In early 2017 the Peruvian government enacted a number of notable reforms to its tax framework, such as increasing tax rates for corporate income, decreasing the dividends withholding tax rate, and extending the temporary exemption from capital gains tax on gains derived from the sale of shares listed and traded on the Lima Stock Exchange. The reform has also focused on amnesty programmes for undeclared income held abroad, and new deductions for health and housing expenses.

Corporate Regulations

In Peru different types of corporations can be used by investors to develop business activities and they are regulated by the General Corporate Law. The types of corporations most commonly used include joint stock companies, closely held corporations, publicly held corporations, limited liability companies and branches.

Joint Stock Company: A minimum of two shareholders are required for a joint stock company. Non-domiciled shareholders must elect a representative in Peru to sign off on bylaws. There is no minimum capital required; however, it is the customary practice of financial institutions to request a minimum amount of PEN1000 ($296) as seed capital. Capital contributions can be made in national or foreign currency and must be deposited in a local bank account. The liability of the shareholders is limited to the par value of the shares they hold. Shareholders’ meetings, the board of directors and general management are responsible for the company’s management. Any transfer of shares is free.

Closely Held Corporation: A minimum of two shareholders and a maximum of 20 is required for a closely held corporation. The liability of shareholders is limited to the par value of the shares they hold. Shareholders’ meetings and general management – a board of directors is optional – are responsible for oversight of the company. Shares cannot be listed on the Lima Stock Exchange. Shareholders have pre-emptive rights in the event that a transfer of shares to a third party is proposed; however, this right may be eliminated in the bylaws.

Publicly Held Corporation: This type of corporation is generally used by companies that have many shareholders with at least 750 shares, have made an initial public offering of shares, have convertible bonds or in which more than 35% of the capital stock belongs to 175 or more shareholders. The shares must be registered with the Stock Public Registry.

The liability of the shareholders is limited to the par value of the shares they hold. Shareholders’ meetings, the board of directors and general management are responsible for oversight of the company. They are supervised by the Peruvian Stock Exchange Superintendence. Any restrictions or limitations on the transfer of shares is prohibited.

Limited Liability Company: A minimum of two and a maximum of 20 partners is required for a limited liability company. This type of firm does not issue shares. The capital is divided into ownership interests or equal parts (participations), which are cumulative and indivisible. At the time of incorporation, no less than 25% of each participation should be paid. The liability of the investors is limited to the par value of the participations they hold. Partners’ meetings and general management are responsible for the company oversight. The participations’ transfer to third parties is subject to approval by the existing partners (pre-emption right is mandatory), must be formalised in public deed and must be registered in the Public Registry of Companies.

Branch: The agreement to establish a branch on behalf of a foreign parent company must be legalised by the Peruvian consulate and certified by the Ministry of Foreign Affairs in Peru, if applicable, or failing that, be apostilled in the country of origin, before being issued to public deed and registered in the Public Registry of Companies. Also, a certificate of good standing from the parent company is required. 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 regulated by the above-mentioned law.

Other Procedures

After selecting the legal form of the company, the founding minutes must be prepared, including the following information:

• The founding shareholders and/or partners;

• The corporate purpose;

• Bylaws; and

• The appointment of directors, among other items. This must be signed by a lawyer. The minutes are presented before a notary public, who will submit it to public deed and prepare the documents for the registration of the company in the Public Registry of Companies. The taxpayer registration number must be obtained from the National Superintendency of Tax Administration. Likewise, a checking account must be opened in the company’s name at a bank or local financial institution.

In addition, it must be taken into account that the financial sector is regulated by the Superintendence of Banking and Insurance, which establishes the specific requirements for companies to carry out the activities of the sector in question. It is important to mention that the General Corporation Law establishes that the financial statements are prepared and presented in accordance with the legal provisions that correspond and with accounting principles generally accepted in the country.

Certain businesses must prepare their financial statements in full compliance with International Financial Reporting Standards as issued by the International Financial Reporting Standards Board. This applies to companies with securities registered in the Stock Public Registry, as well as any firms registered on the Stock Public Registry, including:

• Brokerage agents;

• Companies managing mutual funds;

• Companies managing investment funds;

• Securitisation companies;

• Risk rating companies;

• Price vendor companies and other entities authorised by the Peruvian Stock Exchange Superintendence; and

• Companies managing collective funds and investment funds. Companies supervised by the Superintendence of Banking and Insurance, however, must prepare their financial statements observing the provisions determined by the regulation of the superintendence.

Corporate Taxation

Enterprises incorporated in Peru are subject to income tax on their worldwide income. However, regarding non-domiciled corporations, their branches, agencies or permanent establishments, they are only taxed on their Peruvian-sourced income. The corporate tax rate is 29.5% and is applied to net income. Dividends received from other domiciled legal entities are exempt. Dividends received from non-domiciled entities are taxed at a rate of 29.5%. Domiciled firms are obliged to make tax prepayments for income tax, the amount of which is determined by the sum that is greater when comparing monthly instalments resulting from the application of the following percentage or coefficient methods.


Under the percentage method a rate of 1.5% is applied to the total net income for the month. Under the coefficient method, the tax calculated from the previous fiscal year is divided by the total net income for the same year and is multiplied by a factor of 1.0536 (this factor is only applicable for 2017 and January and February 2018).

The resulting coefficient will be applied to the net income for the month. For January and February 2018 the coefficient will be determined based on the calculated tax and net income of the fiscal year prior to the previous one.

It is possible to request suspension of prepayments under certain circumstances. If the prepayments exceed the annual tax, the excess can be carried forward as a credit against future prepayments and even against annual income tax in following years or a refund can be requested.

In order to determine net taxable income it is permitted to deduct expenses incurred during generation of income, as well as costs related to the maintenance of an economic activity or a source of income. In general, subject to certain requirements and conditions, a firm is allowed to deduct:

• Insurance;

• Extraordinary non-recurring losses;

• Collection;

• Depreciation and pre-operating expenses;

• Authorised reserves;

• Write-offs and bad debt provisions;

• Social benefits provisions; and

• Retirement pensions, bonuses and gratifications for employees, among other things. For interest paid by domiciled taxpayers to related parties, the portion that exceeds the result of applying a coefficient (debt/equity ratio) of 3:1 at the close of the preceding fiscal year is not income tax deductible. Expenses incurred abroad are deductible if they were necessary for the generation of taxable income and have been accredited with the respective payment vouchers issued abroad. Expenses that are not accepted as deductible include, inter alia:

• Personal expenses;

• Assumed income tax (except interest);

• Tax and administrative fines;

• Donations;

• Expenses not supported with proof of payments; and

• Reserves or provisions not permitted by law.

Capital Gains

Capital gains resulting from the disposal of certain securities are exempt from income tax, as long as they comply with certain requirements. Common stock, investment shares, convertible bonds, American Depository Receipts and Global Depository Receipts are exempt if they meet the following conditions:

• Must be disposable through the Lima Stock Exchange;

• The taxpayer and related parties must not transfer more than 10% of the total securities issued by the company whose securities are sold in any given 12-month period; and

• Securities must have a stock market presence. Other securities must only meet the first and last requirements listed above. These include exchange-traded fund units, provided the underlying assets are shares and/or debt securities; debt securities; participation certificates in mutual investment funds; participation certificates in fideicomisos de inversión y bienes raíces (FIBRAS); and participation certificates in securitisation trusts for FIBRAS. Negotiable invoices must only meet the first requirement. This exemption will be in force until 2019, according to Law No. 30341.

Income Tax Withholding

In the case of Peruvian-sourced income obtained by non-domiciled entities, the income tax withholding rate must be applied by Peruvian companies depending on the type of income. For dividends and other forms of profit distribution, as well as the remittance of profits from the branch, the rates vary according to year. The withholding tax rates are as follows:

• 4.1% up to December 31, 2014;

• 6.8% for 2015 and 2016; and

• 5% from 2017 onwards. Capital gains on disposal of transferable securities through the Lima Stock Exchange are subject to a 5% rate. This category includes:

• Disposal;

• Redemption of shares, bonds or other securities issued by companies incorporated in Peru; and

• Indirect disposal of shares of Peruvian companies. Exemptions may apply where applicable under Law No. 30341 as modified by Legislative Decree No. 1262. Capital gains on disposal of transferable securities aside from the Lima Stock Exchange are subject to a 30% rate. This category includes:

• Disposal;

• Redemption of shares, bonds or any other securities issued by companies incorporated in Peru; and

• Indirect disposal of shares of Peruvian companies. Other types of income are subject to withholding tax as outlined below:

• 4.99% for interest, if certain requirements are met;

• 30% for interest paid to related companies abroad;

• 15% for technical assistance services economically used in Peru;

• 30% for digital services economically used in Peru;

• 30% for royalties; and

• 30% for other income resulting from business activities carried out in Peruvian territory. Income from activities performed partially in Peru and partially abroad by non-domiciled entities, including those obtained by their branches or permanent establishments, is subject to the following effective income tax rates:

• 0.3% on air transport, unless reciprocal exoneration applies;

• 0.6% on chartering or maritime transport, unless reciprocal exoneration applies;

• 2.1% on insurance;

• 8% on vessel lease, with a withholding rate of 10%;

• 6% on aircraft lease, with a withholding rate of 10%;

• 1.5% on telecommunications services;

• 3% on international news agencies;

• 6% on cinema films distribution;

• 4.5% on supply of transport containers;

• 24% on demurrage of transport containers; and

• 6% on television broadcasting rights assignment.

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 residing in countries or territories with low or no taxation at all, nor shall they have the right to offset losses incurred by these transactions with foreign source income, except in the case of transactions involving:

• Loans;

• Insurance and reinsurance;

• Assignment for use of vessels or aircraft;

• Fee for transit through the Panama Canal; and

• Transport performed from abroad to the country and vice-versa. Derivative financial instruments entered into with taxpayers domiciled in tax havens shall be considered speculative, in which case losses may only be offset with profits of the same kind.

Transfer Pricing

Transfer pricing rules are based on the arm’s length principle, as interpreted by the OECD, and they 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. Nevertheless, the value agreed on by the parties must only be adjusted when they generate a tax collection detriment. The value of transactions subject to transfer pricing rules shall be determined in accordance with any of the internationally accepted methods, for which purpose the one found to best reflect the economic reality of the operation shall be considered.

However, there are parameters to be considered in order to 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 those markets.

Likewise, for deducting consideration of services as cost or expense, the domiciled company must comply with the benefit test, meaning it must demonstrate that the service has provided economic or commercial value improving or maintaining its commercial position, and the company must provide documentation that proves the effective provision of the service, the actual need for the service, costs or expenses incurred by the service provider and the allocation criteria. It is possible to enter into advance transfer pricing agreements with the National Superintendency of Tax Administration, which may be unilateral or bilateral.

Domiciled companies subject to the scope of transfer pricing rules, whose revenues accrued during the fiscal year exceed approximately $2.8m, must submit a local file affidavit annually. Taxpayers who are part of an economic group the income accrued of which in the fiscal year exceeds approximately $24.5m must submit the master file informative affidavit annually, containing, inter alia, the organisational structure, description of the business or businesses and transfer pricing policies regarding intangibles, group financing and their fiscal-financial position. Likewise, taxpayers who are part of a multinational group must submit the country-by-country report annually, and an informative affidavit containing, inter alia, information related to the global distribution of income, taxes paid and business activities of each of the entities belonging to the multinational group that carry out their activity in a particular country or territory.

Means Of Payment

Any payment that exceeds the amount of PEN3500 ($307) must be made through any of the so-called means of payment, which include bank deposits, money orders, money transfers, payment orders, or debit or credit cards issued in the country, as well as non-negotiable checks. Not using these means of payment may result in failure to recognise the cost or the expense related to that payment for income tax purposes. In addition, the value-added tax (VAT) paid in such transaction may not be used as a tax credit.

International Tax Transparency

Starting on January 1, 2013 the International Tax Transparency Regime was incorporated, and is applicable to taxpayers domiciled in Peru who are owners of controlled non-domiciled entities regarding their passive income, provided that they are subject to income tax in Peru for their foreign-source income. This system entails including the passive income obtained through controlled non-domiciled entities under the taxable income of the individual(s) and companies domiciled in Peru, even when there is no effective distribution of the dividends related to the passive income in question.

Tax law establishes the following requirements that a foreign company must comply with in order to qualify as a controlled non-domiciled entity:

• Have a different legal identity from those of the persons that integrate it;

• Be incorporated, established, resident or domiciled in a tax haven or in a country or territory in which the passive income is not subject to income tax or it is less than 75% of the income tax that would be applied in Peru; and

• Be owned by an individual domiciled in Peru, which occurs when the taxpayer holds, directly or indirectly, an equity, individually or jointly with its related parties domiciled in the country, in more than 50% of the capital, results or voting rights of said entity. It has been established, for the application of the International Tax Transparency Regime, a restrictive list of concepts that qualify as passive incomes. This includes, for example, dividends, interest, royalties, capital gains coming from the alienation of real estate property and securities, as well as a number of excluded concepts. Likewise, it has been established that, if the income that qualifies as passive income is equal or exceeds 80% of the total income of the controlled non-domiciled entity, its total income will be deemed passive income.

Legal Stability Agreements

The state investment promotion agency ProInversión can enter into legal stability agreements guaranteeing foreign investors that they will enjoy the stability of the legal and tax system applicable to the investors and companies receiving these investments. For that purpose, contributions to the capital of an established company or a company to be established in Peru for an amount no less than $10m in the mining and hydrocarbons sector and $5m in any other economic sector are required. The investment can be made within a maximum period of two years. The term of the legal stability agreement is 10 years, except for those 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.

Double Taxation Treaties

Currently, in order to avoid double taxation, Peru has signed and ratified treaties with the following countries:

• Brazil;

• Chile;

• Canada;

• Portugal;

• South Korea;

• Switzerland; and

• Mexico. Peru is also a member of the Andean Community, along with Colombia, Ecuador and Bolivia. In this regard, Decision No. 578 is applicable for avoiding double taxation between Andean Community member countries, as well as for preventing tax evasion. Decision No. 578 prioritises the taxation at the source, using the exemption method.

Vat Regulation

VAT is levied on the sale of goods in the country, as well as the provision and use of services and import of goods, at an 18% rate. This includes 2% for the Municipal Promotion Tax. Corporate reorganisations are not subject to this tax. The export of goods is not taxable.

In the case of transfer of ownership in the country, the goods must be subject to a Customs process for definitive export, within the deadline established by the regulation, in order to qualify for exemption from VAT. If the deadline expires without the goods having been shipped, it will be assumed that the operation was performed within national territory, and the transaction shall be subject to VAT, unless it qualifies as an exempt operation.

The export of services is not taxable under VAT either. Operations that are considered to be export of services include those contained in Appendix V of the VAT Law, so long as:

• They correspond to an onerous transaction;

• The exporter is domiciled;

• The user is non-domiciled; and

• The use or exploitation of services by the non-domiciled party occurs abroad. The VAT Law uses the debit/credit system, under which the VAT paid on sales is offset against the 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.

VAT paid on purchases, related to the export of goods and/or services, shall entitle a balance in favour of the exporter. This balance may be offset against VAT paid on local sales.

If there is a remaining amount, it may be offset against income tax or against other public Treasury tax debts. If there is a remaining amount, a refund can be requested. The compensation and/or refund is subject to a limit.

Vat Recovery

Individuals or legal entities that perform investments in any sector of the economy, or that generate third-category income and have a project in a preoperative phase of two or more years, may benefit from the VAT Early Recovery Special Regime and request the return of VAT levied on local imports and/or acquisitions of new capital goods, new intermediate goods, construction services and contracts that are used directly in the execution of the corresponding project.

For this purpose, it is necessary to sign an investment agreement with ProInversión and the corresponding ministry related to the activity of the project, which will also issue a ministerial resolution qualifying the applicant as a beneficiary of the regime. The minimum amount of the contract investment commitment is $5m, except for investments to be made in the agricultural sector, which are exempt from this requirement.

Moreover, there is a VAT Definitive Return Regime, which consists in returning VAT transferred or paid for the acquisition of goods and services directly related to the development of exploration activities during exploration. This regime can be applied by individuals or legal entities who are holders of mining concessions, and investors who have signed licence or services contracts under the Hydrocarbons Law. For these purposes and in both cases the beneficiary must be in the exploration phase. In addition, in the case of holders of mining concessions an exploration investment programme must be signed, involving a minimum investment of $500,000.

Selective Consumption Tax

There is also a Selective Consumption Tax on the purchase of specific goods, such as fuels, cigarettes, beer, liquors, carbonated drinks, and gambling and bets, among other things. It is applied under three systems:

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

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

• Retail price, which is based on a percentage of the price suggested to the public for the good.

Temporary Tax

The Temporary Net Assets Tax (ITAN) is equivalent to 0.4% of the total value of net assets that exceed PEN1m ($296,000) determined at December 31 of the previous year. Companies in the pre-operational stage are excluded from this tax. ITAN is a credit against income tax, and a refund may be requested if it has not been fully offset by the close of the fiscal year.

Nevertheless, in order to avoid double taxation issues, subsidiaries and branches of foreign companies may choose to use the amount effectively paid for income tax prepayments corresponding to March and the followings of each year against the ITAN. In this way, foreign companies can claim as a foreign credit in their country of origin income tax paid in Peru, instead of a tax levied on assets.

Financial Transactions Tax

There is also a tax on financial transactions at a rate of 0.005%. This applies in general to deposits and withdrawals to and from accounts of financial institutions in Peru. According to Law No. 28194, transactions subject to the Financial Transactions Tax include credits or debits to bank accounts, among other things.

Customs Taxation

The import of goods is subject to the payment of Customs duties, the current ad valorem rates of which are 0%, 6% and 11%. Likewise, a VAT of 18% is applied to the import of goods. In addition, depending on the merchandise type, imports could be subject to the payment of selective consumption tax, anti-dumping duties or countervailing duties, among others.

In the case of the import 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 price discrimination could harm or threaten to harm a branch of national production. However, countervailing duties are applied when the imported goods are subsidised in the country of origin, and at the time of import it could harm or threaten to harm a domestic sector. The application of taxes and Customs duties varies and is summarised below:

• Customs duties include rates of 0%, 6% and 11%, based on cost, insurance and freight (CIF) value;

• The rate of Customs duties applied depend on the type of imported good;

• Capital goods are generally subject to a zero rate;

• VAT is set at 18%, based on CIF and Customs duties;

• VAT could be used as a tax credit by the importer; and

• Certain assets are additionally subject to the selective consumption tax.

Drawback Regime

The drawback regime allows producer-exporter companies to totally or partially recover the Customs duties paid on importing raw materials, inputs, intermediate products, and parts and pieces incorporated or used in the production of goods to be exported, provided the CIF import value does not exceed 50% of the free on board value of the exported product, and that all the established requirements are met in order to be eligible for this benefit. The applicable drawback rate is equivalent to 4% of the free on board value of the exported product; however, from 2019 the rate will be 3%.

Commercial Treaties

Peru is a member of several international trade blocs, including:

• The World Trade Organisation;

• The Andean Community;

• The Southern Common Market;

• The Asia-Pacific Economic Cooperation; and

• The Pacific Alliance. Likewise, Peru has free trade agreements currently 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.

Personal Taxation

Peru also has an income tax for individuals. Peruvian citizens domiciled in Peru are subject to taxation on their worldwide income. Individuals not domiciled in Peru are only taxed in this country on their Peruvian sourced income.

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

Foreign Source Income

In the case of individuals domiciled in Peru, income tax on income derived from a personal work source, as well as from a foreign-source income, is computed at a progressive cumulative rate, according to the following:

• 8% up to five indexed tax units of account ( unidades impositivas tributaries, UITs); one UIT is equivalent to $1227;

• 14% on five-20 UITs;

• 17% on 20-35 UITs;

• 20% on 35-45 UITs; and

• 30% on anything over 45 UITs. For wages, salaries and any other type of remuneration gained from performing dependent or independent work, a non-taxable minimum is set at seven UITs, or approximately $8590. In addition, the amounts paid for certain services, such as real estate rental, doctors, lawyers and architects, may be deducted as an expense up to a maximum of three UITs, or approximately $3680, provided that certain requirements are met.

Finally, a deduction of 20% on independent labour income is permitted, as well as donations and industrial facilities tax deductions.

Capital Incomes

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

Dividends distributed by companies incorporated or established in Peru, received by individuals, are subject to the following rates:

• 4.1% on accrued results as of December 31, 2014;

• 6.8% on results generated in 2015 and 2016; and

• 5% on results generated from 2017 onwards.

Amnesty Regime

Peruvian tax law currently provides for a tax amnesty regime for individuals. This temporary regime and substitute for income tax allows individuals, in cases where they had domiciled status in Peru in any fiscal year prior to 2016, to declare and, if applicable, repatriate and invest in Peru their previously non-declared income. This includes money, assets and/or rights located inside the country or abroad. The applicable rate will be 10% of the received net income that qualifies as previously non-declared income; unless the money is repatriated and invested in Peru, in which case the applicable rate will be 7%. In order to access this system, a tax return must be provided, and the tax must be paid by December 29, 2017. Some exceptions to this amnesty regime have been established.