Setting Up a Business in Peru By: Casahierro...

Setting Up a Business in Peru By: Casahierro Abogados

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Affiliated firms: Arizpe, Valdés & Marcos Abogados, Casahierro Abogados, Lloreda Camacho, Malis & Asociados, Miller Canfield, Rothmann, Sperling, Padovan & Duerte Abogados

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The information in this document provides an overview of the fundamental legal considerations to be

addressed when acquiring or establishing a business in the Peru. The content is intended to summarize some

of the pertinent provisions which apply and is not intended as specific legal advice. Readers are well advised

to seek the counsel of specialist professionals in their home states to advice on compliance with the laws and

identify the many planning opportunities.

LEGAL FRAME FOR PRIVATE FOREIGN INVESTMENT

I. LOCAL LEGAL FRAME

Peruvian foreign investment as well as national is protected on the various sectors of the

economy, granting guarantees and several benefits in its favor under equal conditions, by:

Constitution of Peru.

Legislative Decree 662, Foreign Investment Law.

Legislative Decree 674, Private Investment Promotion Law in State Companies.

Legislative Decree 757, Guidelines for Growth of Private Investment.

Supreme Decree 162-92-EF: Regulation of Systems of Private Investment Guarantee.

These decrees contain the basic legal framework regarding foreign investments in all sectors of the

economy, recognizing the importance of foreign investment and the transfer of technology for

Peruvian economic development, establishing a coherent set of general guaranties for them.

The aforesaid Legislative Decrees grants the following guarantees in favor of foreign investors:

Non-discriminatory treatment for national and foreign investors, guaranteeing equal

conditions for both capitals.

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Guaranty of the right to free remittance abroad, in freely convertible currency and without

prior authorization from the authorities, of all the capitals, dividends, net profits or royalties

derives from investments or the transfer of technology to Peru.

The possibility that foreign capitals may be invested in every sector of the Peruvian

economic activity.

The right to freedom of trade and industry, and the freedom to import and export, accorded

to foreign investors.

Legal and tax stability.

II. INTERNATIONAL LEGAL FRAME

Peru has signed important agreements to guarantee foreign investment within the international

legal frame.

The main agreement is with Multilateral Guarantees Agency, MIGA, a multilateral agency

established in 1985 in Seoul for guaranteeing the investments of member countries against non-

commercial risks. Such risks include restrictions on the transfer of foreign currency abroad;

expropriations or similar actions; default of contracts between investors and governments; and

armed conflict and civil rights that threatens investments made. It is possible to expand the

coverage of this agreement at the point request of the investor and government.

Likewise, an agreement was executed with the World Bank's International Court for the

Settlement of Investment Disputes (ICSID), to resolve disputes between the government and

investors.



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Peru has signed with several countries (United States of America, Canada, Singapore, China,

Japan) Free Trade Promotion Agreements since 2006, eliminating tariffs and removing barriers

to services, providing a secure, predictable legal framework for investors, and strengthens

protection for intellectual property, workers, and the environment. As well, it has signed other

commercial agreements within the framework and countries members of the Latin American

Integration Association (ALADI) and the Cartagena Agreement.

Finally, Peru has signed agreements with Canada, Chile, Brazil, Portugal, Switzerland, Republic

of Korea, Mexico and with the Andean Community Agreement to avoid double taxation (1) and

is in the process of negotiating several others.

III. COMPANIES STRUCTURE

GENERALITIES

Peruvian General Companies Law, admit several limited and non-limited liability

companies to set-up business by means of subsidiaries or completely independent legal

entities as well as the establishments of Branches of foreign companies.

A. Limited liability companies are the regular election among which the more commonly

elected are:

(i) Corporations (“Sociedad Anónima”) which are share owned legal entities with a

minimum of two shareholders, a board of Directors and a General Management. No

Peruvian nationality or residence is required to be shareholder or Director. The

General Manager can be a foreigner but need a resident visa to act in the country.

This type of company admit the three different following kinds:



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a) Regular Corporation (Sociedad Anónima), which shall have a Board of

Directors with a minimum of three members.

b) Close Corporation (“Sociedad Anónima Cerrada”) which have a maximum of 20

shareholders; the Board of Directors is voluntary; and the right of first refusal is

required.

c) Open Corporation (“Sociedad Anónima Abierta”) for listed or public traded

entities and for those whose shares are spread-out among a big numbers of

shareholders. Rights of first refusal are forbidden.

If the avoidance of a Board of Directors and no more than 20 shareholders will be

considered, Close Corporations are the most common use for foreign investments.

(ii) Limited Liability Company (“Sociedad Comercial de Respondabilidad Limitada”)

does not have shares; have a maximum of 20 partners; it does not have a Board of

Directors; and the right of first refusal is required.

B. In regards to Branches, according to Peruvian Companies Law, any company whether

domiciled or not in the country can freely establish branches in Peru which must be

registered in the Public Registry in the correspondent area where they operate.

It is important to mention that only few businesses require further incorporation

authorizations or capital stock conditions, such as financial, insurance and pension

businesses. As well, foreign investment are allow in every kind of economic activity and

business sector, however foreign investments may need specific authorizations to own

properties or right within the area of 50 kilometers from the country boundaries.



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LEGAL REQUIREMENTS TO INCOPORATE A COMPANY

Companies may be incorporated by Peruvian or foreign parties. In case of foreign

parties, they shall obtain a Peruvian migratory status or grant a special power of attorney

(PoA) in favor of a Peruvian representative; such PoA must be registered in the Peruvian

Public Registry. The corporate documents required for the incorporation process are:

o Draft of the Articles of Incorporation: This document contains corporate information

(e.g.: identification of founding shareholders, corporate purpose, Bylaws).

o Capital Stock: The capital contribution may be on cash (There is no minimum capital

stock required by laws but the Peruvian Banks require a minimum amount of $1,000

USD to open a bank account) or assets. Cash contributions need to be deposit in a

Peruvian bank and prove of deposit must be inserted in the Incorporation Public Deed.

o Incorporation Public Deed: This document contains the Articles of Incorporation and

is issued by a Peruvian Notary. The Public Deed shall be signed by the appointed

representative.

o Corporate Books: A Shareholders’ Meeting, Board Meeting (if applicable) and Share

Ledger Books must be open by legalizing them before a Public Notary. Fail to record in

the said books the company´s operations in due time are subject to tax fines.

After the incorporation process the company shall be registered on the Peruvian Tax

Payer Registry (SUNAT) in order to start with its economics activities.

o Accounting Books: As well, accounting books should be open by legalizing them

before a Public Notary too. Fail to record in the said books the company´s operations in

due time are subject to tax fines. We recommend hiring an accountant for such purpose.



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o Invoices: Authorization to issue invoices and similar kind of income receipts shall be

ask by simply filling the special formats with SUNAT. Invoices can only be printed by

printing companies authorize by SUNAT.

o Tax Returns: Monthly and annual tax returns filings must be made upon the open of the

company.

o Pay Roll: The company must open a pay roll if there will be workers or employees

contracted. This process will be made virtually within SUNAT’s web page.

IV. FISCAL MATTERS

The Peruvian tax system is composed of taxes assessed by the Central Government; Local

Governments (Municipalities) and the autonomous agencies that administer labor and sectorial

contributions. Some of the most important are:

o CENTRAL GOVERNMENT

Income Tax

General Sales Tax

Selective Consumption Tax (Excise Tax)

Temporary Tax on Net Assets

Financial Transaction Tax

Customs Duties on Imports

o LOCAL GOVERNMENTS (MUNICIPAL TAXES)

Real State Tax

Tax on Property Transaction

Local taxes



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o OTHER

Contributions to ESSALUD (Peruvian Social Security)

Pension Private or Public System

SENCICO

SENATI

The Tax Unit - “Unidad ImpositivaTributaria” (hereinafter, “UIT”) is the value of reference that

is used in Peru to determine the deductions, bases, limits and sanctions, and is approved by

Supreme Decree every year. The current UIT is S/. 3,850.00.

The most important and relevant taxes are the following:

1. INCOME TAX (IT)

a. Taxpayers

i. Individuals and legal entities resident in Peru, on their worldwide income.

ii. Individuals and legal entities (companies) non-residents in Peru, on their

incomes of Peruvian source.

iii. Branches of non-resident in Peru legal entities, on their incomes of Peruvian

source.



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b. Rates:

i. Resident Individuals:

Payroll and individual net incomes and worldwide incomes

Rate

Up 5UIT 8%

Between 5UIT up 20UIT 14%



More than 45UIT 30%

ii. Resident Legal Entities: 28% of their net income.

iii. Non-Resident Individuals: 30% of their net income, including royalties.

Additionally, there is a list where indicates special rates according to the income

origin, where is specified a rate of 6.8% for dividends and other profit

distributions.

iv. Non-Resident Legal Entities: Among the various conditions indicated by the

Law include the following:

Interest from external credits: 4.99%.

Royalties: 30%

Dividends and other profit distributions: 6.8%.

Technical Assistance: 15%

Other revenue (relate parties, interest not included in the 4.99% rate, thin

capitalization cases): 30%



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c. Responsibility to Pay IT on the Income of Nonresidents:

i. The tax of non-residents must be withheld and paid to the Tax Authority by the

Peruvian residents who pay the income.

d. Countries or Territories Considered Low or Zero Taxation

i. Despite the black list establish by the Income Tax Law to determine countries or

territories considered by the Organization for Economic Co-operation and

Development (OECD) as low or non-taxation, it also have a have a general rule

to determine some others not included therein.

e. Transfer Pricing Rules:

i. Peru has established such rules in accordance to the OECD and UN general

schemes.

2. VALUE ADDED TAX (VAT)

a. Affected Operations:

i. Sales of goods in the country.

ii. Construction contracts.

iii. The first sale of real property made by the builders.

iv. Services rendered or used in the country.

v. Imports of goods.



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b. Taxpayers:

i. National or foreign natural persons who perform levied operations habitually or

as a business.

ii. National or foreign juridical persons (corporations) who perform levied

operations.

c. Rate:

i. The rate is 16%, being the rate in the practice of 18%, as the same items are

charged with a 2% for Municipal Promotion Tax, assessed and paid in the same

way as VAT.

d. Fiscal Credit:

i. VAT paid on purchases of goods and services, or taxes paid on imports may be

credited

V. CUSTOMS

Goods entering or leaving the territory by the Customs of the Republic must be submitted to the

customs system of the Customs Law, except for goods subject to treaties or agreements signed

by Peru.

The duties levied on imports of foreign goods into the country and are calculated on the CIF

value of imports (Ad Valorem CIF). The current rate structure includes four levels: 0%, 4%, 6%

and 11%, with a total of 7,564 items.



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VI. LABOR

A. RECRUITMENT OF PERSONNEL

The hiring of domestic workers has no restrictions and is specified with the inclusion of

staff in the "Payroll Book" that every employer must take effect. These contracts are for

an indefinite period, to hire is not required to sign contracts or written authorization from

the Labor Ministry, except in cases of "Labor Contracts subject to special conditions"

which may not exceed periods of five (05) years and need to be notify to the Labor

Authority.

There is only one labor system to the private sector, while recognizing special benefits

for particular activities.

The hiring of foreign personnel is subject to the following limitations:

The total number of foreign workers should not exceed 20% of company

workers, and

The remuneration paid to foreign personnel should not exceed 30% of the

total payroll for wages and salaries.

However, there are certain situations where employers may request the

exoneration of these limitations.

B. MINIMUM WAGE

There is currently a regulation that establishes a minimum wage for every employee and

worker, which is S/. 750.00 (approximately USD 230.00); however, the employer can

pay any amount that exceeds this regulatory limitation.



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C. PROFIT SHARING

There is regulation that establishes an obligation for employers with more than twenty

(20) employees to share the company’s profit depending on the economic activity. As a

rule, the applicable rate is 5% on net income; however, if the activity is related to the

fishery, mining, industry, telecommunications, whole sale and retail, and restaurants,

there will be special rates which are among the 8% and 10%. The maximum contribution

each employee can receive is equivalent to18 monthly salaries.

D. COMPENSATION FOR ARBITRARY DISMISSAL

There is a regulation that establishes an obligation for the employers to pay

compensation to every employee, if they are fired from the Company without a reason.

a. Indeterminate Term Employment Contracts: The compensation amount is equal

to 1½ salary payment per year worked (or their proportion in months) to a

maximum of 12 salaries.

b. Determinate Term Employment Contracts: The compensation amount is equal to

1½ salary payment per each month stopped working until the expiration of the

contract to a maximum of 12 salaries.

However, the labor regulation also establishes a trial work period, which depending on

the job title, can be between three (03) months to one (01) year.

Regardless of this compensation, the Constitutional Court has established that, at various

types of dismissal, the employee is entitled to opt for replacement in the workplace.

E. UNEMPLOYMENT AUTHORITY

It’s important to mention that in Peru there is no authority in charge of unemployment;

however, there is an obligatory social benefit on behave of the employee named



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Compensation for Length of Service, where the employer deposits one (01) salary per

year in a bank account.

F. LABOR BENEFITS AND SOCIAL CONTRIBUTIONS

It’s important to mention that in Peru the general labor rules grants some other benefits

to employees and workers, such as to additional salaries per year for National Holidays

(July) and Christmas (December) and a 30 calendar days of vacations.

As well salaries and wages are subject to employers and employees contributions for

Healthcare and for Pension (Private or Public) Systems.

If you need further assistance in these or other matters you can contact us to the

following person and addresses or to any other of our lawyers referred bellow:

Percy Castle: [email protected]

Javier Duany: [email protected]

José Matto: [email protected]

Carlos Carrasco: [email protected]

CASAHIERRO ABOGADOS S. Civil de R.L.

Av. Jorge Basadre 999, San Isidro, Lima 27 – Perú

Phone: (511) 222-5599 / Fax: (511) 421-3259

www.casahierro.com.pe


mailto:[email protected]




http://www.casahierro.com.pe/

Setting Up a Business in Peru By: Casahierro...

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