standards applicable to binding contracts—with respect to those highly probable transactions that do not involve obligations that have been signed or fully identified and defined at the time the financial derivative is entered into—remains unaddressed; that is, although both types of transactions differ in terms of their nature and the timing of the fulfillment or consummation of the obligations that may be agreed upon between the parties—a factor that could affect the assessment of the evidence related to such transactions—this matter must be analyzed by the higher court after it has clearly stated its position on whether or not to include them as assets subject to hedging.

2

Appeal No. 27624-2023-Lima (published 07/03/2024)

Related to RTF No. 06103-1-2020.

The Explanatory Memorandum of Legislative Decree No. 970 establishes which assets are subject to reporting; these consist of assets, liabilities, or firm commitments. However, transactions deemed highly probable and net investments in a foreign business are also considered subject to reporting.

For highly probable anticipated transactions, specific and detailed documentation must be available from the beginning of the hedging transaction. The high probability of the underlying transactions must also be demonstrated.

3

Appeal No. 7951-2023, Lima (published March 26, 2024)

The judgment on appeal states that it has been established that the plaintiff did not enter into hedging financial derivatives, as they did not comply with the requirement set forth in paragraph 3) of subsection b) of Article 5-A of the Consolidated Text of the Income Tax Law, which states that the hedged risks must be clearly identifiable and not merely general risks of the business, company, or activity. In this regard, it notes that the loss arising from the early financial settlement of the derivative financial instruments is not offsettable against oth come from Peruvian sources for the purpose of determining income tax for the 2007 fiscal year; consequently, the objection to the deduction of this loss is in accordance with the law. Therefore, the appellant company’s appeal must be declared unfounded.

4

Cassation No. 16999-2024, Lima (published 06/09/2025)

SUNAT and the Tax Court rejected the deduction on the grounds that the supporting documentation was prepared after the financial derivatives were contracted, which would undermine their hedging purpose under Article 5-A of the Income Tax Law.

The Supreme Court notes that Article 5-A of the Income Tax Law requires that the hedging purpose be defined before or at the time the financial derivative (IFD) is contracted. Accordingly, the supporting documents must predate or coincide with such contracting. Evidence prepared after the fact, even if it retrospectively refers to the context of the risk, is insufficient to support the tax deduction.

5

Appeal No. 18462-2025, Lima (published 02/06/2026)

An analysis of the judgment on appeal reveals that the Superior Court has not sufficiently and consistently justified the reasonableness of the requirement for evidence to substantiate the strike price—which was used as a benchmark on the recognized London Metal Exchangeso that the financial derivative qualifies as a hedging instrument.