Peru: When lack of documentation triggers a dividend recharacterization
17.07.2025
In a recent resolution, the Peruvian Tax Court analysed a case in which funds from a company were deposited directly into the personal bank account of its legal representative without supporting documentation. The Peruvian tax authority (SUNAT) treated such deposits as undeclared dividends. The Ecovis expertsexplain the court’s ruling, which contradicts this view.
Background to the case
In Resolution No. 5340-11-2024 (dated 6 June 2024), the Peruvian Tax Court reviewed the treatment of deposits made by multiple companies into the personal bank account of their shared legal representative. SUNAT had recharacterized these transfers as second category income, specifically as dividends paid in cash, based on Article 24(i) of the Peruvian Income Tax Law.
However, the taxpayer challenged the assessment, arguing that the transfers were not distributions of earnings but rather operational payments or reimbursements, and that the absence of documentation should not automatically qualify them as dividends.
SUNAT’s position and arguments
To support the classification as a cash dividend, SUNAT put forward several arguments:
The funds were transferred to an individual with no clear legal obligation or service agreement justifying the payments
There was no evidence of mandates, reimbursement orders, or commercial contracts backing the disbursements
Therefore, the amounts qualified as undeclared dividend distributions, subject to tax as second category income and the corresponding penalties
We support you in creating accurate reports and documentation, reducing audit risks for you. Octavio Salazar Mesías, Partner – Tax & Legal Department, ECOVIS Peru, Lima, Peru
The ruling by the Tax Court
The Tax Court disagreed with SUNAT’s position on several grounds:
SUNAT failed to demonstrate that the funds were distributed within the framework of a formal profit allocation process governed by Article 24-A of the Income Tax Law
The authority also did not identify under which specific paragraph of Article 24-A the recharacterization was being applied
The court concluded that, although the lack of documentation is problematic, it is not sufficient on its own to presume a distribution of profits
This ruling reaffirmed that the burden of proof lies with the tax authority, and that a simple transfer of funds to a legal representative’s account does not automatically constitute a dividend if there is no concrete evidence of profit distribution.
What companies should do now
The Ecovis experts provide recommendations to help companies avoid similar disputes in future audits:
Formally document any transfers to company officers or legal representatives, including:
written mandates
reimbursement orders
detailed expense reports with supporting invoices
Properly record all profit distributions through:
shareholder meeting minutes
profit distribution resolutions
withholding and remittance of applicable income taxes
Maintain detailed accounting and legal records, including service agreements and financial authorisations, to support the legitimacy of each transaction.
The significance of the verdict
The ruling confirms that SUNAT cannot presume a dividend distribution based solely on unexplained bank deposits. Nonetheless, the absence of documentation places the taxpayer in a vulnerable position during tax audits.
For further information please contact
Octavio Salazar Mesías, Partner – Tax & Legal Department, ECOVIS Peru, Lima, Peru
Email: octavio.salazar@ecovis.pe
China will no longer publicly report companies removed from the list of abnormal business relationships. The revised measures already took effect on 1 May 2025. The Ecovis expertsexplain what this means and who can apply for removal from the “blacklist” under the social credit system.
The State Administration for Market Regulation recently issued a notice regarding the implementation of the Measures for the Administration of the List of Enterprises with Abnormal Operations. According to the notice, once a business entity is removed from the abnormal operations list, the related information will no longer be publicly displayed – thus achieving a “no trace” policy after removal.
To date, China’s National Enterprise Credit Information Publicity System has stopped disclosing about 48.42 million entries concerning abnormal operations, affecting around 25.51 million market entities, including 5.02 million enterprises, 20.13 million individual businesses, and 362,400 farmers’ cooperatives.
China wants to strengthen confidence in the market
Upon approval of a removal application, public disclosure of the related listing will cease. This addresses business concerns, enhances credit restoration, fosters fairer conditions, and strengthens market confidence, supporting China’s economic recovery.
The abnormal operations list, part of China’s business “blacklist” system under the social credit regime, tracks relatively minor violations, mainly concerning incomplete or outdated business disclosures. It differs from more serious lists like the Seriously Illegal and Dishonest Entities List or the National Basic List of Punishment Measures for Dishonest Conduct.
Discuss with an expert what impact the tightened compliance and liability regulations have on your company. Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Ladenburg, Germany
How companies can be removed from the list
Businesses may apply for removal depending on the cause of listing:
Failure to submit annual reports: May be removed after submitting the overdue report
Failure to disclose enterprise information on time: May be removed after fulfilling disclosure duties
Failure to register a name change: May apply for removal after the name change is properly registered
Unable to contact via registered address: Can apply after updating the registered address or confirming reachable contact details
In each case, the local market authority will decide on removal within five working days of receiving the application or verifying the correction.
These changes make the system more balanced. While transparency remains a goal, companies that address minor infractions won’t face lasting reputational damage. This encourages timely compliance, while reducing the long-term burden on businesses, helping foster a healthier business environment.
However, it is important to consider, that compliance and liability regulations for companies have tightened and underwent (partially) significant changes under the new company law.
For further information please contact
Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Ladenburg, Germany
Email: richard.hoffmann@ecovis.com
Labour law Czech Republic: Flexibilisation of Czech labour law from 1 June 2025
15.07.2025
The “flexi-amendment” of the Czech Labour Code, also known as the “flexinovela”, came into force on 1 June 2025. The aim is to make the Czech Republic more competitive through a modern and flexible labour market. The Ecovis experts know which changes companies need to be aware of now.
The flexi-amendment introduced some changes that companies must now implement. However, termination of employment without cause was rejected as too fundamental.
Notice periods
The notice period will be reduced to one month if the employee violates work discipline or does not meet the legal requirements for performing the job. The duration of the notice period will also be revised. For further details visit the Ecovis Czech web page.
Get expert advice to ensure that the requirements and changes in Czech labour law are correctly implemented. JUDr. Mojmír Ježek, Ph.D., Partner, ECOVIS ježek, advokátní kancelář s.r.o.
Probationary period
The maximum probationary period will be extended from 3 to 4 months, and from 6 to 8 months for managers. The probationary period will also be extended in certain cases. For more information see the Ecovis Czech website.
Wage transparency
Employers may not prevent employees from sharing information about their wages.
Youth work
Minors aged 14 and over can perform light work during the main summer vacation, even if they have not yet completed compulsory schooling.
The most important changes to Czech labour law
At the beginning of April, the long-awaited amendment to Law No. 262/2006 on the Labour Code, the “Flexinovela”, was adopted, bringing about fundamental changes in the area of labour relations.
For more information and details on these aspects, see the ECOVIS Czech web page.
Expanded Scope of Sales and Service Tax in Malaysia
14.07.2025
Effective 1 July 2025, the Malaysian government revised the list of items subject to sales tax and expand the scope of service tax. These measures aim to strengthen the country’s fiscal position by increasing revenue and broadening the tax base. The Ecovis Experts from ECOVIS Malaysia Tax provide an overview of the changes.
Vietnam Private Sector: Special Policies Planned for Development
08.07.2025
Vietnam has unveiled a series of resolutions aimed at fostering the growth of its private sector, focusing on tax incentives and streamlined administrative processes. The Ecovis Experts from ECOVIS AFA VIETNAM provide an outline, explaining what these changes mean for start-ups and SMEs.
Recently, Vietnam introduced three resolutions outlining special mechanisms and policies to promote the development of the private sector. These resolutions were accompanied by an implementation plan aimed at the relevant authorities. These measures reflect the government’s strong focus on tax incentives and administrative support to enhance innovation and business growth.
In early May 2025, the Politburo of the Communist Party of Vietnam issued the Resolution 68-NG/TW (“Resolution 68”), which primarily aims to address significant obstacles to the growth of Vietnam’s private sector. This includes institutional and policy reform, safeguarding ownership and property rights, ensuring business freedom, promoting fair competition within the private economy, and guaranteeing the enforcement of private contracts. This directive also serves as a framework for subsequent implementation plans. Subsequently, the Vietnamese government introduced two follow-up directives to guide the implementation of incentives for private economic development, including:
Resolution No. 198/2025/QH15 (“Resolution 198”), approved by the National Assembly on May 17, 2025, on special mechanisms and policies for private economic development; and
Resolution No. 139/NQ-CP (“Resolution 139”), dated May 17, 2025, detailing the Government’s plan to implement Resolution 198.
Notably, these dual resolutions include a number of tax and fee incentive policies aimed at fostering growth in the private sector, particularly for start-ups and small to medium-sized enterprises (SMEs). These incentives include:
Corporate Income Tax (CIT) exemptions for a maximum of 2 years, followed by a 50 percent reduction in CIT for the next four years, targeting innovative start-ups and funds supporting innovation.
Personal Income Tax (PIT) exemptions on capital gains and income for experts working in innovative start-ups and R&D centres for up to two years, with an additional 50 percent reduction for the next four years.
A three-year CIT exemption for newly registered SMEs starting from the date of registration.
Allowing larger enterprises to deduct training expenses incurred in support of SMEs within their supply chains.
The removal of business licence tax starting January 2026, aimed at reducing administrative burdens.
Fee waivers for reissuing certificates and permits during times of administrative restructuring.
The recent adoption of Resolutions 68, 198 and 139 by Vietnam marks a significant step toward empowering the private sector as the primary driver of the national economy. Businesses are encouraged to closely monitor the official implementation of these incentives through the expected policy updates this year.
The above content was researched and summarised by ECOVIS AFA VIETNAM from widely published legal documents and articles. If you need to discuss any issues in more depth, please contact us using the details below.
Guiding Businesses Through China’s Legal Landscape: Duke Yu
07.07.2025
Duke Yu is a senior partner at K-Insight law firm – Member of ECOVIS International with over 18 years of legal experience. After seven years of legal study, he has developed strong expertise in commercial law, with a focus on contract law, company law, and bankruptcy.
Duke advises clients across a wide spectrum of industries—including real estate, trade, manufacturing, e-commerce, and solar energy—bringing a practical, cross-sector perspective to complex legal issues. His work reflects a strong understanding of how law intersects with business realities.
Duke’s services span strategic legal consulting, in-depth due diligence, and the drafting of detailed legal advice. He also represents clients in litigation and arbitration, safeguarding their interests throughout every stage of the legal process.
“A lot of legal problems can be avoided with the right advice early on,” says Duke. “I always encourage clients to see legal counsel not as a last resort, but as a strategic advantage.”
One of the common pitfalls that Duke helps clients avoid is entering into high-stakes transactions without first seeking legal advice. His clear, forward-looking guidance helps businesses navigate risk and make confident decisions from the outset.
What sets Duke apart is not just his technical expertise, but his commitment to building long-term relationships. For him, the most rewarding part of his work is seeing his clients succeed – and knowing he’s played a part in that journey.
Supreme Court Ruling Affects the Unterstanding of Equity Incentive Plans in Denmark
04.07.2025
In February 2025, the Danish Supreme Court issued a landmark ruling on how unvested options awarded as part of an equity incentive plan for employees shall be handled upon termination following significant legislative changes in 2019. The Supreme Court followed the arguments presented by ECOVIS Legal Denmark on behalf of a multinational company enabling companies to potentially avoid payments of unvested options (may cover various different kind of shares) to employees, who leave the company.
Introduction to the Case and Legal Framework
During their employment, two employees had been offered participation in an equity incentive plan under which they would either be awarded Restricted Stock Units or offered to purchase a share once the option had vested. Vesting was subject to the employees still being employed on specific vesting dates stated in the offer of participation, and any unvested options
would lapse upon termination.
The two employees were offered participation both before and after 1 January 2019. This is significant as a revised version of the Danish Stock Option Act (SOA) came into effect on that date. However, the transition rules from the SOA applicable prior to January 1, 2019 (2004 SOA) and the revised version (2019 SOA) were unclear, resulting in a lack of clarity as to which set of rules applied to their equity incentive plans.
The significance of whether the 2004 SOA or the 2019 SOA apply is the fact that the 2004 SOA granted employees a statutory protected right to receive unvested options after termination if they were good leavers. After the implementation of the 2019 SOA such legal protection no longer applied.
When the two employees ended their employment, they claimed that the 2004 SOA applied, entitling them to receive the unvested portion of their options, as they were good leavers. The company argued that the 2019 SOA applied, and the core of the dispute was consequently a legal interpretation of the transition rules from the 2004 SOA to the 2019 SOA.
Supreme Court Ruling
In the ruling, the Danish Supreme Court established that the decisive factor for whether the 2004 or the 2019 SOA applies, is at what point in time the actual and legally binding promise of participation in the option-based incentive plan has been made to the employee. If the promise was given before 1 January 2019, the 2004 SOA applies. If the promise was given after
1 January 2019, the 2019 SOA applies.
The Supreme Court further explained that the equity incentive plan did not constitute such an actual and legally binding promise in itself as it was merely the overall framework for grants and did not set out any promise of participation. Whether the 2004 SOA or the 2019 SOA applied therefore depended on when they received their individual offer of participation.
As the unvested options upon termination were all relating to offers granted after 1 January 2019, the 2019 SOA applied. Consequently, no statutory protected right to receive unvested options after termination applied, and the handling of the unvested options would therefore depend on what was agreed upon between the parties.
In this scenario, it meant that the employees did not have any entitlement to the unvested part of their options, as the 2019 SOA prescribes freedom of contract, and the company’s equity incentive plan and individual offers of participation prescribed that unvested options would lapse upon termination.
Key Legal Considerations
The Supreme Court ruling has now clarified what applies when an employee leave his or her position before all awarded options have vested, and it will consequently be easier for employers to handle unvested options upon termination correctly in the future.
Based on the ruling, companies can now limit economic exposure by limiting non-intended payments of unvested options to employees, who left the company, while still complying with the 2019 SOA. It is, however, important for companies to ensure that the transition to the 2019 SOA is handled correctly. Therefore, it is recommended for employers to consider whether
any amendments of their incentive schemes are desirable.
Navigating the complexities of equity incentive plans and the legislative changes can be challenging for both employers and employees. ECOVIS Legal Denmark’s Employment and Labour department is ready to assist, offering expert advice and pragmatic solutions in matters related to handling of equity incentive schemes in employment relationships.
Ecovis welcomes STROHAL LEGAL – Member of ECOVIS International as Exclusive Legal Partner in the United Arab Emirates (UAE).
16.06.2025
ECOVIS International is pleased to announce its new exclusive legal partner, STROHAL LEGAL – Member of ECOVIS International, headquartered in the United Arab Emirates (UAE).
With a strong presence in the UAE since 2005, STROHAL LEGAL is a pioneer in the region, being the first foreign-owned international legal consultancy licensed onshore in the Emirate of Ras Al Khaimah. Under the leadership of Jakob Kisser, the firm has become a trusted name in UAE business law, serving clients from across the globe.
Their areas of expertise include:
Corporate and Commercial Law
Mergers & Acquisitions (M&A)
Business Setups, Expansions, and Relocations
Employment, Labour Law & Immigration
Real Estate and Construction
Intellectual Property (IP) Rights
Dispute Resolution & Litigation
Tax Advisory & Structuring
STROHAL LEGAL advises a diverse international clientele, with a particular focus on clients from the DACH region (Germany, Austria, and Switzerland). Its multilingual team—trained in Austria, Germany, Egypt, South Africa, and Ukraine—combines civil law expertise with strong regional insight. This cross-jurisdictional approach enables the firm to deliver practical legal solutions across corporate, commercial, and regulatory matters in the UAE.
Commenting on the new affiliation, Managing Partner Jakob Kisser stated:
“We are honoured to join ECOVIS International, expanding our reach through a global platform that aligns with our commitment to practical, high-quality legal advice. This partnership connects us with an extensive network of professionals and enhances our cross-border capabilities, allowing us to better serve an increasingly international market and the vibrant growth in the UAE. We look forward to collaborating closely with our ECOVIS colleagues worldwide to deliver seamless, results-driven solutions for our clients.”
To learn more about STROHAL LEGAL, please visit their website or reach out to Jakob Kisser at jkisser@slglaw.cc.
We warmly welcome our new colleagues from the United Arab Emirates to the Ecovis network!