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Foreign Investment

What treatment does a foreign investor receive, and which currencies can be used in peru?

The Constitution of Peru grants equal treatment and rights to both foreign and domestic investors, guaranteeing the free possession, use, and disposal of domestic and foreign currency in the country, without exchange controls, registrations, authorizations, or other similar restrictions regarding money remittances to or from Peru.

As long as the parties involved are in agreement, all transactions may be executed with foreign currencies without the approval of any authority.

Another important characteristic that makes Peru a very attractive destination for foreign investment is the fact that investors have the right to open any type of bank accounts, involving either US Dollars and/or Euros. Also, it is important to mention that financial entities are authorized to grant loans in Soles and in U.S. Dollars. In addition, foreign investors have the right to transfer abroad (after taxes), any capital gain from their investments or economic benefits in a freely convertible currency, at the most favourable exchange rate in effect at the time of the transaction, and without the prior authorization from the Central Bank or any governmental authority.

Companies domiciled in Peru pay income taxes over domestic and foreign sources.  On the other hand, companies not domiciled in the country are taxed only on income of Peruvian origin without any expense deductions.

However, in the latter case, the tax rate varies depending on the type of income, which ranges from 4.99% in the case of interest from external loans, 15% for technical assistance services, and up to 30% for other income. In these cases, the non-domiciled individuals do not have the possibility of deducting the expenses related to the business and must pay the tax through withholdings that the taxpayer must make.

It should be noted that if a company is incorporated in Peru, regardless of the nationality of its partners or members, it will be considered a company domiciled in Peru.

What Internationa treaties exist for the promotion of foreign investments?

In order to encourage private investment and create the right climate to promote a greater flow of foreign investment, the Peruvian government has signed treaties with various countries to allow investors access to multilateral, bilateral, and international mechanisms, for example:

The Peru-Canada Free Trade Agreement ratified by Supreme Decree No. 044-2009-RE seeks to eliminate obstacles and promote trade between both countries. Its main objectives are the following:

  • Tariff reduction and/or elimination.
  • Increase in exports, through the elimination of distortions caused by tariffs, import quotas, subsidies, and non-tariff barriers.
  • Legal security for the investor.
  • The attraction of domestic and foreign private investment flows, promoting the development of economies of scale.
  • Employment generation.
  • Greater competitiveness
  • Integration of Peru into the world economy
  • Participation in public contracting and acquisitions

http://www.acuerdoscomerciales.gob.pe/index.php?option=com_content&view=category&layout=blog&id=60&Itemid=83

It should also be noted that Peru and Canada belong to the Asia Pacific Economic Cooperation (APEC), considered the main forum to facilitate economic growth, technical and economic cooperation, enablement and liberalization of trade and investments in the Asia-Pacific region.

Peru and Canada are also part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is a new free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Once the CPTPP enters into force, it will be one of the largest free trade agreements in the world and will provide enhanced market access in the Asia Pacific region to its members.

Likewise, Canada, New Zealand and Singapore are in negotiations with the Pacific Alliance, promoted by Peru, Colombia, Chile and Mexico for their entry as “Associated States” to the block.

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