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Tax in Peru on Capital Gains Realized on Transfers of Our Shares

Please note that the following is a non-exhaustive summary of the main requirements with regard to capital gains taxable in Peru derived from “indirect transfers”, which are subject to changes to Peruvian tax law and regulations. The Peruvian tax authority has not published detailed rules in relation to this tax. The Company will make an announcement if such detailed rules are published in future. Prospective purchasers of our Shares and our Shareholders should consult their own tax advisors as to the applicable tax consequences, including capital gains tax in Peru, of the purchase, ownership and disposal of our Shares.

Overview

Under Peruvian law, capital gains realized on an “indirect transfer” of shares in a Peruvian company may, in certain circumstances, be subject to tax in Peru (generally at a rate of 30%). To qualify as an indirect transfer, the transfer must be of shares in a non-Peruvian company which directly or indirectly holds shares in a Peruvian company, and where at least one of the following criteria is met:

  • the market value of the Peruvian company accounted for 50% or more of the market value of the non-Peruvian company at any time during the 12 months preceding the transfer; or
  • the non-Peruvian company is resident in a tax haven (unless the seller can demonstrate that the criterion in the previous bullet point is not met).

In addition, if the transferor is not resident in Peru, in order to be taxable the indirect transfer must represent in aggregate 10% or more of the total shares in the non-Peruvian company in any 12-month period.

Conversely, if the transferor is resident in Peru, the indirect transfer may be subject to tax in Peru regardless of the percentage in the non-Peruvian company that the transfer represents. In this case, the resulting gain may be subject to tax either as foreign source or Peruvian source income at a rate that will depend on the nature of the investor (corporate or individual).

Relevance to investors in our Company

Our Company is a non-Peruvian company that holds shares in Peruvian companies (our subsidiaries in Peru), the market value of which subsidiaries accounted for more than 50% of our market value during the 12 months preceding the date of our Company’s listing on the Stock Exchange of Hong Kong, although in future this may change. Our Company is also regarded as resident in a tax haven . As a result of this, capital gains realized by a seller not resident in Peru on the sale of 10% or more of our Shares in any 12-month period (or by a seller resident in Peru on the sale of any number of our Shares) may be subject to tax in Peru (generally at a rate of 30%). If so, the seller may be required to undertake a self-assessment process, complete a tax payment form or return issued by the Peruvian tax authority and pay the tax through an authorized Peruvian bank. Alternatively, if the purchaser of such Shares is resident in Peru, it may be required to withhold the tax when paying the purchase price.

If this tax is payable, it is the gain of the selling Shareholder, as seller of the ultimate beneficial interest in the Shares, that is taxed. It is the opinion of Rebaza, Alcazar and De Las Casas, our Peruvian legal advisor, that Peruvian tax law will disregard the fact that Shares deposited in the Central Clearing and Settlement System (“CCASS”) are held in the name of HKSCC Nominees Limited (“HKSCC Nominees”) and may also be held through a broker or custodian. Consequently, a selling Shareholder’s gain may be subject to capital gains tax even where legal title to the Shares remains with HKSCC Nominees and where the selling Shareholder and/or the buying Shareholder hold the Shares through the same or different custodians or brokers. The Peruvian capital gains tax would not be payable by the broker(s) or custodian(s) or by HKSCC Nominees, including in circumstances where HKSCC Nominees transfers legal title to a Shareholder to hold directly.

Similarly, for the purpose of determining whether a Shareholder has transferred 10% or more of our Shares in any 12-month period, aggregation will apply at the level of the Shareholder (as ultimate beneficial owner) and not at the level of HKSCC Nominees or any broker or custodian. Hence, transfers by different Shareholders would not be aggregated for the purpose of determining whether the 10% threshold is reached solely because all their Shares were held legally in the name of HKSCC Nominees and/or held through the same broker or custodian.

For the avoidance of doubt, a transfer does not need to result in a change of control of the non- Peruvian company in order to meet the 10% threshold. Detailed rules for aggregating transfers for the purpose of determining whether or not the 10% threshold has been reached have not been published by the Peruvian tax authority, although it is anticipated that future regulations may address this point.

Selling Shareholder — self-assessment and payment

In summary, in order to comply with the obligations imposed under Peruvian law, a Shareholder not resident in Peru who is liable to capital gains tax must follow the process set out below.

  • Determine the amount of capital gains tax to be paid through a self-assessment process. For this purpose, the capital gain subject to tax is equal to the difference between the purchase price and the sale price of the relevant Shares. The sale price used for this calculation must not be lower than the fair market value of the Shares. The price at which shares are trading on the Stock Exchange at the time of sale should represent fair market value.
  • Obtain the appropriate tax payment form issued by the Peruvian tax authority. This is Form No. 1073, which can be downloaded from the tax authority’s website (http://www.sunat.gob.pe/orientacion/formularios/formularioDecPago.htm).
  • Complete the tax payment form, which may be done by the selling Shareholder or an authorized intermediary. The tax payment form is currently available in Spanish only and the original Spanish version above should be used. In order to help selling Shareholders complete the form, the Company has produced English and Chinese translated versions intended to serve as guides to completion of the original tax form in Spanish. Prospective purchasers of our Shares and our Shareholders should consult independent Peruvian tax advisors in the event of doubt. These translated versions are available for downloading below:
  • Submit the tax payment form to, and pay the capital gains tax due through, an authorized Peruvian bank. At the time of the Company’s listing on the Hong Kong Stock Exchange, the Peruvian banks authorized for this purpose were Scotiabank Peru, Banco Continental, Banco de Crédito del Peru, Interbank, Citibank and Banco de la Nación.

Payment by the seller not resident in Peru of any tax due must be made within the first twelve working days of the month after the month in which the sale proceeds are received. Tax that is not paid on time will not attract a penalty but will accrue interest. If a Peru resident purchaser withholds the tax due as set out in the following section, the selling Shareholder is not required to complete the self-assessment process summarized above or pay the tax due.

Purchaser resident in Peru — withholding tax due from purchase price

Under Peruvian law, if tax on capital gains is due on a transfer of our Shares by a seller not resident in Peru, a purchaser who is resident in Peru must withhold the tax when paying the purchase price. It is the opinion of our Peruvian legal advisor that it is reasonably expected that future regulations will create an exception to this requirement for transfers made on a stock exchange through a central clearing and settling system, where it is impracticable for a purchaser to obtain sufficient information about the seller of the Shares that it purchases. Whilst at present no such exception exists, it is reasonably expected that the withholding requirement would not apply to transfers of our Shares that are centrally cleared and settled through CCASS on the basis that the purchaser would not have sufficient information about the seller to determine whether any capital gains tax should be withheld.

However, where a purchaser resident in Peru acquires our Shares through a transfer that is not centrally cleared and settled through CCASS it must withhold any capital gains tax due following the process set out as follows:

  • Determine the amount of capital gains on which the withholding tax of 30% would apply. For this purpose, the calculation of the capital gain subject to tax is equal to the difference between the purchase price and the sale price of the relevant Shares. The sale price used for this calculation must not be lower than the fair market value of the Shares. The price at which shares are trading on the Stock Exchange on the day of sale should represent fair market value.

    Considering that in the case of indirect transfers the seller is not required to certify its tax basis before the Peruvian Tax Authorities, the seller must provide the tax basis information directly to the purchaser.

  • Obtain and complete the appropriate tax payment form issued by the Peruvian tax authority. This is digital Form No. 617, which can be downloaded from the tax authority’s website
    (http://www.sunat.gob.pe/orientacion/formularios/formularioDecPago.htm).
  • Submit the tax payment form through the tax authority’s website (http://www.sunat.gob.pe/), and pay the tax withheld through an authorized Peruvian bank or by means of a virtual system offered by the Peruvian tax authority (also accessible at http://www.sunat.gob.pe/). In order to access to the virtual system, the Peru resident seller needs to have or obtain a Peruvian Tax ID number (RUC), a system username and a password.

Payment of any tax due must generally be made within the first ten working days of the month following the month in which the purchase price is paid (the specific deadline will depend on the purchaser’s Peruvian tax identification number). Failure by a purchaser resident in Peru to withhold and pay tax will result in a penalty of 50% of the amount not withheld; any unpaid tax will accrue interest and the purchaser would become joint and severally liable with the seller for the unpaid tax. In this case, the seller will also remain liable to pay tax as described under the heading “Selling Shareholder non-resident in Peru” above.

The tax provisions that establish the obligation of a purchaser resident in Peru to withhold the tax when paying the purchase price are not clear as to whether such obligation applies only when the selling shareholder is not resident in Peru. It is the opinion of our Peruvian legal advisor that is reasonable to expect that future regulations will clarify that such withholding obligation does not apply when the selling shareholder is also resident in Peru.

If a purchaser resident in Peru completes the process summarized above and withholds the tax due on the Selling Shareholder’s capital gain, the selling Shareholder is not required to undertake the self-assessment process, complete the tax payment form or return and pay the capital gains tax.

Selling Shareholder resident in Peru

The provisions that regulate the taxation of capital gains from indirect transfers do not establish clear rules on their application to selling shareholders resident in Peru, which may be explained by the fact that those provisions were intended to apply at least mainly to sellers not resident in  Peru. However, considering that the indirect transfer provisions did not expressly exclude their application to persons resident in Peru, it is the opinion of Rebaza, Alcazar & De Las Casas, our Peruvian legal advisor, that those provisions, as currently in force, also apply with respect to persons that are resident in Peru.

Companies and individuals resident in Peru are taxed on their worldwide income (both foreign source and Peruvian source income). As such, capital gains realized on transfers of shares of our Company will be subject to tax in Peru at the rate that will depend on the nature of the taxpayer.

In the case of a company resident in Peru any capital gain – whether foreign source or Peruvian source - will be taxed at the same applicable corporate rate which is generally 30%.

In the case of an individual resident in Peru the tax treatment will depend on whether such gain is Peruvian source or foreign source. If it is Peruvian source, the capital gain will be taxed at the rate of 5%; if the capital gain qualifies as foreign source it will be subject to the progressive rate of 15%, 21% and 30%.

From a reasonable interpretation of the current Peruvian tax provisions, it is the opinion of our Peruvian legal advisor that any gain derived from a transfer of shares of our Company that does not meet the 10% threshold in any 12-month period would qualify as foreign source income for Peruvian purposes whereas gains derived from transfers that meet such 10% threshold in any 12-month period would qualify as Peruvian source income. Future regulations should clarify how the mechanics and effects regarding the aggregation for purposes of the 10% threshold should work.

The corresponding capital gains, whether foreign source or Peruvian source income, will be subject to tax in Peru at the abovementioned rates.

In order to comply with the obligations imposed under Peruvian law, a Shareholder resident in Peru who is liable to such tax on capital gains must file the corresponding return and pay the corresponding tax taking into account the tax regime to which they are subject. The procedure to file the returns and pay the tax will depend upon several factors such as the nature of the seller, source of income, among others. Failure to file the respective return and pay the corresponding tax will result in a penalty that will depend on the nature of the taxpayer and any unpaid tax will accrue interest.

More information on Peruvian capital gains tax is available in the Company’s prospectus in respect of its global offering.

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