Peruvian Plans To Lift CGT Exemption Slammed

by Mike Godfrey, Tax-News.com, Washington

02 December 2009

The Peruvian government is expected to remove exemptions from capital gains tax from January 2010, despite recent claims from the president of the Lima Stock Exchange that such a move would adversely affect expansion plans for the market.

Although recommended in a 2003 report commissioned by the Ministry of Finance, plans to remove the exemption have been postponed a number of times.

Lifting the exemption would result in a levy of up to 30% on Peruvian broker trades, and a 5% tax on foreign brokers, according to stock exchange President, Roberto Hoyle. It is expected to raise USD70-100m annually at a time when government tax revenues have fallen 16% to USD14.88bn.

Press commentators in Peru have added pressure to lift exemptions, citing election promises to that effect.

In November 2008, Economy Minister Luis Valdivieso postponed the elimination of the exemptions until 2010 because the Ministry "had not yet been able to draw up the regulations of Decree 972". The press are now commenting that the regulations have still not been published.

Hoyle has argued that the tax would discriminate against "foreign investors and earnings from investments in ETFs (Exchange Traded Funds) established by non-domiciled individuals compared to Peruvian investors".

He added that, should the exemptions be lifted as planned, proposed integration with bourses in Chile and Colombia would have to be put on hold.

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