Peru is currently one of the most attractive destinations for foreign investment due to its economic stability and legal framework, which guarantees equal treatment with domestic businesses and investors, as well as benefits such as the free repatriation of capital.
However, venturing into the Peruvian market without understanding its tax regulations can lead to significant problems. Because SUNAT (the National Superintendency of Customs and Tax Administration) has intensified its audits, tax planning and proactive compliance are vital to protecting profitability. When a Peruvian company makes payments to non-resident entities, it is legally required to act as a withholding agent, assuming joint liability to SUNAT.
According to Article 56 of the Income Tax Law (LIR), the following rates apply: 15% for technical assistance (which requires an audit report if the amount exceeds 140 Tax Units); 4.99% for qualified external loans; 30% for royalties or digital services; and 8% for dividends. Therefore, misclassifying these transactions or failing to withhold the corresponding amount exposes the local company to fines of 50% of the omitted tax and late payment interest, according to section 13 of article 177 of the Tax Code.
Furthermore, it is important to mention the benefits of Double Taxation Avoidance Agreements under the OECD model and the Andean Community (Decision 578). Some countries (including Canada, Chile, Mexico, Switzerland, etc.) can access benefits through these agreements, such as maximum withholding limits, elimination of double taxation, legal protection, and non-discrimination, among others; these are very attractive for facilitating taxation for foreign companies.
However, to access these benefits, the foreign company must prove its tax residency abroad with a valid and apostilled certificate. Because omitting this requirement or operating without active economic substance triggers the SUNAT's Principal Purpose Test Clause against "treaty shopping," eliminating preferential rates and imposing the general rate of up to 30% (Article 56 of the Income Tax Law). Furthermore, it's important to consider the definition of a Permanent Establishment (PE), which is established when a foreign entity operates in Peru through a fixed location, a dependent agent, or if it provides services for more than 183 days in a 12-month period, according to Article 14-A of the Income Tax Law.
This is crucial because if SUNAT detects an unregistered PE, the foreign company loses its "non-domiciled" status and becomes subject to taxation on its attributable income at a general rate of 29.5%, as mentioned in Article 55 of the Income Tax Law. Additionally, it must assume obligations such as registering with the Taxpayer Registry (RUC), maintaining complete local accounting records, and issuing payment receipts.
Investing in Peru offers great opportunities, but requires rigorous tax management to avoid potential problems. At Gamarra & Associates, we provide comprehensive legal and tax advice, assisting companies in planning, structuring, and protecting their businesses in the country. Contact us to schedule a personalized consultation and ensure the legal security and profitability of your operations.
