Since 1992, Peru has experienced sustained and steady economic growth, mainly fuelled by the implementation of a social market economy model that recognised the importance of promoting the creation of wealth and guaranteeing the freedom of private enterprise, commerce and industry. The participation of government and public entities in business activities has diminished progressively, to the extent that it can now be considered subsidiary and reserved for exceptional cases of overriding public interest, leaving the matter in the hands of private companies.

In the 1990s, the government established an attractive constitutional and legal framework that, complemented by its strong macroeconomic performance and stable policies, encouraged foreign business presence to increase in Peru. Although Peru has experienced an economic slowdown in the past few years, foreign investment continues to play an essential role.

Among other factors, economic growth has been possible owing to the following guarantees granted to foreign investors:

  1. equal treatment of national and foreign investment;
  2. free production of goods and services and foreign trade;
  3. no limitations or restrictions on the possession and disposition of foreign currency and remittance of funds abroad;
  4. free market, and a prohibition on monopolistic practices and abuse of dominant position; and
  5. the ability to execute legal and tax stability agreements with the government.

In addition, Peru has executed over 30 bilateral investment treaties establishing the terms and conditions for the protection of private investment. In several cases, such treaties have been subsumed under other commercial agreements with wider scope (such as free trade agreements), which contain specific chapters related to the promotion and protection of private investment. Peru has executed free trade agreements with Canada, Chile, China, Costa Rica, the EFTA countries (Iceland, Liechtenstein, Norway and Switzerland), the EU, Guatemala, Honduras, Korea, Japan, Mexico, Panama, Singapore, Thailand, the United States and Venezuela, and most recently with Australia.

Peru is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Its membership was approved by Congress and entered into force in 1993. Peru is also a member of the Convention for the Multilateral Investment Guarantee Agency, which grants insurance against political non-commercial risks. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards has been enforceable in Peru since 1988.


The most commonly used business entity in Peru is the corporation. Depending on the number of shareholders, the existence of restrictions on the transfer of shares and some other factors treated in more detail in the following paragraphs, corporations may adopt two additional sub-types: close corporations and public corporations.

Other entrepreneurial forms to set up a business presence in the country are the limited liability company and – mostly in the specific case of foreign investors – the branch.

As a general rule, all business entities established in Peru are subject to taxation on their net income (i.e., they are taxed only for the difference between the revenues derived from their economic activities and the expenses incurred for such purpose).

i Corporate

Businesses generally adopt a corporate form (corporation, limited liability company or branch). The most relevant characteristics and key differences of these types of entities are as follows.


A corporation is created with contributions of at least two shareholders (either local or foreign individuals, or legal entities) to perform certain economic activities with the aim of obtaining profits in return. There is no maximum number of shareholders.

The liability of the shareholders with third parties is limited to the amount of their respective equity contributions (capital). The funds initially invested must be deposited in a local banking account.

The articles of incorporation and by-laws of the corporation must be converted into a public deed with a notary and then registered with the Public Registry, which gives place to the legal 'birth' of the corporation.

The bodies of the corporation are:

  1. the general shareholders' meeting (maximum body formed by the owners of the company, which decides by majority on the relevant matters thereof);
  2. the board of directors (body in charge of designing the economic policies of the company, submitting for the consideration of the shareholders' meeting annual reports and balance sheets, and profits distribution); and
  3. the general management, represented by a chief executive officer (in charge of executing the economic strategies and ordinary business activities of the company).

Close corporations

Unlike the regular corporation, in close corporations the maximum number of shareholders is 20, and the transfer of shares may be subject to some limits and restrictions if agreed upon by the shareholders.

Likewise, the existence of a board of directors in this type of corporation is optional.

Public corporations

Public corporations must be registered with SMV, the Stock Market Superintendency, and their shares must be listed on the Stock Exchange Market.

Owing to its public nature, transfer of shares is completely free in this type of corporation.

Limited liability companies

The setting up, steps and liability parameters of limited liability companies (LLCs) are the same as those for corporations. Likewise, with regards to the number of shares and managing bodies, LLCs resemble close corporations without a board of directors.

Unlike all other types of corporations, LLCs do not issue shares in favour of their partners, but rather 'participation' titles. Transfer of such titles is subject to first refusal rights of the existing partners, and must be formalised through a public deed and registered with the Public Registry (which is not required by corporations).


Companies, whether established in Peru or abroad, may freely organise branches in the country following similar procedures to those required for the creation of corporations. The formal document containing the agreement of the parent company for the creation of the branch describing, inter alia, the latter's line of business, capital assigned and appointment of legal representatives with detail of its powers, must be converted into a public deed and subsequently registered with the Public Registry. In addition, a certificate that proves the existence of the parent company (certificate of good standing) must be provided.

From a legal standpoint, branches do not have a status independent of their parent companies, but rather constitute an 'extension' of them. Nevertheless, branches represent parent companies with autonomy on management matters within the scope of the activities assigned by them, and are considered as independent local taxpayers from a tax standpoint.

ii Non-corporate

Even though the predominant way of doing business in the country is through corporate entities, some non-corporate forms are used in particular cases, such as consortium agreements and joint ventures.

These associative agreements (partnerships) are regularly used when two or more companies or individuals not wishing to create a new legal entity are interested in participating in a specific business activity or work (usually subject to a fixed term) for the purposes of which each of the participants is prepared to contribute determined 'specialised' resources of their own for the benefit of the common interest (funds, services, immovable property, know-how, workforce, client portfolios, etc.).

With respect to the applicable tax provisions, partnerships must keep accounting records that are independent of those of the partners (unless otherwise authorised by the tax administration) so that they are treated as separate taxpayers. Owing to this legal fiction, partnerships are taxed on the difference between the revenues generated by the specific activities or works conducted and the expenses incurred in the development of those activities.

In those cases where the partnerships do not keep independent accounting records, they will be treated as transparent entities, meaning that revenues and expenses will be attributed to the contracting parties in proportion to their respective participation in the business.


i Tax on profits

Regardless of the individuals' nationality, the companies' place of incorporation and the location of the productive source, resident entities are subject to income tax on their worldwide income, while non-resident entities and their branches, agencies and permanent establishments (PEs) are only taxed in respect of their domestic-sourced income.

Income subject to taxation is that obtained from:

  1. capital, work, and from the joint application of both factors (i.e., enterprises);
  2. capital gains;
  3. other profits derived from third parties' operations; and
  4. some specific imputed income.

To assess the taxable profits, taxpayers are entitled to deduct all expenses required for the generation of income or maintenance of its source, as well as those related to the generation of capital gains, provided that they are not specifically forbidden by law. In other words, tax legislation has adopted a broad criterion for the deduction of expenses. Therefore, it is acceptable to deduct, inter alia:

  1. interest derived from debts contracted to acquire goods or services related to the generation of taxable income or the maintenance of the productive source;
  2. insurance premiums covering risks over transactions, services and goods related to the production of taxable income;
  3. write-offs for bad debts and equitable provisions for the same purpose;
  4. awards, bonuses, compensations and, in general, payroll payments agreed for staff;
  5. royalties; and
  6. travel expenses incurred in connection with the business activities.

Likewise, depreciation of fixed assets and amortisation of finite intangible property, when related to the generation of taxable income, are also deductible. With respect to depreciation of assets, tax law has adopted the straight-line method, with maximum annual rates. For the depreciation to be accepted, it has to be recorded on the accounting books of the company, and the corresponding assets have to be related to the generation of income or maintenance of its source.

On the other hand, tax law contains a list of non-deductible expenses, such as:

  1. personal and living expenses of the taxpayer and his or her relatives;
  2. fines, surcharges and interest applied by governmental entities;
  3. donations not complying with legal requirements;
  4. expenses not supported with proper formal documentation; and
  5. expenses (including capital losses) incurred with entities domiciled or established in tax havens, with few exceptions.2

The starting point for determining taxable income is the profit and loss statement derived from accounting recorded in companies' books, which are adjusted in accordance with the previously mentioned rules on deductible and non-deductible expenses. Taxable profits and deductible expenses are computed on an accrual basis (a cash flow or receipt of funds is not necessary). For the first time ever, a legal definition of 'accrual' – in force as of 2019 – has been included in the tax legislation. Accordingly, as a general rule income shall be considered accrued whenever the substantial facts for its generation have occurred, provided the right to obtain the income is not subject to conditions. Additional rules have been approved to determine the accrual of income arising from specific transactions, such as alienation of goods, rendering of services, temporary assignment of goods and non-performance obligations.

Capital and income

In general terms, both income and capital gains obtained by resident entities are taxed in the same manner.


Tax losses may be relieved by carrying them forward and applying them to income obtained in subsequent fiscal years. There are two possible carry-forward systems that companies may choose between: system A allows losses to be carried forward for up to four years as from the year following on from the generation of the losses; and system B allows losses to be carried forward indefinitely, but only up to 50 per cent of the taxable income each year.

Any changes in the ownership of the company (i.e., at shareholder level) do not affect the loss tax relief. Companies are not allowed to carry-back their losses.


The general income tax annual rate for resident entities is 29.5 per cent.3 In addition, resident entities are obliged to make advance payments on a monthly basis by applying a coefficient over the accrued taxable income of the month.4 Advance payments are to be offset against the annual income tax obligation.

Companies involved in certain economic sectors may be subject to special or reduced income tax rates (i.e., companies involved in agriculture, animal husbandry and similar activities are entitled to a 15 per cent rate).

Companies entering into sectoral tax stability agreements for mining or oil and gas projects are subject to an additional two percentage points.


Peruvian-resident legal entities must file tax returns and pay taxes both on a monthly and annual basis.

The most important tax authority is the National Superintendency of Tax Administration (SUNAT), which is in charge of the administration and collection of all taxes assigned as public resources of the national government (taxes on income, sales, assets and financial transactions, as well as customs duties), public pensions and health security system contributions.

In addition, each of the approximately 1,800 municipalities in Peru is considered as a separate tax authority with respect to municipal taxes (mainly taxes on the ownership and transfer of immovable property, real estate and payment of municipal public services).

Tax authorities have discretionary faculties to exercise their auditing duties, which are not conducted on a routine cycle but rather on a variable basis. Larger businesses are usually audited every year, while medium-sized and small businesses may be audited on a biannual or lower frequency rate.

Should uncertainty exist as to the correct interpretation of a legal tax provision, SUNAT may issue a formal opinion providing proper guidance. Such opinions are mandatory for the employees of the tax administration.

If, however, the tax authorities try to collect taxes based on a criterion not shared by the taxpayer, the latter may file an administrative claim challenging the tax administration resolution. If said tax administration upholds its criterion, the claimant taxpayer may appeal the decision to the Tax Court, which constitutes the final administrative level for challenging tax resolutions. Further, the Tax Court's resolutions may be contested in the judiciary.

Tax grouping

Peruvian tax law does not contain any provision for consolidated taxation ('group of companies' doctrine). Indeed, as a general rule, all assets, losses, dividends, interest, etc., may not move within a tax group, but should remain within the particular company that originated them. In the case of reorganisation processes (such as mergers and spin-offs), however, it is possible to move tax credits and rights (but not deductible losses) from one company to another, subject to some specific requirements and restrictions.

ii Other relevant taxes

In addition to income tax, the following taxes should be taken into account when performing business activities in Peru.

Value added tax (VAT)

VAT at a rate of 18 per cent is generally imposed on the following transactions: sale of movable property, rendering and use of services, construction contracts, first sale of real property (except land) made by builders and the import of goods.

As occurs with many indirect tax systems, to determine the tax payable by the company performing the above-mentioned transactions (output VAT), the VAT paid in the company's acquisitions is accepted as a tax credit (input VAT). Exporters can recover VAT paid in acquisitions for up to 18 per cent of an export's free on board (FOB) value.

Companies that have not commenced productive operations with a pre-production stage equal to or longer than two years may resort to a special system to obtain the advanced recovery of the VAT levied on certain acquisitions provided that they execute an investment agreement with the state.

Payroll taxes

Companies must pay 9 per cent upon wages and salaries for Peru's health and social security system.

An approximate 13 per cent withholding on wages and salaries paid to employees is mandatory for AFP, the private pension fund.

A special retirement fund for mining and metallurgical workers shall be financed by 0.5 per cent of the mining companies' annual net income before income tax, and 0.5 per cent of the workers' gross monthly salary.

All wages, salaries, remunerations, bonuses, awards and, in general, compensations received by employees are subject to taxation with a progressive scale of 8, 14, 17, 20 and 30 per cent for resident employees, and with a flat 30 per cent rate for non-resident employees.

Temporary tax on net assets

This tax is levied at a rate of 0.4 per cent on the value of companies' assets exceeding an approximate amount of US$300,000. Temporary tax on net assets that has been effectively paid can be offset against income tax obligations for that fiscal year or reimbursed, at the taxpayer's option.

Tax on financial transactions

A 0.005 per cent tax on financial transactions is imposed on credits and debits in local banking accounts.

Customs duties

In addition to VAT, the import of goods is subject to the payment of customs duties, which may vary from zero up to 11 per cent, depending on the nature of the imported goods.


i Corporate residence

Whether owned by local or foreign investors, entities incorporated in Peru are resident for tax purposes.

Without prejudice to the comments below regarding branches and PEs, a non-locally incorporated entity may not be considered a tax resident itself unless it agrees to transfer its legal domicile to the country and be registered as a local company with the Public Registry.

ii Branch or permanent establishment

A non-locally incorporated entity can have a fiscal presence in the country through a formal branch or agency, as explained in Section III, as well as through PEs.

According to the Income Tax Law and its regulations, a PE is deemed to exist in any of the following cases:

  1. a fixed place of business where a foreign entity develops activities such as administrative offices, factories, workshops, places where natural resources are extracted, and any fixed or mobile facilities used for the exploration or exploitation of natural resources;
  2. a building site or construction, installation or assembly project, as well as related supervision activities, exceeding 183 calendar days within any 12-month period, unless an applicable tax treaty has set forth a shorter term, in which case such term will apply;
  3. the furnishing of services, conducted in the country for the same or a connected project or service, for a period or periods aggregating more than 183 calendar days within any 12-month period, unless an applicable tax treaty has set forth a shorter term, in which case such term will apply;
  4. an individual acting in the country on behalf of a non-locally incorporated sole proprietorship enterprise, company or entity, provided that such individual habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the non-locally incorporated sole proprietorship enterprise, company or entity, and these contracts are:
    • in the name of the said entities;
    • for the transfer of the ownership of, or the granting of the right to use, property owned by them or that they have the right to use; or
    • for the provision of services by them; or
  5. an individual acting on behalf of a foreign entity customarily keeping goods or merchandise destined to be negotiated in the country on behalf thereof.

Branches, agencies and PEs are subject to taxation in respect of their Peruvian-source income only.

Double taxation treaties entered into by Peru do not provide for special protection with respect to the generation of PEs. Nonetheless, such agreements allow income arising from certain activities to be subject to reduced tax rates or even exempted from taxation that otherwise would have been levied owing to the generation of a PE pursuant to domestic law.


There are special tax regimes for certain activities (public infrastructure and services concessions, electricity, geothermal energy, hydrocarbons, mining, tourism, agriculture, agribusiness, water farming, education), or for certain locations (jungle, Andes highlands and duty-free zones). Given that local and foreign investors, and the companies in which they invest, enjoy equal treatment,5 there are no special tax regimes for entities' operations outside their home jurisdiction or shareholders resident outside such jurisdictions.

i Holding company regimes

There are no special holding company regimes, such as participation exemptions, withholding exemptions, or exemptions for receipt of non-local dividends or income.

ii IP regimes

There are no special IP tax regimes, and no draft legislation for such a purpose is in the pipeline.

iii State aid

State aid is available in the form of the special tax regimes covering the sectors referred to above. Nevertheless, a type of state aid is being applied with the drawback of tariffs paid on the import of goods by exporters. It amounts temporarily to 3 per cent of the export FOB value as long as the production cost does not exceed 50 per cent of the FOB value.

iv General

Tax stability agreements

Although the tax regime has been relatively stable for the past few years, since tax simplification enacted in 1992 reduced the number of taxes from more than 40 to seven, tax stability agreements with the state have continued to be available to investors and recipient companies, and have played a key role in attracting investment to Peru, in particular in the mining and oil and gas sectors, where operations entail large investments in exploration or huge investments for the development of a project and its long-term operation. A second type of tax stability agreement is available for the mining and oil and gas sectors, providing for a broader scope of stability and longer terms than the stability provided in the ordinary stability agreements for all sectors.

Pursuant to the Peruvian Constitution, tax stability agreements are deemed contract law and cannot be amended unilaterally, not even by a law passed by Congress.

Juridical stability agreements (JSAs)

JSAs with the state are available for foreign or local investors in any economic activity, and for companies receiving investment from a foreign or local investor entering into a JSA, with the following characteristics:

  1. minimum investment committed for the next two years: US$5 million (mining and hydrocarbon activities US$10 million);
  2. term of the stability agreement: 10 years from the date of its execution;6
  3. tax regime stabilised for foreign investors, dividend tax regime;7 and
  4. tax regime stabilised for local companies receiving investment, corporate income tax regime.8

As the stability for investors is referred to a committed investment amount, such amount can be increased within the above-mentioned two-year term, hence expanding the stability scope. Likewise, successive agreements with the same investor can be executed and be effective simultaneously. In turn, as the stability for local companies receiving the investment is referred to the profits of the company, regardless of its source of investment, it may only have in place one JSA at a time.

Mining stability agreements (MSAs)

MSAs are available for mining projects. They comprise not only the whole tax regime for the project, but also foreign exchange and trade regulations. Companies that invest in a new mining project may enter into a contract with the state that would guarantee the stability of the tax laws in force at the time the contract is executed, and for a term of 15 years, provided that they invest at least US$500 million to either develop a mining project of not less than 15,000 tonnes per day or to expand an existing operation to reach a minimum processing capacity of 20,000 tonnes per day. Alternatively, mining companies may conclude a 12-year stability agreement provided that they invest at least US$100 million to either develop a mining project of not less than 5,000 tonnes per day or to expand an existing operation to reach a minimum processing capacity of 5,000 tonnes per day. In addition, a 10-year stability agreement is available to companies investing at least US$20 million to develop a mining project larger than 350 tonnes per day and up to 5,000 tonnes per day.

The stability term starts in the year when the committed investment in developing the mine is completed and exploitation begins, or at the request of the mining company as from the following year.9

Through an MSA, the state guarantees that the mining project will be subject solely to the tax regime in force on the date of execution of the MSA, including income tax rates, the calculation method to determine taxable income, tax refund mechanisms, customs duties, municipal taxes, water licences and good standing fees. The mining company is subject to the tax regime in force on the date of execution of the MSA and will not be subject to any other tax created thereafter. Moreover, it will not be subject to any further changes to the regime governing the calculation and payment method of taxes.10

An additional two percentage points in the regular income tax rate are also applicable to profits from mining projects with an MSA.

Legal mining royalties and the special tax on mining are also subject to the stability agreement. An MSA grants the mining company the right to keep its accounting records (and capital) in foreign currency and the right to apply a total annual overall depreciation rate of up to 20 per cent on fixed assets.11

Oil and gas stability agreements

The licence contract to be entered into with the state for the purpose of oil and gas activities guarantees that the tax regime in force at the time the licence contract is entered into will remain unchanged during the lifetime of the licence contract, under the following terms:

  1. the contractor is subject to the regular tax regime of Peru, including the ordinary income tax regime and specific regulations set out in the Organic Law for Hydrocarbons in force on the execution date;
  2. no taxes established after execution of the licence contract, or any changes that may be introduced at the source that generates the tax obligation, or in the amount of the tax, or in the exemptions, benefits, incentives and exclusions, shall apply, with the exception of VAT, excise taxes and any other tax on consumption, as well as the special regime applicable to exports and exemptions regarding imports;
  3. in the case of exemptions and other tax benefits, the tax stability shall be subject to the terms and conditions established by the legal provision that grants the said benefits; and
  4. the tax system that the contractors enjoy shall also apply to whomever, subsequent to the execution of a contract, assumes the contractor's condition according to law.

An additional two percentage points in the ordinary income tax rate are also applicable to profits from activities of the licence contract.


i Withholding on outward-bound payments (domestic law)

Dividends and other forms of profits distributed by local companies in favour of non-resident individuals or entities are subject to a 5 per cent income tax withholding. The tax is due at the time the distribution is agreed to by the general shareholders' meeting or when the distribution is effectively performed, whichever occurs first.

Reimbursement to a shareholder following a capital reduction up to the amount of non-distributed profits, revaluation surplus, reserves or additional capital at the time of the capital reduction is deemed to be taxable dividend.

On the other hand, branches and other PEs are subject to a 5 per cent dividend tax at the time their annual income tax return is due. The tax is calculated on the outstanding profits (after corporate income tax) available for distribution in favour of the foreign entity.

Likewise, interest is subject to income tax withholding if the capital is invested or economically used within the country, or if the payer is a resident entity. The applicable tax rate is 4.99 per cent if certain conditions are met; otherwise, the withholding tax rate is 30 per cent.12

Technical assistance services economically used within the country may also be subject to a special 15 per cent withholding income tax, for the purposes of which certain formalities must be fulfilled.13

Finally, royalties are subject to a 30 per cent withholding income tax whenever the rights in respect of which they are paid are economically used within the country or if the payer is a resident entity.

ii Domestic law exclusions or exemptions from withholding on outward-bound payments

Currently, domestic law exemptions from withholding on outward-bound payments are reduced to very specific cases, such as interest from promotion credits granted by international organisations or foreign government institutions, or royalties for technical, economic, financial and any other consulting provided from abroad by state entities or international organisations.

iii Double tax treaties

Peru's double taxation treaty network currently comprises Brazil, Canada, Chile, Korea, Mexico, Portugal and Switzerland. These treaties are largely based on the OECD Model Tax Convention. Likewise, Bolivia, Colombia, Ecuador and Peru, as members of the Andean Community, are subject to a common regime to prevent double taxation.

OECD-type treaties concluded by Peru establish maximum tax rates for dividends, interest and royalties in the residence state of the payer or where such items of income arise.

In turn, the Andean Community treaty establishes that royalties, interest and dividends are exclusively taxed at source, this is, in the state where the intangible property is used, the payment is attributed and recorded, and the distributing company is domiciled, respectively.

iv Taxation on receipt

Dividends and income flows received from abroad increase the taxable income of local companies, but if such flows were taxed in their country of origin, a 'direct' credit is given to reduce the local tax charge applicable to them. As from 2019, an 'indirect' credit is also available in respect of the corporate taxes paid abroad by the company that distributed dividends to the Peruvian shareholder. These credits proceed provided that foreign taxes do not exceed the amount resulting from the application of the 'average rate' of the taxpayer to the income obtained abroad, or the amount of tax actually paid abroad.


The most common ways for local entities to be funded is by means of capital contributions or through loans.

i Thin capitalisation

A maximum debt-to-equity ratio of 3:1 is in force regarding loans granted by related (or, as from 2019, unrelated) companies. Interest corresponding to the portion of the loan exceeding this ratio is not deductible. As from 2021, thin capitalisation rules are expected to be replaced by a new rule according to which interest is deductible up to an amount not exceeding 30 per cent of the previous year's EBITDA (as specifically defined in the law).

ii Deduction of finance costs

Interest from debts and expenses originated by the contracting, renewal or payment thereof may be deducted provided they have been contracted to acquire goods or services related to the generation of taxed income or the maintenance of the source.

It should be noted that interest can be deducted as to the portion that exceeds the amount of exempt interest income.

iii Restrictions on payments

The main restriction on dividend payments arises from corporate legislation, pursuant to which they may only be paid owing to the existence of profits or freely disposable reserves provided that the net equity of the company is not lower than the paid-in capital.

iv Return of capital

In general terms, equity capital can be repaid to shareholders by a reduction of capital without limitations. Should the repayment be performed in favour of local individuals, or non-resident entities or individuals, a 5 per cent dividend tax would apply on the difference between the nominal value of the shares and the amounts effectively received by them.14


i Acquisition

Non-local companies acquiring local businesses generally structure a transaction through an acquisition of shares or a capital contribution. Usually they use a non-local entity for the acquisition. If the acquirer of the shares is a local subsidiary, financial expenses related to such acquisition would, in principle, be considered non-deductible.15 Thin capitalisation rules as described above are applicable. Withholding tax on the consideration for non-resident sellers (if there is a capital gain) is applicable only at payment and proportionally to it.

The legal concept of Peruvian-source income includes capital gains from 'indirect alienation' of Peruvian-issued shares by non-resident companies, deeming such to be (1) the alienation of shares issued by a non-resident company; (2) a capital increase or capital reduction carried out by a non-resident, when the main value of such non-resident company is made up by the value of its shares in Peruvian companies; or (as from 2019) (3) the alienation of shares issued by a non-resident company, when the Peruvian-issued shares are worth approximately US$50 million or more.

ii Reorganisation

Under the Income Tax Law, corporate reorganisations, including mergers, demergers, spin-offs and simple reorganisations, enjoy a special regime when all the parties involved in the reorganisation are companies established in Peru. They can elect to reorganise themselves by transferring assets and liabilities at book value without attracting taxes owing to the application of the fair market value rules. It is a tax deferral system through an exemption of fair market value rules. Transfers of shares or capital reductions that occur within the taxable year following reorganisations by way of spin-offs or simple reorganisations have negative tax consequences.

For tax purposes, losses of a company cannot be transferred to another company within the framework of a corporate reorganisation. Certain restrictions apply to the use of own losses as well. Taxable surplus derived from a revaluation carried out prior to a reorganisation cannot be offset with carried losses.

Transfer of assets in a corporate reorganisation is VAT-free, and parties involved can agree the amount of VAT credit that can be assigned to each of them.

This same treatment is applicable to branches of foreign companies. Specifically, assets (and liabilities) of the branch transferred within the framework of a corporate reorganisation may be made, for tax purposes, at their book value and not at their fair market value.

Shares exchanged as a result of corporate reorganisation are, in principle, not taxed. It is easy to consolidate an acquired business through corporate reorganisation. There are no restrictions if merging with a non-local entity, but the special tax treatment provided to corporate reorganisations is not applicable if any involved parties are not local.

Reorganisations involving local companies and non-resident companies are not addressed in the tax legislation.

iii Exit

Although authorised in the corporate legislation, the tax effects of relocation of companies to or from Peru are not specifically considered in the tax legislation and there are no rulings to this extent. Currently, there are no exit taxes applicable in Peru, and no tax penalties incurred in relocating businesses.


i General anti-avoidance

The Tax Code provides for a general anti-avoidance rule that grants to the tax administration a broadened scope for applying the substance-over-form criteria in assessing the true nature of a taxable event. A specific procedure was recently approved for SUNAT to be allowed to apply the general anti-avoidance rule. However, the effective application of this rule remains suspended until the approval of regulations that clarify its scope.

ii Controlled foreign corporations (CFCs)

Foreign-source passive income (dividends, interests, royalties) and capital gains obtained by a CFC16 may be attributed to the Peruvian-resident controlling taxpayer in the corresponding proportion.

iii Transfer pricing

Transfer pricing rules, with the adoption of the arm's-length principle as interpreted by the OECD, have formed part of the local tax system for approximately 15 years. Likewise, the OECD three-tiered reporting standard (local file, master file and country-by-country report) has also been included in Peruvian tax system.

The main purpose of these rules is to ensure that the prices agreed upon between related parties are similar to those that would have been agreed among non-related parties with respect to comparable transactions under similar circumstances. In other words, transfer pricing rules dictate that all transactions are carried out at fair market value.

iv Tax clearances and rulings

Economic, labour and professional entities, as well as national public sector entities, may make 'institutional' inquiries regarding the meaning and scope of the tax rules. This procedure is also available to private companies and individuals ('private' inquiries), although restricted to specific taxpayers.

Interpretation criteria provided by the tax administration are mandatory for the tax administration; however, if such criteria are considered incorrect by taxpayers, they may follow the procedures explained in Section III.i.


Peru's GDP growth for 2018 is around 4.0 per cent and estimated for 2019 is 4.1 per cent. Fiscal deficit is around 3.0 per cent. Tax pressure (tax collected/GDP) is around 13.9 per cent in 2018 and estimated for 2019 is 14.2 per cent.

In 2018, a number of tax measures entered into force, the most relevant ones being the following:

  1. changes in the rules referring to capital gains derived from indirect alienation of shares issued by Peruvian companies;
  2. new limitations on interest deductions (stringent thin capitalisation rules);
  3. a definition of the accrual principle for tax purposes has been included for the first time ever;
  4. new rules to acknowledge the existence of permanent establishments have been enacted; and
  5. a procedure to apply the general anti-avoidance rule has been enacted, but it will need some regulations to enter into force.

Two relevant court decisions regarding taxes were issued in 2018. The first is a Constitutional Court decision that removed accrued interest on tax debts in a case where the tax administration took a long time (much longer that what has been regulated) to issue a decision on a tax assessment that was contested by the taxpayer. The other one was a Tax Court decision on the grounds of the former anti-avoidance rule in a case where a sale of shares was completed after its listing on the Lima Stock Exchange in order to benefit from the special 5 per cent tax rate on capital gains when the shares are sold through the stock exchange (instead of the regular 30 per cent rate). Based on the fact that the contract was concluded before listing and on certain contractual provisions, the Tax Court ruled that the alienation was not made through the Lima Stock Exchange and therefore, the regular 30 per cent rate was applicable.

Domestic legislation has continued to be passed to meet OECD standards and recommendations on transfer pricing reporting obligations,17 the exchange of information for tax purposes and mutual administrative assistance in tax matters (including lifting of banking secrecy), in line with Peru's efforts to become an OECD member. Throughout the year, Peru continued to participate in regional and international meetings on the OECD base erosion and profit shifting (BEPS) project. Most notably, in 2018 Peru signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, during a plenary meeting of the Inclusive Framework on BEPS held in Lima.

Peru concluded a free trade agreement with Australia during 2018 and continued negotiations with India.

Negotiations to conclude bilateral tax treaties with Italy, Japan, the Netherlands, Qatar, Singapore, Thailand and the United Kingdom, and renegotiations with Spain, continue.


Peru will continue negotiating agreements to avoid double taxation, since it is acknowledged that said agreements help attracting new investments and technologies, and to establish collaboration mechanisms and mutual assistance. The next treaty to be negotiated will incorporate the experience gained in the already executed ones to maximise their effects on investment and tax collection, as well as recommendations of the BEPS Project on international taxation.

Peru will continue incorporating the required regulations and minimum standards to adopt the recommendations of the OECD regarding international taxation and fulfil the commitment taken on by the country as an associate to the Inclusive Framework on BEPS.


1 César Castro Salinas is a partner and Rodrigo Flores Benavides is a senior associate at CMS Grau.

2 Such as interest for loans, insurance policies and lease of ships and aircraft.

3 Workers' profit sharing is applicable on the same basis in companies with more than 20 employees. The rate varies according to the economic sector (mining, retail and wholesale trade, 8 per cent; fishing, industry and telecommunications, 10 per cent; other activities, 5 per cent). It is deductible from taxable income.

4 A minimum 1.5 per cent advance payment is applicable, subject to certain exceptions.

5 There are a few exceptions established by the Constitution and special laws.

6 In the case of investment in companies to operate a public infrastructure or service concession, the term is the concession's life (usually 30 years).

7 This also 'freezes' for the investor the regime that guarantees the investor's right to free access to foreign currency, the right to use the most favourable exchange rate available, the right to repatriate capital and to remit profits abroad, and the right to non-discrimination in legal matters.

8 This also maintains for the investor the hiring regime for workers and export incentives.

9 Alternatively, at the request of the mining company, the stability period may be advanced and commence prior to completion of the required investments for a term of up to eight years (15-year and 12-year contracts) or three years (10-year contract).

10 The following are other guarantees granted under an MSA: free availability of export-related foreign currency, both in the country and abroad; non-discrimination as to the exchange rate used to convert the FOB value of exports or local sales (or both) into local currency, it being understood that the most favourable exchange rate is to be granted for foreign trade operations; free sale of mineral products; stability with respect to special regimes, in the event they are granted, for tax refunds and temporary imports, among others; and the guarantees granted under the MSA cannot be unilaterally changed by one of the parties.

11 Except depreciation of constructions, the rate for which is 5 per cent.

12 Conditions: (1) in the case of cash loans, the remittance of funds to Peru is duly documented; (2) the loan is subject to an annual interest rate not greater than the LIBOR rate plus seven points; (3) the lender and the local borrower are not regarded as related parties; and (4) the transaction is not considered as a related parties 'sham transaction' (e.g., back-to-back). If (1), (3) and (4) are not met, the withholding tax rate is 30 per cent. If (2) is not met, only the excess of such interest is subject to such 30 per cent rate.

13 If the fees amounted to more than approximately US$170,000, a certification from a local or international audit firm stating that the technical assistance was effectively rendered is required.

14 See Section VI.i: the tax treatment for reimbursement to a shareholder following a capital reduction up to the amount of non-distributed profits, revaluation surplus, reserves or additional capital at the time of the capital reduction is deemed to be taxable dividend.

15 An exception to such criteria was declared in Tax Court Rulings No. 4757-2-2005 and 539-5-2018, which took into account the synergies that benefited the acquirer.

16 A corporation located in a low or zero-tax jurisdiction in which a Peruvian resident owns more than 50 per cent.

17 The three-tiered approach to transfer pricing documentation (consisting of a local file, a master file and a country-by-country report) was regulated during 2017. The obligation to present a local file for fiscal year 2016 is in force from 2017; while the obligation to present a master file and a country-by-country report for fiscal year 2017 is in force from 2018.