Peru in numbers International Treaties Foreign Trade Corporate considerations External Audit Requirements Tax system Transfer pricing Labor legislation TGS Sarrio & Asociados

1. Sarrio & Asociados
SINCE 1979
PERU
doing business
Content
Peru in numbers
International Treaties
Foreign Trade
Corporate considerations
External Audit Requirements
Tax system
Transfer pricing
Labor legislation
TGS Sarrio & Asociados
www.tgs-sarrio.pe

2. Source: INEI / BCR
December, 2018
Peru in
numbers
Population
32.17 millions
Currency
Soles (PEN)
Annual
Inflation
2.19%
Exchange Rate
1 USD = 3.4 PEN
Country Risk
1.87
Extension
1,285 millions of
Km2
International
Time
UTC/GMT - 5 horas
Main
Language
Español

3. GDP
growth
4 Think Glocal, Think TGS
Source: INEI / BCR
December, 2018
5.3%
12.4%
0.4%
13.3%
1.8%
5.9%
10.4%
5.1% 4.9%
2.3%
5.4%
4.4% 4.8%
14.5%
Agropecuario
Pecsa
Mineríae
Hidrocarburos
SectorManufactura
SectorElectricidad
yAgua
SectorConstrucción
SectorComercial
Transportey
Mensajería
Alojamientoy
Restaurantes
Telecomunicaciones
ServiciosFinancieros
ySeguros
Serviciosprestado
atercros
AdministraciónPública
yDefensa
OtrosServicios
Percentage of GDP by Economic Sectors
1.07
Gross Domestic Product (VAR%)
9.26
8.40
5.83
6.51
5.98
2.47
3.23
4.07 3.98
2.49
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Peruvian Labor Force (2018)
EMPLOYED
UNEMPLOYED
93.50%
6.50%

4. International
Agreements
Andean Community of
Nations - CAN
Mercosur
Free Trade Agreements
Member of the Latin American Integration Association - ALADI
Bolivia Colombia Ecuador Peru
PeruParaguay Uruguay
BrazilArgentina
South Corea China Costa Rica Japan Honduras Canada
Singapoor Thailand Chile EU Switzerland El Salvador
USA Panama Iceland Turkey Indonesia
Norway
Mexico Lichtenstein
Source: SBS
December, 2018
Australia

5. FOREIGN
TRADE
• The government guarantees the free movement of goods
• In some cases, the government exempts certain products from customs duties
• Under certain conditions, temporary regimes for the import of goods with suspension of the
collection of customs duties and tax liabilities are available.
• There are limited import restrictions
IMPORTS AND EXPORTS
The State guarantees the freedom of foreign trade. Imported goods are subject to the payment of
customs duties, the General Sales Tax and, in certain cases, the Selective Consumption Tax. Customs
duties on imports are applied on CIF values and exports are not taxed. Peru is a member of the WTO,
CAN and ALADI.
Restrictions
In general, there are no significant restrictions on the import and export of goods; however, there are
some exceptions established by law. Thus, the following are considered as restricted goods: import
of weapons and ammunition, specialized communication equipment, products and by-products
of plant and animal origin, agricultural and similar pesticides, ammonium nitrate, nuclear material,
among others.
Import Duties
The goods are classified under the NANDINA nomenclature and the customs duties are applied on
the CIF value of the imported goods with variable rates of 0%, 6% and 11%.
Verification of the Price of Goods
In accordance with the WTO Agreement on Customs Valuation, this verification is intended to
determine the correct basis for the payment of the customs liabilities through intervention of an
authorized supervisory entity. This verification must be mandatory depending on the type of good
and its FOB value.
CUSTOMS WAREHOUSES
There are customs warehouses for the temporary placement of goods. These warehouses are
responsible for the damage and loss of the goods entered to such premises.
CUSTOMS AGENT
The Customs Agent can be a natural or legal person duly authorized to provide services as a regular
manager regarding all types of customs procedures to third parties. Likewise, these customs
procedures can be executed by the importer, consignee or owner of the goods himself or by the
Customs Broker.

6. For the conduct of business in Peru, foreign investors generally choose the corporate form of the
corporation or opt for the establishment of branches. Branches of foreign companies pay income tax
as a corporation but only on their Peruvian source income.
There is no minimum percentage of ownership by Peruvian persons or entities, nor are there
provisions requiring that management positions be held by Peruvians or residents of Peru. The
following forms of companies exist:
CORPORATE
CONSIDERATIONS
Sociedad Anónima Abierta
(S.A.A.)
Sociedad Anómina
(S.A.)
Sociedad Anónima Cerrada
(S.A.C.)
• Más de 750 accionistas
• More than 750 shareholders.
• More than 35% of its capital
is owned by 175 or more
shareholders.
• It is obliged to perform an annual
external audit.
• Has primary offering of shares or
bonds convertible into shares.
• From 2 to 750 shareholders.
• The capital contributions are
represented by shares.
• Liability is limited to the value of
the contribution
• From 2 to 20 shareholders.
• It does not have shares
registered in the Public
Registry of the Securities
Market.
Sociedad Comercial de
responsabilidad Limitada
(S.R.L.)
Sociedad Civil
(S.C.)
Sociedad Civil de
Responabilidad
Limitada(S.C.R.L)
• From 2 to 20 participating
partners.
• Partners have limited liability.
• Partners are personally and
subsidiarily liable for social
obligations.
• There cannot be more
than 30 members and are
not personally liable for
corporate debts.

7. The branch
A branch is a secondary Company’s establishment (a place other than its domicile), through which
a company develops certain activities included in its corporate purpose. It does not have legal
independence or legal capacity.
Branch of foreign companies
For tax purposes, a branch of a foreign company is considered independent from its parent company.
Empresa Individual de Responsabilidad Limitada (EIRL)
The EIRL is not a company, but it is a vehicle for economic activities. The EIRL is a type of business
organization formed by a legal person distinct from the holder, who must be a natural person.
The holder’s liability is limited to his contribution. Moreover, the EIRL must be registered in public
records. This form of organization is bound by a special legislation.
Companies, no matter what type of business organization they belong, as well as the EIRL, must
be registered in public records. In order to establish a branch of a foreign company, the legal
representative of the parent company in Peru must grant, in the presence of a Notary Public, the
corresponding public deed to which certain documents of the parent company must be contained or
attached. Such documents must be legitimized before the Peruvian Consul or apostilled.
The business activity of the branch is directed by the legal representative with power of attorney duly
registered. The scope of the representative’s powers may vary according to the policy of each parent
company, but it must be sufficiently broad to allow for adequate representation in Peru.

8. Distribution of dividends
The profits distribution in corporations must be by
agreement of the shareholders or partners, considering
the following rules:
• Dividends can only be paid from profits obtained or
from free reserves, provided that the net worth is not
less than the paid-in capital.
• Even if the shares are not paid in full and regardless
of the time they were issued or paid, all the shares of
the company have the same right to the dividend,
except where otherwise indicated by the General
Shareholders’Meeting.
• An interim dividend distribution is valid, except for
those companies for which there is an express legal
prohibition.
• If an interim dividend distribution is agreed without
having the favourable opinion of the board of
directors (if having or existing this administrative
body), the joint and several liability for the payment
falls exclusively on the shareholders who voted in
favour of the agreement.
• The delegation to the board of directors of the
authority to distribute interim dividends is valid.
Dissolution and liquidation
The dissolution of a company must be agreed upon at
the General Shareholders’Meeting or by a Shareholders’
Meeting and must be published in local newspapers
for 3 consecutive times, within 10 days of the adoption
of the agreement. Likewise, its registration in public
records within 10 days of the last publication must be
requested.
The liquidation procedure will be in charge of the
liquidators appointed by the Shareholders’Meeting.
The liquidators will be responsible for the realization
of the company’s assets, as well as the payment of the
corresponding liabilities and subsequently, they must
distribute among the shareholders the equity resulting
from the final balance sheet.
The dissolution and liquidation of a foreign company’s
branch follows basically the same procedure applicable
to a corporation, except for the fact that the dissolution
is done by means of a public deed containing the parent
company’s agreement for which no publication in the
newspapers is required.

9. An annual external audit by independent public accountants is mandatory in the following cases:
• When the company’s bylaws so provide.
• When the annual external audit is expressly requested by shareholders representing no less than
10% of the subscribed voting shares.
• When the annual external audit is requested in a Sociedad Anónima Cerrada (S.A.C.) by
shareholders representing less than 50% of the subscribed shares with voting rights.
• When the company is incorporated as a Sociedad Anónima Abierta (S.A.A.).
• When this obligation is established by a special legislation.
• When the income of any company exceeds 3,000 tax units (approximately US$ 3’996,540 for the
year 2015).
BOOKS AND RECORDS
Legal entities are required to keep complete accounting records. The accounting books must be
legitimized by a Notary Public. Failure to do so constitutes an infraction punishable by a fine, which
would even lead to an income tax assessment on a presumptive basis. For all purposes in Perú, the
fiscal year is the calendar year. In this sense, the accounting books must be closed as of December 31
of each calendar year.
Assets and liabilities must be detailed in the inventory and balance sheet book at the beginning
date of the operations and at the end of each fiscal year. Details of year-end inventory should be
maintained in a separate book as part of the main inventory book.
The use of loose-leaf auxiliary journals, computerized systems, other indispensable auxiliary records
and auxiliary ledger records is permitted. In some cases, the pages must be previously numbered,
legitimized and bound at the closing of each fiscal year.
The summary of the totals in the major auxiliary records must be passed monthly into the official
bound books. However, the official books may replace each of the legal records.
The minutes of the shareholders’meetings and the meetings of the Board of Directors must also be
recorded in books that must be numbered and legitimized by a Notary Public. Minute books may
also be kept through the loose-leaf system, requiring that the pages be numbered and legitimized.
EXTERNAL AUDIT
REQUIREMENTS

10. INCOME TAX (IT)
The IT Law distinguishes 3 groups of income: capital income, business income and labor income. The
taxable income of each of the income groups is declared and assessed separately, and there is no
compensation among them.
For IT purposes, the following are taxpayers: natural persons, undivided inheritances, de facto
associations and similar, as well as legal entities.
Joint ventures and other business partnership agreements are also considered as taxpayers if they
keep independent accounting. Otherwise, each party will be responsible for the costs and expenses
generated before the tax authority.
Regarding business income, the IT rate on net income is 29.5% and when distributing dividends
to the shareholders, a dividend tax rate of 5% must be withheld unless the shareholder is another
domiciled legal entity, in which case this tax does not apply.
The worldwide source income of taxpayers domiciled in Peru, whether natural or legal entities, is
subject to IT and may deduct the IT paid abroad from the foreign source income taxed by Peruvian IT.
Non-domiciled persons receiving Peruvian source income are subject to tax withholding in
accordance with the rates approved for such purpose. The general rate is
Accounting
Accounting records must be kept in Spanish and expressed in Soles. By exception, foreign investors
contracting with the State may keep their accounting records in foreign currency, provided that they
have the corresponding authorization from the government sector.
Income recognition
For Income Tax purposes and as a general rule, companies’income is recognized as it accrues, which
implies that non-income collection is necessary for such recognition. The accrual criterion is also
applicable for the deduction of expenses.
There are special cases, such as construction companies in which income recognition is based on the
amount collected or receivable.
TAX
SYSTEM

11. Depreciation of fixed assets
For Income Tax purposes and as a general rule, buildings and constructions intended for taxable
income-generating activities are depreciated in 20 years (at a rate of 5% per year). All other fixed
assets are depreciated in 4, 5 or 10 years, depending on the type of movable property.
There is a perk regarding accelerated depreciation when fixed assets are acquired through a financial
leasing contract. In these cases, fixed assets may be depreciated within the term of the leasing
contract.
Intangible assets
The price paid for limited duration intangibles is deductible in a single fiscal year and, optionally, they
can be amortized proportionately over a period of 10 years.
Tax returns and inspections
The Peruvian tax system operates on a self-assessment tax payment basis that is subject to
verification by the Tax Entity. This Entity has the right to audit the self-assessment tax payment within
an expiration date of 4 years as from the year following the tax return filing; 6 years for those who
have not filed a tax return; or 10 years for the cases when the withholding or collection agent has not
paid the tax withheld.
Consolidation of financial statements
No tax effects are recognized on the consolidation of financial statements. Each company is
considered an independent taxpayer and the losses of one company cannot be offset against the
profits of another, even in the case of corporate groups.
Agreements to avoid double taxation
Peru has signed agreements to avoid double taxation on income tax with the governments of
Canada, Chile, Brazil, Mexico, the Republic of Korea, Switzerland and Portugal, which follow the model
agreement developed by the Organization for Economic Cooperation and Development (OECD).
Likewise, Peru is governed by Decision 578, which contains the rules to avoid double taxation among
the countries of the Andean Community, which is formed by Peru, Colombia, Bolivia and Ecuador.
GENERAL SALES TAX (IGV)
The General Sales Tax (known in other countries as“VAT”) is a monthly tax levied on the added
value at each transaction made at different stages of the economic cycle. The IGV is intended to be
assumed by the final consumer.
The IGV taxes the following operations:
• The sale of movable property in the country.
• Provision or use of services in the country.
• Import of goods.
• Construction contracts.
• First sale of properties made by the builder.
The rate of this tax is 18% and it is applied on the taxable base which is calculated on a monthly basis
as a result of deducting the VAT of sales from the VAT of purchases. If the VAT of purchases exceeds
the VAT of sales, the difference may be used as credit in the following months. The export of goods
and services does not affect the VAT.

12. SELECTIVE CONSUMPTION TAX (ISC)
The ISC is a specific indirect tax that, unlike the IGV, is levied only on certain goods. One of its
purposes is to discourage the consumption of products that generate negative external factors in the
individual, social and environmental order.
The goods that are subject to the CSI are, for example, gasoline and its derivatives, cigarettes,
beer, liquors, used and assembled vehicles, games of chance and gambling, casino tables and slot
machines that are in operation, etc.
Moreover, depending on the type of good or service, the ISC is calculated on the basis of the
following 3 systems: value system, specific system and value system in accordance with retail price.
TAX ON FINANCIAL TRANSACTIONS
This tax is levied at the rate of 0.005% on financial operations performed in or from the country.
Likewise, it should be noted that the total annual paid tax is deductible for Income Tax assessment
purposes.
TAX ON NET ASSETS
This tax is levied on the total value of the companies’net assets as expressed in the balance sheet on
31 December of the previous taxable year.
A rate of 0% is levied on net assets up to S/ 1’000.000.00. In case of exceeding this amount (S/
1’000.000.00), the tax rate will be 0.4%. In addition, the tax paid serves as an applicable credit against
the Income Tax.
SENATI
This tax levies a 0.75% on the total amount of salaries paid to the
workers in industrial companies. This tax is paid by industrial
companies.

13. TRANSFER
PRICING
Transfer Pricing rules apply to the following transactions:
• Transactions made between taxpayers and their related parties.
• Transactions made from, to or through non-cooperative countries or territories or with low or null
taxation.
• Transactions made with parties subject to a preferential tax regime.
LOCAL REPORT (Local File)
During the taxable year, taxpayers who comply with the following are obliged to file the Informative
affidavit Local Report:
• Taxpayers with accrued income exceeding 2,300 UIT *.
• Taxpayers who make transactions within the scope of transfer pricing for amounts of 100 UIT * or more.
MASTER REPORT (Master File)
During the taxable year, taxpayers who comply with the following are obliged to file the Informative
affidavit Master Report:
• Taxpayers that consolidate or are obliged to consolidate financial statements.
• Taxpayers whose accrued income exceeds 20,000 UIT *.
• Taxpayers who make transactions within the transfer pricing scope for amounts of 400 UIT * or more.
COUNTRY BY COUNTRY REPORT
All taxpayers, who belong to a Multinational Economic Group and whose accrued consolidated income
is equal or greater than S/ 2’700’000,000 or € 750’000,000, are obliged to file the Informative Affidavit
Country-by-Country Report (CbCR). Moreover, they must comply with the following:
• Whenever the taxpayer is the parent company of the multinational group.
• Whenever the non-domiciled parent company of the multinational group is not required to file the
CbCR in its jurisdiction of domicile or residence.
• Whenever the jurisdiction of domicile or residence of the parent company does not have an agreement
for exchange of the CbCR with Peru.
• Whenever there has been systematic failure to exchange tax information, which has been
communicated by SUNAT to the taxpayer.
• Whenever the taxpayer has been designated as responsible for filing the CbCR.
BENEFIT TEST
Regarding intragroup services and as necessary conditions for the deduction of costs or expenses for tax
purposes, the taxpayer must comply with the benefit test and provide the documentation and information
requested.
FINAL BENEFICIARY
Legal persons and legal entities are obliged to identify, obtain, update, file, keep and provide information
about their final beneficiaries, including supporting documentation.
(*) The UIT is a value that is updated every year. The UIT must be considered valid for the year to which the presentation of the Annual Information Affidavit
corresponds.

14. Employment contracts can be indefinite or fixed term, depending on the temporary nature of the
business. Indefinite employment contracts can be written or verbal, whereas fixed-term contracts
must necessarily be written.
The probation period in employment contracts is 3 months and during this time the company can
dismiss the worker without expressing a specific cause. After this period, the dismissal requires a fair
cause and to follow a procedure, otherwise, the dismissal may be classified as arbitrary and give rise
to a compensation right for the worker.
The probation period can be extended to 6 months or 1 year in the case of management or trusted
personnel, respectively. It should be noted that there are additional rights for working women and
children.
OCCUPATIONAL MEDIATION
Occupational mediation occurs when certain personnel provide services in the workplace or
operations centre of the user company, provided that there are presumptions of seasonality,
complementarity or specialization. The personnel assigned to a user company cannot provide
services that involve permanent execution of the company’s main activities. Likewise, this service
can only be provided by companies constituted as legal entities or as cooperatives, whose exclusive
purpose is to provide occupational mediation services.
PAYROLL AND REMUNERATION REQUIREMENTS
Employers must maintain control over their payrolls in electronic form, in which the payment of
workers’salaries and other labor concepts must be reflected.
WORKERS’PARTICIPATION IN THE COMPANY’S PROFITS
In Peru, the company’s profit-sharing system is instituted. The workers of companies, who develop
activities that generate business income, can participate in the profits provided that they are subject
to the labor regime of the private activity and that there are more than 20 workers in the company.
The workers covered by this labor regime participate in the company’s profits by means of the
company’s percentage distribution of its annual pre-tax income. This percentage may vary
depending on the type of economic activity performed by the company.
The maximum limit of shares each worker can receive is the equivalent to current 18 monthly salaries
at the fiscal year-end.
LABOR
LEGISLATION

15. LEGAL WORKING HOURS
Regular working hours is 8 hours per day and not more than 48 hours per week, with some
additional limitations regarding minors. Management personnel is not subject to these limitations.
Furthermore, 48 hours per week can only be exceeded voluntarily and with the corresponding
economic compensation.
TERMINATION OF EMPLOYMENT
The main causes for termination of the employment relationship are the following:
• Worker’s or employer’s death (if the latter is a natural person).
• Worker’s voluntary resignation or retirement.
• The termination of the work or service, fulfilment of the resolutory condition and the expiration
date of contracts legally executed under a certain modality.
• Dismissal. In this case, causes of dismissal are related to the worker’s functional capacity or
misconduct.
The employer may not dismiss the worker for causes related to the conduct or capacity, without first
granting the worker a deadline to counteract the charges in writing. If the dismissal is arbitrary, the
worker hired for an indefinite term has the right to ask for compensation equivalent to one and a half
monthly salaries for each year of service, up to a maximum of 12 salaries.
COMPENSATION FOR LENGTH OF SERVICE (CTS)
Workers are entitled to tax-free compensation for length of service. This compensation is
equivalent to one month’s salary plus one-sixth of a salary for each year of service. The right to
compensation is obtained after the first month of service.
SOCIAL SECURITY IN HEALTH (ESSALUD)
The Social Security in the country is administered by EsSalud, to which employers must
pay a monthly contribution. The rate of this contribution is 9% of the worker’s salary.
The social security legislation covers all dependent workers registered on
the payroll. The employment relationship is the only requirement that
determines the mandatory affiliation of the worker, regardless of the
term of employment or the number of hours worked per day, week or
month. This contribution is paid by the employer for all the workers
registered on the payroll, whether domestic or foreign.
Workers, employees and blue-collar workers are entitled to
the benefits of EsSalud that basically comprise prevention,
promotion, recovery, as well as subsidies on health care,
social welfare, work and occupational diseases.
Although social security health is EsSalud’s
responsibility, workers may affiliate to
alternative health plans and programs
provided by private entities called
Private Health System (EPS),
financing the benefits through
contributions and other
payments as appropriate
under the Law.

16. NATIONAL PENSION SYSTEM (SNP)
The SNP is administered by the Oficina de Normalización Previsional (ONP) and covers the pensions
of retired employees and workers provided that they have fulfilled their contribution for a minimum
of 20 years.
This contribution amounts to 13% of the worker’s compensation. The amount of the pensions is
calculated based on the remuneration received by the worker and the density of contributions paid
to the system.
PRIVATE PENSION SYSTEM (SPP)
The Pension Fund Administrators (AFP) manages an alternative pension system. Through this system,
AFPs guarantee pensions for retirement, handicap and survivorship pensions and burial expenses.
Contributions constitute an individual capitalization fund. Pensions are financed exclusively through
workers’contributions, which accrue and generate profitability. For these purposes, workers must
contribute 10% of their monthly compensation, plus commissions for the AFP and insurance
premiums for handicap, survival and burial coverage, ranging approximately from 12.82% to 13%.
Complementary Insurance for Hazardous Work (SCTR)
The SCTR is intended to cover high-risk activities. The employer is obligated to contract this
insurance and assume its cost. The insurance provides coverage for health and pension plans such as
temporary or fixed disability pension, survivors’pension, as well as funeral expenses.
LEGAL BONUSES
Employers must pay the workers a bonus equivalent to one monthly salary in July (National Holidays)
and December (Christmas).
LIFE INSURANCE
This insurance provides coverage in the event of a worker’s death because of an accident and for
fixed or permanent worker’s disability. As from 01.01.2021, the insurance will also cover natural
worker’s death. The insurance must be paid by the employer and contracted from the beginning of
the employment relationship. The premium is calculated based on the worker’s remuneration and
the percentage is determined by the insurance market. Currently, the reference percentage is around
0.5%.
FOREIGN STAFF
Foreign staff must sign a labor contract which must be approved by a local authority. Regarding the
contract period, the maximum term is 3 years but extendable by similar periods of time.
After signing the labour contract, the foreign citizen must obtain a work or residence visa. Foreign
personnel must not exceed 20% of all payroll staff and the total remuneration received by foreign
workers must not exceed 30% of the company’s payroll. These limits are not applicable under certain
assumptions.

17. THINK GLOCAL, THINK TGS
We are a Firm that thinks in a“glocal”way. This
means we have the support and vision of a global
Firm, but with a more local and specialized business
approach at a regional level.
Our local and foreign clients seek to do business in
the region; hence, regional advisory becomes more
important every time.
We provide Audit, Tax & Legal, Advisory and
Outsourcing services. Moreover, we are committed
to the implementation of responsible business
practices and execution of solutions with a positive
impact on society.
Our professionals work under a cooperation
style that allow us to have teams with a broader
perspective in all lines of service and industries, as
well as geographies; adding value in order to assist
you in finding the best possible solution.
We have more
than 40 years of
experience in Peru.
Recommended Firm
by the International
Tax Review.
TGS Global has
member firms
in more than 60
countries.
We are a multi-
service firm with
global reach.
We are more than
3,800 professionals
around the world.

18. A different mentality
Whether your goals include expansion,
improved operational efficiency or
investor confidence, we strike a balance
between the desire to do what is best
for you in the future and an experienced
sense of what will help you now.

19. www.tgs-sarrio.pe
Sarrio & Asociados
SINCE 1979
TGS Sarrio & Asociados
Av. Emilio Cavenecia 264 oficina 701 San Isidro.
Lima - PERÚ
Contact:
T. +51 1 6156868 / +51 1 6156864
info@tgs-sarrio.pe
©2020 TGS Sarrio & Asociados. All rights reserved. TGS Sarrio & Asociados is an independent member of TGS GLOBAL. As a separate and independent legal entity of TGS GLOBAL, TGS
Sarrio & Asociados is solely responsible for the work it carries out and the services it provides to its clients. TGS Sarrio & Asociados is not responsible for the acts or omissions of other
member firms.