EY
Av. Víctor A. Belaúnde 171
San Isidro
Lima
Peru
Executive and immigration contacts
José Ignacio Castro
+51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: jose-ignacio.castro@pe.ey.com
Mauro Ugaz +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: mauro.ugaz@pe.ey.com
Valeria Galindo
+51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: valeria.galindo@pe.ey.com
Miguel Rubio +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: miguel.rubio@pe.ey.com
Mauricio Matos
+51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: mauricio.matos@pe.ey.com
Alejandra Osorio +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: alejandra.osorio@pe.ey.com
Adriana Gianotti +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: adriana.gianotti@pe.ey.com
Fabiola Jimenez +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: fabiola.jimenez@pe.ey.com
Gisell Martinez +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: gisell.martinez@pe.ey.com
Vanessa Barzola +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: vanessa.barzola.ortiz@pe.ey.com
Lesli Ruiz +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: lesli.ruiz@pe.ey.com
Valeria Portugal +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: valeria.portugal@pe.ey.com
Renán Mantilla
+51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: renan.mantilla@pe.ey.com
Roberto Llanos +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: roberto.llanos@pe.ey.com
Daniel Sánchez +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: daniel.sanchez@pe.ey.com
José Morales +51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: jose.martin.morales@pe.ey.com
Karen Marquina
Vanessa Cisneros
Alejandra Alvarado
+51 (1) 411-4444
Fax: +51 (1) 411-4445
Email: karen.marquina@pe.ey.com
+51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: vanessa.cisneros@pe.ey.com
+51 (1) 411-4444
Fax: +51 (1) 411-4445
Email: alejandra.alvarado@pe.ey.com
Luis Valencia 51 (1) 411-4444
Fax: +51 (1) 411-4445
Email: luis.valencia@pe.ey.com
Sadaam Luna 51 (1) 411-4444
Fax: +51 (1) 411-4445 Email: sadaam.luna@pe.ey.com
A. Income tax
Who is liable
Territoriality. Individuals resident in Peru are taxed on their worldwide income. Nonresidents are taxed on their Peruviansource income only.
In general, Peruvian-source income is any income obtained in Peru, regardless of the citizenship or residence of the individual.
Under the Peruvian Income Tax Law, Peruvian source-income includes, among other items, the following:
• Income earned for services rendered in Peru or for civil, com mercial or business activities performed in the country, regard less of where it is paid
• Personal work-related income
• Income earned for selling, transferring or renting property or land located in Peru
• Income earned for selling, transferring, renting assets or rights, if such assets are physically located in Peru or such rights are used economically in Peru
• Royalties if they originate in assets or rights that are economi cally used in Peru or if the payer is a Peruvian resident
• Capital gains, interest, commissions, premiums and any amount additional to the agreed interest with respect to loans, credits or other financial transactions, if the capital is allocated or eco nomically used in Peru or if the payer is a Peruvian resident
• Dividends and any other forms of profit-sharing distribution, if the payer (company or society) is domiciled in Peru
• Income earned from the sale, transfer or redemption of shares, participations, bonds, securities and other instruments repre senting the capital stock
• Income received for serving as a member of a board (perform ing abroad) if the payer company is domiciled in Peru
Definition of resident. Residence for income tax purposes is generally bound to the physical presence of an individual in Peru. In general, remaining more than 183 days in Peru results in resi dency and remaining 183 days abroad loses it. Residency of foreign citizens is acquired as of 1 January of the calendar year subsequent to the foreign citizen’s cumulative physical presence in Peruvian territory for more than 183 days, measured in any 12-month period. An exception applies to individuals who leave the country after signing a long-term contract (at least one year)
or who hold a resident visa of the destination country. For these individuals, residence status changes immediately as of the departure date, from resident to nonresident.
Peruvian citizens who lost tax residence may regain such status on the first day of the first calendar year after they return to Peru, unless they do it temporarily and stay in Peru no more than 183 days in any 12-month period.
Income subject to tax
Employment income. Tax is imposed on all remuneration received by an employee in the form of salaries, bonuses, living and hous ing allowances, tax reimbursements, benefits in kind and any other fringe benefits at the rates set forth in Rates.
Salaries and remuneration received by nonresidents for services provided in Peru are taxed at a flat rate of 30%.
Self-employment and business income. Taxable self-employment income includes fees from independent professional, artistic and scientific activities, and from skilled occupations carried out by individuals, and is taxed at the rates set forth in Rates. Taxable income for self-employed persons equals their gross income minus a deduction of 20%. Such deduction is allowed up to a maximum of PEN105,600, which equals 24 annual tax units (ATUs; see Rates).
Nonresidents are allowed a deduction equivalent to 20% of gross income received as remuneration for services as an independent professional. As a result, they are subject to an effective with holding tax rate of 24%.
Business income includes profits from personal business and is taxed at a rate of 29.5% of net income. For information regarding the deductibility of expenses, see Deductions
Directors’ fees. Directors’ fees are included in taxable income and are subject to tax at the rates set forth in Rates. In addition, directors’ fees are subject to an 8% withholding tax, which may be taken as a credit against the director’s final income tax liabil ity.
Investment income. Dividends and other forms of profit distri butions, as well as remittances of net profits by branches, are subject to a 5% withholding tax if paid to resident individuals or to nonresident individuals or entities.
For residents and nonresident individuals, interest on deposits and savings in Peruvian banks and interest from bonds issued by the government are exempt from income tax. Other interest and royalties are considered taxable income.
Income from the rental of real estate received by residents is taxed as a capital gain at a rate of 6.25%. A deduction of 20% of gross rental income is allowed. As a result, the effective rate is 5%.
Income from the rental of real estate received by nonresidents is subject to an effective final withholding tax at a rate of 5%.
Taxation of employer-provided stock options. The Peruvian Income Tax Law has not established specific rules regarding taxation of equity awards. Under the general taxation rules, the benefit ob tained from a stock option plan equals the spread between the purchase price and the fair market value of the shares. Such spread must be recognized as compensation income because it is provided as part of an employment relationship. However, on the sale of the shares, the individual derives a capital gain equal to the difference between the sale price and the purchase price. Because no specific rule allows the purchase price to include the spread previously taxed as compensation income, a double taxa tion issue may arise.
Capital gains. For both resident and nonresident individuals, capital gains derived from the sale of real estate (except for real estate occupied as dwellings) are subject to a definitive payment, which equals 5% of the sale value.
Taxable capital gains include profits derived from the sale of shares issued by Peruvian entities and gains derived from an in direct sale of shares (including, among others, the sale of more than 10% of the shares of a nonresident company in any 12-month period, provided the total share value of such nonresident com pany included 50% or more of a Peruvian company’s shares in any month in the 12-month period before the sale). If the sale of shares is made on the Peruvian Stock Exchange Market and if the shares meet specific requirements (generally speaking, permanence in the Peruvian Stock Exchange Market of at least 12 months and trade activity during that period for less than 10% of the total number of shares issued by such company), the capi tal gains can be exempted from tax.
Net taxable income for resident individuals derived from capital gains on Peruvian shares equals their gross income minus a deduction equal to 20%. Withholding tax is imposed on this amount at a rate of 6.25%. As a result, such income is subject to an effective withholding tax rate of 5%.
Nonresidents are taxed at a rate of 5% if the Peruvian shares are listed and traded on the Peruvian Stock Exchange Market. Otherwise, they are subject to tax at a rate of 30% on their gross income.
Capital gains also include profits derived through investment funds, trust funds or pension funds established in Peru. These profits are taxed at an effective rate of 5% for residents and non resident individuals.
For capital gains on foreign shares, the tax treatment varies depending on the residence status of the individual and the exchange market on which the shares are traded.
Gains derived from sales of personal property are not considered capital gains.
Deductions
Deductible expenses. Individuals receiving business income may deduct expenses incurred to earn the income or maintain the source of income.
Personal deductions. Individuals earning employment and selfemployment income may deduct from taxable income the first PEN30,800 of income earned, which is equivalent to seven ATUs (for information regarding ATUs, see Rates) without proof of expenses. It is possible to deduct up to three additional ATUs, based on actual expenses related to housing rental, health care, professional services, social security of housemaids and amounts paid for accommodation in hotels and consumption in restau rants, subject to specific requirements and limits for each type of expense.
In addition, individuals earning employment or self-employment income may deduct donations to public agencies and nonprofit organizations that are certified by the Ministry of Economy and that are dedicated to educational, social welfare and other similar activities. Donations made by taxpayers as sports sponsors to sports beneficiaries, such as athletes, are deductible if the activ ity sponsored is authorized by the Peruvian Institute of Sport. If a location is declared to be in a state of emergency as a result of a natural disaster, donations made to help the population of such location during the state of emergency can also be deducted. The total donation deduction may not exceed 10% of net employment income or net self-employment income.
Rates. For resident employees, the tax rates are applied on a pro gressive scale expressed in ATUs, as set forth in the table below. ATUs are established by the government at the beginning of each year. For 2021, one ATU equals PEN4,400 (approximately USD1,113). The following are the tax rates.
Relief
losses.
relief is provided for nonbusiness losses incurred by individuals. However, individuals may select either of the following two systems to carry forward losses related to business income:
Carrying forward losses to the following four consecutive years
Carrying forward losses indefinitely, subject to an annual limit equal to 50% of the taxpayer’s taxable income in each year
losses may not be carried back.
B. Other taxes
Property tax. Property tax is imposed on urban and rural property and is payable by the property owners. The tax is administered and collected by the government of the locality where the prop erty is located. The property tax base equals the total value of the taxpayer’s property in every jurisdiction. To determine the total value of the property, land tariff values and construction official unitary values in force as of 31 October of the preceding year and
the depreciation tables formulated by the National Council of Valuation must be applied. Property tax is levied at progressive rates ranging from 0.2% to 1%.
Vehicle tax. Vehicle tax is imposed on automobiles, vans, buses and station wagons that are up to three years old. The tax is pay able by the vehicle owners. If the ownership of the vehicle is transferred, the new owner becomes the taxpayer from 1 January of the year after the transfer. The tax base equals the original value on acquisition or importation of the vehicle, which cannot be lower than the value approved by the Ministry of Economy and Finance. Vehicle tax is levied at a rate of 1%. The amount of tax cannot be less than 1.5% of one ATU as of 1 January of the year in which the tax is payable.
Tax on financial transactions. The rate of the tax on financial transactions is 0.005%. This tax is generally imposed on debits and credits in Peruvian bank accounts.
C. Social security
Employees must contribute 13% of their salaries and wages to the government-sponsored pension fund (Oficina de Normalizacion Previsional, or ONP). Under an alternative system, employees must contribute approximately 12% of their salaries and wages to the Private Pension Funds Trustee (Administradora de Fondo de Pensiones, or AFP). These amounts must be withheld by employ ers under both the ONP and AFP systems. Employers must contribute to the Health Care Fund (HCF) at a rate of 9%. Following the procedure established by law, employers can hire private health providers (Spanish acronym EPS). This allows them to use a credit of up to 25% of the HCF contribution, subject to certain limits. The health care system provides the employee with medi cal attention and subsidies in case of disability.
D. Tax filing and payment procedures
Employers must withhold income tax monthly from salaries of employees. An 8% tax must also be withheld on fees paid for independent professional services that are provided to legal entities as payment toward the professional’s annual income tax. Such professionals may avoid withholding up to PEN38,496 if they foresee that their income will not be higher than this amount.
The tax year is the calendar year. Individual tax returns must be filed with the tax office usually in late March or by early April, and any balance due must be paid at that time. Only tax residents are subject to tax return filing obligations.
Married persons are taxed separately. However, for income derived from properties held in common, they may elect to be taxed jointly.
Individuals earning only employment income are not required to file tax returns, unless they want to apply the additional deduc tion of expenses up to three ATUs.
E. Double tax relief and tax treaties
A tax credit is granted for taxes paid or withheld abroad, within certain limits. Under a treaty with Bolivia, Colombia and Ecuador (signatories to the Andean Pact), income earned in those
countries is excluded from taxable income in Peru to avoid dou ble taxation, subject to certain exceptions. Peru has double tax treaties that are currently in force with Brazil, Canada, Chile, Korea (South), Mexico, Portugal and Switzerland.
F. Temporary visas
In general, all foreign nationals must obtain visas to enter Peru. However, citizens of the jurisdictions listed below may enter Peru for tourist, cultural or sporting purposes by getting tourist visas at the airport for periods of a maximum of 183 days. The visas are granted after the expatriates enter Peru.
Andorra Hungary Romania
Antigua Iceland Russian and Barbuda Indonesia Federation Argentina Ireland St. Kitts and Australia Israel Nevis Austria Italy St. Lucia Bahamas Jamaica St. Vincent and Barbados Japan the Grenadines Belarus Kiribati Samoa Belgium Korea (South) San Marino Belize Latvia Serbia Bolivia Liechtenstein Singapore Brazil Lithuania Slovak Republic Brunei Luxembourg Slovenia Darussalam Malaysia Solomon Islands Bulgaria Malta South Africa Canada Marshall Islands Spain Chile Mexico Suriname Colombia Micronesia Sweden Cook Islands Moldova Switzerland Croatia Monaco Taiwan Cyprus Nauru Thailand Czech Republic Netherlands Tonga Denmark New Zealand Trinidad Dominica Niue and Tobago Ecuador North Macedonia Turkey Estonia Norway Tuvalu Fiji Palau Ukraine Finland Panama United Kingdom France Papua New United States Germany Guinea Uruguay Greece Paraguay Vanuatu Grenada Philippines Vatican City Guyana Poland Venezuela Hong Kong Portugal
Foreign nationals may enter Peru with temporary visas, which allow entry and stays for up to 183 days and are not renewable. Temporary visas are issued to individuals with tourist, business, official, artistic, religious, student, employee, designated employ ee and crew member status.
The granting of a visa is subject to the judgment of the Peruvian migratory office. All temporary visas are required before entry
into Peru. If the expatriate will obtain the visa before entering Peru, he or she needs to pick up the visa at the Peruvian Consular Office, which can also evaluate whether a visa should be issued to the expatriate. The essential requirements for obtaining a visa are a passport and evidence of transitory status.
Foreign nationals holding the following visa statuses receive temporary visas:
• Business visas, granted to foreign nationals who enter Peru temporarily to carry out business activities that do not generate Peruvian-source income and who do not intend to establish per manent residence. Business visas are also granted to foreigners who will perform technical assistance services. These foreign nationals are permitted to sign agreements and undertake transactions. This visa can be granted for up to 183 days, and is not renewable.
• Work visas for designated employees who have an assignment for less than one year, granted to foreign nationals who are sent to work in Peru by their foreign company employers to perform agreed services. This visa can be granted for up to 90 days and is renewable for up to one year.
• Work visas for employees who have a work contract with a Peruvian entity for a term of less than one year and for foreign nationals who enter Peru to carry out activities related to their own profession. This visa can be granted for up to 90 days and is renewable for up to one year.
• Official visas, granted to foreign nationals who are recognized as official visitors by the Ministry of Foreign Affairs and are subject to special regulations. This visa can be granted for up to 90 days and is renewable.
• Diplomatic and consular visas, which can be granted for up to 90 days and are renewable.
• Tourist visas, granted to foreign nationals who visit Peru for recreational purposes and who do not intend to immigrate or to enter into remunerated activities. This visa can be granted for up to 183 days and may not be extended. A foreign national who is in Peru on a tourist visa can change his or her migratory status while in Peru.
• Student visas, granted to foreign nationals who enter Peru to study in educational institutions recognized by the Peruvian gov ernment and who do not generate Peruvian-source income, except for professional practices or vacation jobs approved by a corresponding policy-making body. This visa can be granted for up to 90 days and is renewable up to one year.
• Artist visas, granted to foreign nationals who enter Peru with the purpose of carrying out approved remunerated artistic or performance-related activities and who do not intend to estab lish a permanent residence in Peru. This visa can be granted for up to 90 days and is renewable twice for additional periods of 30 days each within a calendar year.
G. Work visas and self-employment
Domestic and foreign companies established in Peru may employ foreign nationals up to a maximum of 20% of the total personnel of a company. Salaries paid to foreign nationals may not exceed 30% of the total payroll. Specialists or management personnel of a new industry may be exempt from these limits, among others.
The following individuals are not considered foreign nationals for purposes of hiring foreign personnel:
• Foreigners with Peruvian spouses, ascendants, descendants or siblings
• Foreigners who have immigrant visas
• Foreigners whose country of origin has a treaty of labor reciproc ity or a treaty of double nationality with Peru
• Personnel from foreign transport enterprises that operate under a foreign flag
• Personnel from foreign enterprises or multinational banks that have a special regulation
• Foreign personnel under bilateral or multilateral agreements honored by the Peruvian government who render services in the country
• Foreign investors, regardless of whether they have waived the right to repatriate capital investments or profits, if an investment of no less than PEN500,000 (approximately USD156,000) is maintained throughout the term of their contracts
• Artists, athletes and, in general, those who work in public events in the country for a maximum of three months during a calen dar year
Documents that must be submitted to obtain a work visa include the following:
• An application addressed to the Ministry of Labor
• Affidavit of limiting percentages subscribed by the employer, attesting that the employment agreement complies with the limits set under the law for hiring foreign personnel (other documents may apply with respect to employees exempt from these limits)
• Employment agreement with all of the mandatory clauses for a term of one year or more (limit of three years)
• Affidavit stating that the expatriate is qualified to perform the service; a copy of his or her professional degree, technical study or work certificates must be in his or her personal file
• Copy of the passport or the foreign card (the passport must have a minimum validity of six months at the moment of the visa application)
• Interpol criminal records
• Criminal records request in home country apostilled
• Copy of the company’s tax registration
• Receipt for payment
• Document issued by the Peruvian Public Registry proving that the Peruvian legal representative of the company is authorized to submit work contracts
Employment agreements are approved by the Ministry of Labor automatically. The hired person may begin to render services after the work visa is obtained. This visa can be granted as a temporary or resident visa, depending on the term of the work contract with the Peruvian company.
The Peruvian immigration office approves resident work visas in approximately 60 working days. This visa can be granted tempo ral or resident and can be renewed. Temporal visas have a maxi mum duration of one year, while resident visas can be renewed annually with no limit.
A foreign national with a valid work visa may change employers after notifying the Ministry of Labor and the migratory office.
For a work visa for designated employees, the following docu ments must be filed with the immigration authorities:
• A service agreement between the foreign company and the local company, apostilled or legalized by the Peruvian consulate of the place where the document was issued
• A letter of assignment from the foreign company, apostilled or legalized by the Peruvian consulate of the place where the document was issued
• Interpol criminal records for individuals who apply for a resi dent visa
• Criminal records request in home country apostilled
• A letter from the local company, signed by the legal representative
• A copy of the passport (the passport must have a minimum validity of six months at the time of the visa application)
The Peruvian immigration office approves designated work visas in approximately 60 working days. This visa can be granted tem poral or resident and can be renewed.
Self-employed foreign nationals are required to obtain work permits in Peru.
H. Residence visas
Foreign nationals holding the following visa status may receive residence visas:
• Employees who have a work contract with a Peruvian entity for a term of one to three years and foreign nationals who enter Peru to carry out activities related to their own profession may obtain a work visa. This visa can be granted for one year and is renewable annually for up to one year.
• Foreign nationals who are sent to work in Peru by their foreign company employers to perform agreed services may obtain an assignment work visa. The service agreement and assignment letter must be for one year. This visa can be granted for one year and is renewable for up to one year.
• Diplomatic, consular and official visa holders may obtain resi dence visas valid for a specific period established by the Ministry of Foreign Affairs.
• Religious, student and work visa holders may obtain residence visas valid for up to one year, which are renewable.
• Immigrants (now called permanent residents) may obtain resi dence visas with an undetermined time period.
In these cases, a document that supports the residence must exist. For example, for work visas, a work contract for a period of one year is required for an employee. If the term of the contract is less than one year, a temporary visa applies.
Foreign nationals from Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay and Uruguay can obtain residence visas for a two-year period under the Southern Common Market (Mercado Común del Sur, or MERCOSUR) Agreement. This visa allows them to live and work in Peru. The visa is not renew able, but individuals can request permanent residency for an undetermined period three months before the expiration date. For
permanent residency, it is necessary to prove that the expatriate has resources to live in Peru.
I. Family and personal considerations
Family members. A resident visa allows a foreigner to obtain a visa for his or her family members, including a spouse, children younger than 18 years old, and for children 18 years or older (in this case, it is necessary to prove that the dependent is single and is studying in Peru), parents and other dependents. This visa ap plies also to concubines. To obtain the visa for family members, the individual must submit a marriage certificate (issued no more than six months before the application) and birth certificates. These documents must be apostilled or legalized before the Peruvian consulate. If they are not in Spanish, they must be translated into Spanish by a Public Translator in Peru. Expatriates who have this type of visa are allowed to work in Peru. Apostilled Interpol criminal records and criminal records from the home country are required for applicants 18 or older.
Driver’s permits. Foreign nationals may drive legally in Peru with their home country driver’s licenses for the first six months after their arrival in Peru. Foreign nationals can also drive legally in Peru with their international driver’s licenses, but the six-month period will apply. If the expatriate become a migratory resident in Peru, it will be necessary to obtain a Peruvian driver’s license.
The following are the two ways to obtain a Peruvian driver’s license:
• Taking a written test, physical test and practical driving exam
• Exchanging a local driver’s license for a Peruvian one
This driver’s license is granted for up to eight years depending on the category of the license.