Business Operations in Peru (Portfolio 7288)

Tax Management Portfolio, Business Operations in Peru, No. 7288, contains general information designed to assist foreign investors/businesses in determining the best method of conducting their operations in Peru from both a tax and a general legal perspective. To view this Portfolio, visit Bloomberg Tax for a free trial.

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Description

Tax Management Portfolio, Business Operations in Peru, No. 7288, contains general information designed to assist foreign investors/businesses in determining the best method of conducting their operations in Peru from both a tax and a general legal perspective. The Portfolio describes the forms of doing business in Peru and provides an analysis of the statutory and procedural framework of Peruvian income taxation as it applies to individuals and corporations. In addition to providing a detailed explanation of the Peruvian income tax system, the Portfolio discusses the value added tax, the temporary tax on net assets, the real property tax, the real property transfer tax, as well as corporate, customs, intellectual property, labor, immigration, and foreign investment related law issues.

A guide to the Detailed Analysis is provided by a Table of Contents. The Portfolio's Worksheets provide access to the most important tax returns for corporations and individuals. A complete list is shown in the Table of Worksheets.

This Portfolio may be cited as Davila and Huaylla, 7288 T.M., Business Operations in Peru.

Authors

Jorge Davila Carbajal, Esq.

Jorge Davila C., Pontificia Universidad Catolica del Peru (Degree in Law, J.D.); Universidad del Pacifico (Postgraduate in Transfer Pricing and International Taxation); member, Peruvian Tax Law Institute; member, International Fiscal Association; licensed to practice law in the Republic of Peru.

Natali Huaylla Hernandez, Esq.

Natali Huaylla H., The London School of Economics and Political Science (LL.M. in Taxation); Pontificia Universidad Católica del Perú (Degree in Law, J.D.); member, Peruvian Tax Law Institute; member, International Fiscal Association; licensed to practice law in the Republic of Peru.

Table of Contents

Detailed Analysis
I. Peru — The Country, Its People and Economy
A. The Country
B. Language
C. Population
D. Basic History
E. Political Organization
F. Economy
II. Operating a Business in Peru
A. Foreign Investment Regulation
1. Background
2. ProInversion
a. Introduction
b. Main Activities and Responsibilities
3. Principal Rights for Foreign Investors Under the Peruvian Constitution and the Foreign Investment Encouragement Law
a. Principal Rights
b. Restrictions
4. Juridical Stability Agreements and Registration of Foreign Investment
a. Definition
b. Entitled Parties
c. Minimum Investment Amounts
d. Principal Rights of the Parties
(1) Investors
(2) Invested Company
e. Term
f. Registration of Foreign Investment
g. Mining and Hydrocarbon Industries
(1) Mining Industry
(a) Legal Requirements
(b) Guarantees
(c) Special Promotion for Larger Investments
(2) Hydrocarbon Industry
(a) Legal Requirements
(b) Guarantees
5. Investment Agreements
6. Investment Guarantees
B. Currency and Exchange Controls
C. Trade and Commerce Regulation
1. Imports and Exports
a. International Trade Agreements
(1) European Generalized System of Preferences Plus
(2) Andean Community of Nations/Cartagena Agreement
(3) United States-Peru Free Trade Agreement
(4) Canada-Peru Free Trade Agreement
(5) China (PRC)-Peru Free Trade Agreement
(6) European Free Trade Association-Peru Free Trade Agreement
b. Imports
(1) Import Regimes
(a) Imports for Consumption
(b) Re-importation in the Same Condition
(c) Temporary Admission for Re-exportation in the Same Condition
(d) Customs Warehousing Regime
(2) Tax Regime Applicable to Imports
(a) Ad Valorem Duties
(b) Specific Duties — System of Price Levels
(c) Excise Tax
(d) Value Added Tax
(3) Formalities and Documentation
c. Exports
(1) Export Regimes
(a) Final Export
(b) Temporary Export for Re-importation in the Same Condition
(2) Formalities and Documents
2. General Regulation of Business
a. Monopolies
b. Mergers
(1) Stock Purchase Agreement
(2) Asset Purchase Agreement
(3) Merger
(a) Types of Merger
(b) General Procedure for Undertaking Mergers
(c) Simplified Merger Procedure
(d) Merger Control
(e) Securities Law and Takeovers
c. Restrictive Trade Practices
(1) Price Controls
(2) Securities Regulation
3. Licensing and Franchising
a. Introduction
b. Patents
c. Trademarks
d. Trade Names
e. Utility Models
f. Industrial Designs
g. Trade Secrets
h. Copyrights
i. Industrial Know-how
D. Immigration Regulations
1. Overview
2. Visas
a. Tourist Visa
b. Business Visa
c. Detached Employee Visa
d. Resident Employee Visa
e. Training Visa
3. Registration with the Central Register of Foreigners
4. Sanctions for Noncompliance with Immigration Law
E. Labor Relations
1. Legal Framework
2. Individual Labor Regime
a. General Employment Rules
b. Employment Agreement
c. Term of Agreement
d. Distortion of the Nature of a Fixed-Term Employment Agreement
e. Termination of Employment Agreement
f. Protection against Arbitrary Dismissal
g. Remuneration
h. Employer's Obligations
(1) Compensation for Time Served
(2) Legal Bonuses
(3) Annual Vacations
(4) Family Allowance
(5) Profit Sharing
(6) Life Insurance
(7) Complementary Risk at Work Insurance
(8) Workday and Overtime
(9) Legal Contributions
(a) National Health System
(b) Pension System
3. Foreign Employees
4. Collective Labor Relations
a. Unions
b. Creation of Unions
c. Types of Privilege
d. Union Immunity
e. Negotiation
f. Collective Bargaining
5. Labor Measures
F. Financing the Business
1. Shareholder Capital Injection
2. Loans from Financial Entities
3. Issuance of Debt Instruments
4. Project Finance Structures
III. Forms of Doing Business in Peru
A. Principal Business Entities
B. Stock Corporation (Sociedad Anónima)
1. Formation
a. Purpose Clause
b. Corporate Name
c. Incorporation
d. Articles of Incorporation
e. Capital Stock
f. Voting Shares
g. Nonvoting Shares
h. Incorporation Procedure for Foreign Shareholders
i. Costs of Incorporation
2. Operation
a. License
b. Amendment of By-laws
c. Increases and Decreases in Capital
(1) Increase in Capital
(2) Decrease in Capital
d. Acquisition of Own Stock
e. Corporate Officers
f. Shareholders’ Meeting
g. Directors’ Meetings
h. Books and Records
i. Financial Statements
j. Dividends and Other Distributions
k. Reserves
3. Merger
4. Dissolution
5. Liquidation
6. Reorganizations
C. Closed Stock Corporation (Sociedad Anónima Cerrada)
1. Preferential Acquisition Right
2. Optional Board of Directors
D. Limited Liability Company (Sociedad Comercial de Responsabilidad Limitada)
E. Branch of a Foreign Corporation
IV. Principal Taxes
Introductory Material
A. Sources of Authority in Tax
1. Legislative
a. Power to Enact Law
b. Lawmaking and Enactment
c. Constitutional Challenge
2. Administrative
a. Power to Enact Regulations
b. The Peruvian Tax Administration
(1) Resolutions of Superintendence
(2) Formal Opinions Issued by the Peruvian Tax Administration
(3) Advance Tax Ruling Request Procedure
3. Tax Court Mandatory Jurisprudence
B. Income Tax
C. Estate, Inheritance and Gift Tax
D. Value Added Tax
1. Activities Taxed
a. Local Sale of Movable Goods
b. Rendering or Use of Services in Peru
c. Construction Contracts
d. First Sale of Real Property by Builder
e. Importation of Goods
2. Exempt Activities
3. Taxpayers
a. Taxpayers that Carry on Business Activities
b. Taxpayers Who Do Not Carry on Business Activities
4. Calculation of Value Added Tax
a. Taxable Event
b. Taxable Base
c. Value Added Tax Credit
d. Filing
e. Export Activities
E. Excise Tax
F. Capital Investment Tax
G. Payroll Tax
1. National Health System
2. Pension Contributions
H. Trade Tax
I. Net Worth Tax
J. Temporary Tax on Net Assets
K. Financial Transactions Tax
L. Local Taxes
1. Real Property Tax
2. Real Property Transfer Tax
M. Tax Incentives
1. Value Added Tax Anticipated Recovery Regime
2. Centers for Export, Transformation, Industry, Commercialization and Services
3. Free Zone and Commercial Zone of Tacna
4. Special Regime for the Amazonian Region
5. Special Regime for the Andean Region
V. Income Taxation and Financial Accounting of Resident Corporations
A. Introduction
B. Resident Legal Entities
1. What Is a Legal Entity?
2. Residence
3. Basis of Taxation for Resident Legal Entities
4. Peruvian-Source Income Categorization
C. Income Tax on Resident Corporations
1. Overview
2. Peruvian-Source Gross Income
a. General
b. Peruvian-Source Income
c. Gross Income Derived from the Disposal of Goods
d. Presumptive Income
(1) Income from Loans
(2) Income from the Leasing of Real Property
(3) Income from the Granting of the Use of Real Property
(4) Income from the Granting of the Use of Movable or Immovable Property (Other than Real Property)
e. Treatment of Dividends
(1) General Rule
(2) Indirect Disposal of Business Income
3. Peruvian-Source Net Income
a. Deductible Business Expenses
(1) Debt Interest
(2) Employee Transportation Expenses
(3) Scientific Research and Promotion of Research and Development Activities
(4) Taxes
(5) Insurance Expenses
(6) Extraordinary Losses
(7) Income Collection Expenses
(8) Pre-operating Expenses
(9) Unrecoverable or Bad Debts
(10) Expenses Associated with Employees
(11) Travel Expenses
(12) Donations
(13) Inventory Shrinkage and Obsolescence
(14) Depreciation
b. Nondeductible Business Expenses
c. Net Income from International Activities
d. Treatment of Losses
e. Foreign-Source Net Income
4. Calculation of Income Tax
a. Basis of Taxation
b. Tax Rates
c. Tax Credit for Income Tax Paid Abroad
d. Tax Return Filings
(1) Annual Income Tax Return
(2) Monthly Income Tax Return
(3) Withholding Income Tax Return
e. Statute of Limitations for Assessment and Collection of Taxes
f. Tax Audit Process
g. Tax Claims and Appeals
5. Accounting Records
6. Taxation of Mergers and Acquisitions
a. Voluntary Asset Appraisal with Tax Effects
b. Voluntary Asset Appraisal with No Tax Effects
c. No Asset Appraisal
VI. Income Taxation of Nonresident Corporations
A. Definition of Nonresident Corporation
B. Basis of Taxation
C. Calculation of Income Tax
1. Business Activities in Peru
2. Technical Assistance
3. Digital Services
4. Royalties
5. Loan Interest
6. Dividends
7. Disposal of Real Property
8. Disposal of Goods
9. Disposal of Securities
10. Indirect Transfer of Shares
11. International Activities
a. Income from the Leasing of Ships and Aircraft
b. International Air and Maritime Transportation
VII. Taxation of Branches, Agencies and Other Permanent Establishments
A. Introduction
B. What Is a Permanent Establishment?
C. Determination of Taxable Income
D. Branch Accounting
E. Subsidiary vs. Branch
VIII. Taxation of Consortia, Joint Ventures and Business Collaboration Contracts
IX. Taxation of Resident Individuals
A. Introduction
B. Residence
C. Income Tax on Resident Individuals
1. Overview
2. Peruvian-Source Gross Income
a. First Category Income
b. Second Category Income
c. Fourth Category Income
d. Fifth Category Income
3. Exempted Income
4. Income Tax Calculation
a. First Category Income Derived from Operating Leases of Immovable Goods
b. Second Category Income Derived from Dividends
c. Second Category Income Derived from the Transfer of Real Property
d. Second Category Income Derived from the Transfer of Shares
e. Other Second Category Income
f. Fourth and Fifth Category Income
5. Filing and Payment
D. Temporary Regime for the Reporting, Repatriation and Investment of Income
X. Taxation of Nonresident Individuals
A. Definition of Nonresident Individual
B. Basis of Taxation
C. Income Tax Calculation
XI. Estate, Inheritance, Transfer and Death Tax
XII. Inter-Company Pricing
A. Introduction
B. Related Parties Definition
C. Accepted Transfer Pricing Methods
D. Comparability Criteria
E. Benefit Test for Services
F. Transfer Pricing Formal Obligations
G. Advance Pricing Agreements
1. General Provisions
2. Procedure
3. Termination of Advance Pricing Agreements
XIII. Special Provisions Relating to Tax-Avoidance
Introductory Material
A. Tax Havens
B. General Anti-Avoidance Rule
C. Controlled Foreign Corporation Regime
XIV. Avoidance of Double Taxation
A. Tax Credit for Income Tax Paid Abroad
B. Tax Treaties
1. General Double Taxation Agreements
2. Regime of the Andean Community of Nations to Avoid Double Taxation and Prevent Tax Evasion

Working Papers

Table of Worksheets
Worksheet 1 List of Important Tax Forms for Corporations and Individuals
Worksheet 2 List of Other Relevant Forms for Corporations and Individuals
Worksheet 3 List of Countries with Which Peru Has In Force Income Tax Treaties and Other Tax-Related Agreements as of November 1, 2017