An overview of Peru's business taxation regulations

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The following provides an account of the Peruvian corporate and personal tax laws of most interest to international and local investors.

Corporate Entities

The various types of corporations that can be utilised by investors for business activities are regulated via the General Corporate Law. Below are the corporation types most commonly established.

Joint stock company: A joint stock company requires a minimum of two shareholders. Shareholders who do not have domicile in Peru must appoint an attorney-in-fact to sign off on the by-laws on their behalf. Funds in local or foreign currency for the initial capital contribution must be deposited in a local bank. There is no minimum capital amount required by law, but financial institutions generally request initial capital of at least PEN1000 ($303). Shares are represented by certificates or book entries.

Closely held corporation: These corporations resemble limited liability companies and must have a minimum of two and a maximum of 20 shareholders. Shares in these businesses cannot be listed on the Lima Stock Exchange.

Publicly held corporation: Publicly held corporations are intended for companies with a large number of shareholders – typically more than 750 – for which an initial public offering has been made; a business that has debts that can be converted into shares; or where more than 35% of the capital stock belongs to 175 or more shareholders. These shares of stock must be listed on the Lima Stock Exchange.

Limited liability company: These companies may be established with a minimum of two and a maximum of 20 partners. The incorporation procedures are the same as those for all other corporations. Its capital is divided into ownership interests, which are cumulative and indivisible.

Branch: A parent company resolution is required to incorporate a branch in Peru. It must be certified by a Peruvian consulate and authenticated by the Ministry of Foreign Affairs in Peru, or otherwise be apostilled in accordance with the Hague Convention in the country of origin, before it becomes a notarised instrument and is registered in the Public Records Office. A certificate of good standing from the parent company is required for setting up a branch office. In accordance with the General Corporate Law, branches of foreign companies may be recharacterised into a legally incorporated company in Peru under any of the corporate entity types stipulated by said law.

Corporate Income Tax

Companies incorporated in Peru are subject to income tax on their worldwide income. Non-domiciled corporations and their branches, agencies or permanent establishments are only taxed on income earned in Peru.

The corporate income tax rate is 29.5% and is applied to net income. Dividends received from other legal entities with Peruvian domicile are exempt from tax. Dividends received from non-domiciled entities are taxed at the rate of 29.5%.

Companies must make advance payments of income tax. Such payments equal the higher of the following amounts:

• The figure obtained by applying 1.5% to the total net income for the month; or

• The figure obtained by applying to monthly net income the ratio obtained by dividing the amount of tax calculated for the preceding tax year by the total net income for that year. For January and February payments, the ratio is determined by dividing the amount of tax calculated for the year before the preceding tax year by the net income for that year. Under certain circumstances, it is possible to request the suspension of the obligatory prepayments mentioned above. If the prepayments exceed the annual tax due, the excess can be carried forward as credit against future prepayments or against the annual income tax of following years. Otherwise, a refund can be requested.

In order to determine net taxable income, it is permitted to deduct expenses incurred in generation of the income or for the maintenance of the source. In general, subject to certain requirements and conditions, deductions of the following are allowed:

• Interest;

• Insurance;

• Extraordinary (non-recurring) losses;

• Collections;

• Depreciation and pre-operating expenses;

• Authorised reserves;

• Write-offs and bad debt provisions;

• Social benefit provisions;

• Retirement pensions; and

• Bonuses and gratifications for employees. However, interest paid by domiciled taxpayers to related parties is not deductible for the portion of the loan that exceeds the result of applying a debtto-equity ratio of 3:1 at the close of the immediate preceding fiscal year. For FY 2019 and FY 2020 the thin capitalisation rule will be applicable to loans with unrelated parties as well.

Notwithstanding the above, a new set of thin capitalisation rules will apply from January 1, 2021. Under these rules, the interest that exceeds 30% of earnings before interest, taxes, depreciation and amortisation for the previous fiscal year will not be deductible. Interest that is not deducted may be carried forward for up to four years.

Certain exceptions to the current rules exist, including for financial and insurance companies, and taxpayers whose income does not exceed 2500 tax units. Each tax unit equals PEN4200 ($1270).

Expenses incurred abroad are deductible provided that they are necessary for the generation of taxable income and have been accredited with the respective payment vouchers issued abroad.

Expenses that are not accepted as deductions from net income include:

• Personal expenses;

• Assumed tax, except in the case of interest;

• Tax and administrative fines;

• Donations;

• Expenses not supported by proof of payment; and

• Reserves or provisions not permitted by law. It should be noted that starting in FY 2019, costs or expenses for services received from non-domiciled companies – whether related or not – must be paid prior to the submission of the tax return to be considered deductible.

Peruvian legislation has specific rules to recognise when income and expenses are considered accrued for income tax purposes, and those rules do not necessarily coincide with current accounting standards. These new rules apply from FY 2019.

Permanent Establishments

According to income tax legislation, a foreign company is considered to have a permanent establishment in Peru if:

• It has a fixed place of business through which it carries out business activities in whole or in part;

• An individual has power of attorney of a foreign entity and uses it on a regular basis to sign agreements on behalf of the foreign entity; or

• The person with power of attorney of the foreign entity keeps inventory and/or goods in Peru to be negotiated in Peru on behalf of the foreign entity. As of 2019 a permanent establishment will also be recognised when:

• The operations of a construction site or installation project, as well as the supervision activities related to them, exceed 183 calendar days within any 12-month period;

• The provision of services is rendered in Peru for the same or related project for a period or periods that exceed 183 calendar days within a 12-month timespan; or

• A person in Peru acts on behalf of a non-resident entity and has and habitually exercises an authority to: (a) enter into contracts on behalf of the nonresident entity; (b) transfer property or the use of goods/ assets owned by the non-resident entity; or (c) enters into contracts for the referring of services by the non-resident entity.

Capital Gains

Capital gains resulting from the disposal of certain securities are exempt from income tax if they meet the below requirements:

• The securities must be traded on the Lima Stock Exchange;

• In any 12-month period the taxpayer and its related parties must not transfer more than 10% of the securities issued by the company; and

• The securities must meet a liquidity threshold to be considered stock market securities. At the opening of every market session, the Lima Stock Exchange publishes the securities that comply with the requirements to be considered stock market securities. This exemption is in force until 2019, according to Law No. 30341 and Legislative Decree No. 1262. The exemption is lost if, after the application of the exemption, the issuer of the securities unlists them from the Lima Stock Exchange within 12 months following the sale.

Indirect Share Transfers

Profits obtained from the indirect transfer of shares are considered Peruvian-sourced income. Under income tax law, an indirect transfer of Peruvian shares is deemed to have occurred if the following conditions are met:

• Within the 12-month period before the transfer, the fair market value of the shares issued by the Peruvian entity represents 50% or more of the fair market value of the total shares of the non-resident entity; and

• At least 10% of the shares of the non-resident entity are transferred within a 12-month period. As of 2019 an indirect transfer of Peruvian shares will also be triggered if the amount of the stock or ownership interest in Peruvian legal entities is equal to or greater than 40,000 tax units ($50.9m).

Tax Havens

Companies domiciled in the country cannot deduct, for effects of determining their income tax, expenses derived from transactions performed with individuals or entities that qualify as:

• Residents of non-cooperative countries or territories with low or no taxation; or

• Permanent establishments located or established in non-cooperative countries or territories with low or no taxation. In addition, companies cannot deduct expenses if they obtain income, revenue or profit through a non-cooperative country or territory with low or no taxation, or are subject to a preferential tax regime for their operations. Income tax regulations include Peru’s blacklist of nations and jurisdictions that are considered non-cooperative countries or territories with low or no taxation. The law outlines the requirements that must be met to be excluded from the blacklist. OECD members or countries that have double taxation treaties with Peru that include an exchange of information clause may be blacklisted if they do not comply with such exchanges of information. This limitation does not apply in the case of expenses derived from the following transactions:

• Loans;

• Insurance and reinsurance;

• Assignment for use of vessels or aircraft;

• Transport performed from abroad to the country and vice versa; and

• Fees for transit through the Panama Canal, as long as they are agreed at market value.

Transfer Pricing

Transfer pricing rules are based on the arm’s length principle as interpreted by the OECD, and must be considered exclusively for income tax purposes.

In Peru these rules are applied to transactions between related parties and to transactions with companies domiciled in tax havens, non-cooperative countries or under preferential tax regimes. Nevertheless, the value agreed by the parties must only be adjusted when the agreed price undermines tax collection procedures.

The market value of transactions subject to transfer pricing rules shall be determined in accordance with any of the internationally accepted methods, with the one found to best reflect the economic reality of the operation being selected.

It is possible to enter into advance transfer pricing agreements with the National Superintendency of Customs and Tax Administration, which may be unilateral or bilateral.

Whether an intragroup service charge can be deducted from net income for taxation purposes is subject to the following:

• The benefit test, which demonstrates that the service has provided economic or commercial value, improving or maintaining the company’s commercial position; and

• The documentation that proves the effective provision of the service, the actual need for the service, the nature of the service, the costs plus expenses incurred by the service provider and the allocation criteria. The deductibility of the mark-up applied to an intragroup service charge that is characterised as a lowvalue-added service is limited to a mark-up of 5%.

There are certain parameters to consider to accurately determine the market value in the case of export or import operations of goods with a known price in the international market, the local market or the market of destination, including those of derivative financial instruments, or with prices that are fixed by reference to the prices of these markets.

Tax Transparency Regime

The Peruvian income tax law includes the International Fiscal Transparency System, which applies to Peruvian residents who own a controlled foreign corporation (CFC). The law provides requirements for a foreign company to be qualified as a CFC. For these purposes, the ownership threshold is set at more than 50% of the equity, economic value or voting rights of a non-resident entity.

Furthermore, to be considered a CFC, a non-resident entity must be a resident of either of the following:

• A non-cooperative country, territory or tax haven jurisdiction; or

• A country in which passive income is either not subject to income tax or subject to income tax that is equal to or less than 75% of the tax that would have applied in Peru. The law also provides a list of the types of passive income that must be recognised by the Peruvian resident, such as dividends, interest, royalties and capital gains.

Revenues are allocated based on the participation that the Peruvian entity owns in a CFC as of December 31 of any given year.

Indirect Foreign Tax Credit

As of 2019 Peru recognises an indirect credit for foreign tax purposes. Previously, it only allowed the direct tax credit. With the new rules, a Peruvian entity receiving foreign income as dividends or profits from non-resident entities will be able to deduct:

• The income tax withheld for the dividends or profits distributed (direct credit); and

• The income tax paid by the first-tier non-resident entity (indirect credit). To qualify for the indirect foreign tax credit, the Peruvian entity must own at least 10% of the shares of the non-resident entity for 12 months before the date in which the dividends are paid.

The indirect foreign tax credit may be claimed for the income tax paid by the second-tier non-resident entity, provided the following conditions are met:

• The Peruvian entity indirectly owns at least 10% of the shares of the non-resident entity for 12 months before the date in which the dividends are paid; and

• The second-tier non-resident entity is a resident of a country that has an exchange of information agreement with Peru or is a resident of the same country of residence as the first-tier non-resident entity.

Legal Stability Agreements

ProInversión, the agency for the promotion of private investment, can enter into legal stability agreements on behalf of the Peruvian government, guaranteeing foreign parties the stability of the legal and tax systems applicable to the investors and companies receiving the foreign investment.

For that purpose, capital contributions of an established company or a company to be established in Peru for an amount not less than $10m in the mining and hydrocarbons sector and $5m in any other economic sector are required. The investment can be made over a maximum period of two years.

The duration of legal stability agreements is 10 years, except for those related to investors who have entered into a concession contract for the construction and use of public infrastructure works and/or the provision of public services, in which case the concession deadline applies.

Income Tax Withholding

In the case of Peruvian-sourced income obtained by non-domiciled entities, the rate of income tax withholding must be applied by Peruvian companies depending on the type of income, as outlined in the table at the bottom of the page.

Income from activities performed partially in Peru and partially abroad by non-domiciled entities, including that obtained by their branches or permanent establishments, is subject to the following effective income tax rates:

• Air transport: 0.3%, unless reciprocal exoneration applies;

• Chartering or maritime transport: 0.6%, unless reciprocal exoneration applies;

• Insurance: 2.1%;

• Vessel lease: 8%, with a withholding rate of 10%;

• Aircraft lease: 6%, with a withholding rate of 10%;

• Telecommunications services: 1.5%;

• International news agencies: 3%;

• Cinema films distribution: 6%;

• Supply of transport containers: 4.5%;

• Demurrage of transport containers: 24%; and

• Television broadcasting rights assignment: 6%.

Double Taxation Treaties

To avoid double taxation, Peru has signed and ratified treaties with Brazil, Chile, Canada, Portugal, South Korea, Switzerland and Mexico as of early 2019. Peru is also part of the Andean Community along with Colombia, Ecuador and Bolivia. In this regard, Decision No. 578 is applicable for avoiding double taxation between those countries. This is done by prioritising taxation at the source, using the exemption method.


Value-added tax (VAT) is levied on the sale of goods in the country, the provision and use of services, and the importation of goods at a rate of 18%, which includes 2% of municipal promotion tax. Corporate reorganisations are not subject to this type of tax.

It should be noted that the VAT Law uses the debit/credit system, under which VAT paid on sales is offset against VAT paid on purchases. VAT not applied as credit in a particular month may be carried forward to the following months until it is used up. This credit is not subject to prescription or expiration terms.

The export of goods is not taxable, but if the transfer of ownership occurs within the country, special requirements apply. The export of services is not subject to VAT either, but again this determination depends on certain requirements.

VAT paid on purchases related to the export of goods and/or services shall entitle a balance in favour of the exporter. Such a balance may be offset against VAT paid on local sales, if any. If there is a remaining amount, it may be offset against income tax or against other public Treasury tax debts, or a refund can be requested. The compensation and/ or refund is subject to a limit.

VAT Recovery Regimes

Individuals or legal entities who perform investments in any sector of the economy, generate third-category income and have a project in a pre-operative phase of two or more years may benefit from the VAT Early Recovery Regime. This means an investor is able to request the return of VAT that was levied on local imports and/or acquisitions of new capital goods, new intermediate goods, construction services and contracts that were used directly in the execution of the corresponding project.

To be eligible for this special regime, the amount of contract investment commitment must be at least $5m, except for investments made in the agricultural sector, which are exempt from this requirement.

Moreover, Peru offers a Final VAT Refund Regime, which consists of returning the VAT transferred or paid during the acquisition of certain goods and services directly related to the development of exploration activities in certain sectors. This regime can be applied by individuals or legal entities who hold mining concessions, and investors who have signed licence or service contracts under the country’s Hydrocarbons Law.

Selective Consumption Tax

This tax applies to the consumption of specific goods, such as fuels, cigarettes, beer, liquors, carbonated drinks, gambling games and bets. It is calculated via three systems:

• Specific, involving a fixed amount in new soles per unit of measurement;

• At value, based on a percentage of the sale price; and

• Retail price, based on a percentage of the price suggested to the public.

Temporary Net Assets Tax

This tax is equivalent to 0.4% of the value of total assets over PEN1m ($303,000), determined as of December 31 of the previous year. The amount paid is usable as credit against corporate income tax or subject to refund.

Pre-operative entities are exempt from this tax during their first year of operations, but will be subject to the tax the following year.

Tax on Financial Transactions

This rate is 0.005% and generally applies to deposits and withdrawals of financial institution accounts in Peru.

Means of Payment

Any business payment that exceeds PEN3500 ($1060) must be made through one of the following means:

• Bank deposit;

• Money order;

• Money transfer;

• Payment order;

• Debit or credit card issued in the country; or

• Non-negotiable check. Not using one of these means of payment results in failure to recognise the cost or expense related to that payment for corporate income tax purposes. In addition, the VAT paid on such transactions may not be used as a tax credit.

Customs Tax

The importation of goods is subject to Customs duties, the current ad valorem rates of which are 0%, 6% and 11%. VAT of 18% is applied to the import of goods as well. In addition, depending of the merchandise type, its importation could be subject to the payment of excise tax, anti-dumping duties, countervailing duties and other fees.

In the case of goods subject to the payment of anti-dumping and countervailing duties, it should be noted that the former is applied to some imported goods when the price discrimination could harm or threaten to harm a branch of national production. Countervailing duties, meanwhile, are applied when the imported goods are subsidised in the country of origin and, at the time of importation, could harm or threaten to harm a branch of national production.

The application of Customs duties and VAT is summarised in the table below.

Drawback Regime

The drawback regime allows producer-exporter companies to totally or partially recover the Customs duties paid on importing raw materials, inputs, and intermediate products and parts incorporated or used in the production of goods to be exported, provided that the import value of cost, insurance and freight does not exceed 50% of the free-on-board (FOB) value of the exported product, and that all the established requirements are met to be eligible for this benefit. The applicable drawback rate is equivalent to 3% of the FOB value of the exported product.

Commercial Treaties

Peru is a member of the World Trade Organisation, the Andean Community, the Southern Common Market, the Asia-Pacific Economic Cooperation Forum and the Pacific Alliance. Likewise, Peru has free trade agreements in force with Chile, Mexico, the US, Canada, Singapore, China, South Korea, Thailand, Japan, Panama, the EU, Costa Rica, Cuba, Venezuela, Honduras and the European Free Trade Association.

Negotiations for other commercial agreements are under way with Guatemala, Brazil, Australia, and the Commercial and Progressive Agreement for Trans-Pacific Partnership.

Personal Taxation

Citizens domiciled in Peru are subject to taxation on their worldwide income, while citizens not domiciled in Peru are only taxed on their Peruvian-sourced income.

Foreigners residing or staying in Peru for more than 183 days within any given 12-month period will have the status of individuals domiciled in the country from January 1 of the following fiscal year in which the duration of stay expires.

Labour & Foreign Source Income

In the case of individuals domiciled in Peru, income under the fourth and fifth categories – which relate to income from a personal work source (independent and dependent, respectively), as well as foreign-sourced income – is taxed at a progressive cumulative rate, according to the following:

• Up to five tax units: 8%;

• Over five and up to 20 tax units: 14%;

• Over 20 and up to 35 tax units: 17%;

• Over 35 and up to 45 tax units: 20%; and

• Over 45 tax units: 30%. For wages, salaries and any other type of remuneration gained from performing dependent or independent work, a non-taxable minimum is set at seven tax units ($8900). Also, the amounts paid for certain services such as real state rental, doctors, lawyers and architects may be deducted as an expense up to a maximum of three tax units ($3810), provided that certain requirements are met. Lastly, a deduction of 20% on independent labour income is permitted, as well as donations and deductions of financial transaction tax.

Capital Income

Income obtained by domiciled individuals from the lease, sublease and assignment of assets (first category income), as well as other capital income (second category income), are subject to an effective rate of 5% of gross income.

Dividends received by individuals that are distributed by companies incorporated or established in Peru are subject to the following rates if the distribution is made with respect to:

• Accrued results as of December 31, 2014, at 4.1%;

• Results generated in 2015 and 2016, at 6.8%; and

• Results generated from 2017 onwards, at 5%.


On July 19, 2012 a general anti-avoidance rule (GAAR) was introduced in the Peruvian tax code to assist the tax authorities in responding to situations of tax avoidance and simulated transactions. To exercise powers under the GAAR, the authorities must determine that the taxpayer has:

• Performed artificial or improper acts to achieve a specific tax result, whether individually or with others; and

• The use of such artificial or improper acts created legal or economic results different than the regular tax outcome obtained from the routine or proper acts. Tax officials must follow a special procedure to determine the above. The GAAR allows for audits reviewing facts, acts and situations from July 19, 2012 onwards.

Legal representatives will be jointly liable for tax debt when the GAAR is applied, provided that those legal representatives have collaborated with the design, approval or implementation of the acts, situations or economic relationships challenged by the tax administration under the rule.

In the case of businesses that have a board of directors, the company’s board is responsible for approving the entity’s tax planning and cannot delegate this obligation. Boards of directors were obligated to evaluate the tax planning they had implemented up to September 14, 2018 in order to ratify or modify it. The deadline for such ratification or modification expired on March 29, 2019.

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