Peru Tax & Business Guide - Deloitte

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Basic facts
Population 27.6m Inflation 1.7% (2005)*
Main languages Spanish, Quechua, Aymara GDP per head US$2,790*
Currency Nuevo sol (PEN) GDP growth 5.9% (2005)*
Economic communities Asia Pacific Economic Co-operation, Latin America Integration Association, WTO
GDP sources 6.7% agriculture, 25.4% industry, 67.9% services
*Economist Intelligence Unit.
Political environment

Peru is a presidential republic with a unicameral legislature and a strong executive.

Alejandro Toledo of Per? Posible was elected to the presidency for a five-year term in 2001. New elections (presidential and congressional) are due in April 2006.
Foreign trade and investment
Exports US$16.7bn (2005)* Imports US$12.1bn (2005)*
*Economist Intelligence Unit.

Leading exports: Gold, copper, textiles, zinc, lead and petroleum products.

Main export markets: the US, the UK, China, Japan and Germany.

Peru ranks 48th of 60 countries in the Economist Intelligence UnitÌs business environment rankings.

Multinational companies are generally extended the same treatment as domestic firms, with some recent exceptions in sectors such as telecommunications, energy and tobacco.
Business and financing
Business forms Corporations

Most foreign-owned firms are organised as corporations (sociedades anonimas, or SAs). Foreigners can also opt for a limited-liability company (sociedad comercial de responsibilidad limitada, or SRL), unlimited partnership (sociedad colectiva), branch office (sucursal) or a sole proprietorship.

Establishing a branch is relatively straightforward, but locally incorporated companies enjoy certain tax advantages over branches. Both business forms are subject to the same employee profit-sharing rules.
Labour environment
Unemployment rate 8.7% (2005)* Minimum wage PEN 460 (monthly)
*Economist Intelligence Unit.

Less than 15% of the labour force is unionised.

The employer pays 9% of the workerÌs monthly wage for social security (health benefits).

Foreign employees have the same employment rights and obligations as Peruvians, with some exceptions. The labour force must be at least 80% Peruvian and a maximum of 30% of payroll may go to foreign employees.

Variable remuneration is becoming more widespread.

The pension system consists of two separate funds: one state-run, the other set up by the private sector and run by private pension funds.
Taxation
Corporate tax
Main rate 30%

Resident companies are taxed on their worldwide income, with a credit for foreign tax paid; non-resident companies are taxed on Peruvian-source income only. The place of incorporation determines the place of residence of a legal entity for Peruvian tax purposes. Tax is charged at 30% on total income. Dividends paid between resident companies are not subject to withholding tax, but foreign dividends are included in taxable income.

The temporary net asset tax is in force for fiscal years 2005 and 2006, applied on net assets as of December 31st of the previous year for resident companies. The tax is determined by applying a cumulative progressive scale from 0% (up to approximately US$1.48m) to 0.6% (for the excess over US$1.48m), and it is payable during the first 12 working days in April or in nine instalments (from April to December). It may be credited against the payments on account of income tax or against the final payment of income tax.
Individual tax
Progressive rates to 30%

Resident individuals are taxed on their worldwide income; non-residents are taxed on Peruvian-source income only. An individual is resident if domiciled in Peru (domicile being the place of habitual abode). A foreigner is resident if staying in Peru for two years (disregarding absences of less than 90 days). Income tax is charged at progressive rates of 15%, 21% and 30%; non-domiciled individuals pay tax at a flat rate of 30%. Dividends received from resident companies are subject to a final withholding tax of 4.1%.
Capital gains
Gains are taxed as income

Capital gains are generally taxed as income. Capital gains of individuals from the disposal of property are only taxable if they result from habitual transactions, or if they are disposals of certain business property, depreciable personal property, or immovable property constructed with the intention of resale or sold within a development scheme.
Indirect tax
VAT standard rate 17% Municipal sales tax 2%

Value-added tax (including Municipal Sales Tax) applies at 19% to most transactions, and exports are zero-rated. Registration is compulsory for businesses. Exemptions include some basic foodstuffs, urban passenger transport, the international transport of cargo, life assurance policies, some financial products, books, and the construction and maintenance of ships.
Tax administration and compliance
Tax year Corporations: calendar year; Individuals: calendar year

Companies make nine monthly advance income-tax payments based on a percentage of net assets and 12 payments on account based on monthly taxable income. An annual self-assessment tax return must be filed, and final tax paid by the first week in April following the end of the tax year. Tax is deducted at source from wages and salaries. Individuals earning other types of income may be required to make advance payments, depending on the category of income received. Final tax is payable by individuals on submission of an annual self-assessment tax return.
Additional tax information
Withholding taxes Dividends 4.1%, Interest 4.99% (to non-related parties) or 30% (to related parties), Royalties 30%. Technical assistance services provided by non-domiciled companies 15% (if certain requisites are fulfilled).
Tax treaties Peru has concluded four tax treaties, with Canada, Chile, Sweden and the Andean Countries (Venezuela, Colombia, Ecuador and Bolivia). A tax treaty with Spain is under negotiation. There is no tax treaty with the US.
Dividends Dividends received from non-resident companies are taxable.
Revenue protection There is transfer-pricing and anti-haven (CFC) legislation.
Groups There are no provisions for group taxation.
Incentives Hydrocarbons; exports; mining; farming; tourist promotion.
Other taxes Customs and excise duties, Entertainment tax, Financial transactions tax, Industrial training fund levy, Municipal tax on real property.