Peru Meeting June 2012Lima, Peru

César Luna-Victoria León

INVESTMENTS REQUIREMENTS

CORPORATE & TAX

Corporate

• Setting up a bussiness presence in Peru• Options

– Branch (local incomes) – Subsidiary (world wide incomes) – Joint Venture

• Peruvians = Foreigners• Residents vs Non residents

Main Taxes

• IT (Income Tax) 30%?

• VAT (Value Added Tax) 18%

IT – Income Tax

i

(e)

100

(30)

70

(3)

67

IT Corporate 30%

IT Profits 4.1%

33%

IT + W Protif Sharing

i + x

(e)

100 + x

(x)

100

(30)

70

(3)

67

W Profit Sharing

IT Corporate 30%

IT Profits 4.1%

33% + x

W Profit Sharing

• 10% Fishing, telecomunications, industrial

• 8% mining, whosale and retail, restaurants

• 5% others

• 0% small bussines, professional services

IT - Spots

• Accrual basis

• IAS (NIC’s) or Peruvian NIFF’s

• Market Value / Transfer pricing rules (OECD)

• Preoperative expenses: 1 or 10 years

• Shorter depreciation term

• IT advances payments / monthly

• Losses carry on (System A or B)

IT - Financing• Related parties

– Transfer pricing rules– Thin capitalization 3 x 1– Witholding 30%

• Non related parties– Thin capitalization not applicable– Witholding:

• 4.99% up to Libor + 7• 30% for the excess

– No back to back

IT – Capital Gains

• 30 % real state

• 5% MILA stock market

• 30% others

IT – Services from non residents

• Performed in or outside Peru– 30% royalties– 30% digital services– 15% technical assistance

• Other services – 30% performed in Peru – 0% not performed in Peru

Other Taxes

• 0.4% x assets (minimum income tax) (ITAN)

• 0.005% financial transactions tax (ITF)

• Local Tax– Up to 1% Real Estate Property Tax– 1% Motor Vehicular Property Tax– 3% Real Estate Transfer Tax

Mining Special Regime

• Special mining burden (GEM)

• Special mining tax (IEM)

• Modified royalty

Oficina de Lima.

I T E M O F I N C O M E

C O U N T R I E S

Interest Dividends Royalties General Services

Technical Assistance

COLOMBIA Unlimited source taxation only(*)

BOLIVIA Unlimited source taxation only(*)

ECUADOR Unlimited source taxation only(*)

CHILE 15% 10%-15% 15% Residence taxation, unless a Permanent Establishment in the Source State.

CANADA 15% 10%-15% 15% Residence taxation, unless a Permanent Establishment in the Source State.

BRASIL 15% 10%-15% 15% 15 %

(*) Under Andean Community Decision to avoid international double taxation. [1]

[1] Tax Treaties

Payroll Taxes

Corporate EmployeeIncome Tax 0 – 30Health contributions 9%Pension Fund 11% - 12%

Benefits• Minimum salary• 2 Legal Bonuses/year• Labor risks insurance• Profit-Sharing• CTS – Compensation for Retirement

Expatries - Witholding

• 24% independent – professional services

• 30% employment

• 15% live shows performed by artists

• 30% others

VAT

• 18%

• Recover VAT– Fiscal credit– Early recovery– Export reimbursement

Investments Warranties

• Constitutionals

• Stability agreements

• International arbitration– MIGA– CIADI– TLC Canada/Peru

¿Fiscal Turbulence?

Fiscal Needs % PBI % PBI Potential IncomesPoverty eradication 1.0 3.0 Tax burden

Health 1.7 4.0 Unexecuted budget

Education 1.9 5.0 Tax evasion

Kuntur 0.6 1.9 Fiscal costs

Infrastructure gap 1.9 -.- -.-

Total 7.1 13.9 Total

29

32

25

20 19

1412

10 10

7

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

ANNUAL AMOUNT REQUIRED TO ERADICATE MONETARYPOVERTY WITH TRANSFERS

(% of the total tax revenues of the Central Government)

Source: Enaho-INEI,MEF, APOYO Consultoría

1,1

4,1

2,2

2,82,6

4,54,7

4,5

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

Perú Chile Colombia América Latina 1/

Health Education

PUBLIC SPENDING IN HEALTH AND EDUCATION 1/(% of GDP)

Source: INEI1/ Weighed average.

17,2 16,5 17,3 19,3 20,8 20,3 19,3

1,8 1,73,9

5,24,6 4,2 4,3

0,0

5,0

10,0

15,0

20,0

25,0

30,0

2005 2006 2007 2008 2009 2010 2011

Executed Unexecuted

BUDGET OF THE GENERAL GOVERNMENT 1/(% of GDP)

Source: SIAF, MEF1/ PIM: Modified Institutional Budget.

19,0 18,3

21,3

24,5 25,4 24,5 23,6

20,4

20,6

22,2

28,5

34,7

36,8

45,8

0,0 10,0 20,0 30,0 40,0 50,0

Chile

Argentina

El Salvador

México

Perú

Ecuador

Guatemala

RATE OF TAX EVASION 1/ 2/(Evasion as % of tax revenues)

1/ Estimate. Evasion is defined as less effective theoretical collection.2/ Date of publication of the study: January 2010.

Source: CEPAL

Many thanks

César Luna-Victoria

clunavictoria@rubio.pe

www.rubio.pe

51 945 094 557