AN OPEN AND STABLE LEGAL FRAMEWORK FOR FOREIGN INVESTMENTS
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| A. Introduction |
Turkey-Peru Investment & Trade Promotion Ltd., has been created as strategic ally for the promotion of investments in Peru in order to boost Peru’s development.
Within the scope of information and guidance duties, Turkey-Peru Investment & Trade Promotion Ltd hereby presents a summary of the principal aspects of the legal framework to carry out investments in Peru.
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B. Legal Framework
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Peru has established a stable an attractive legal framework for private national and foreign investment with the purpose of attracting financial and technological resources required to develop vast natural resources and opportunities in the country. |
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C. Constitutional Provisions
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The Constitution of 1993 includes provisions on essential principles to guarantee a favorable juridical framework for the development of private sector investment, and foreign investment in particular. Some of them are: |
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Free private initiative exercised in a market-based social economy. |
Freedom of work and to engage in business, trade and industry. |
Definition of the subsidiary role for the State in economic activity. |
Free competition and prohibition of restrictive practices and the abuse of dominant or monopolistic positions. |
Freedom to engage workers. |
Powers of the State to establish guarantees and grant securities by means of contract law. |
National treatment. |
Right to submit controversies arising from contractual relationship with the State to national or international arbitration |
Freedom to hold and dispose of foreign currency. |
Inviolability of property and establishment of conditions for exceptional causes that empower expropriation, specifically, in-advance cash payment of a fair-value; equal treatment on taxation matters; and the express acknowledgement that no tax may have confiscating effects. |
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D. Framework Legislation
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The Foreign Investment Promotion Law, approved in August 1991 Legislative Decree Nº 662, is the cornerstone of a sound legal framework that establishes clear rules and security for the development of foreign investments in the country.
The general legal framework for the treatment of foreign investments is complemented by the Framework Law for Private Investment Growth, approved by Legislative Decree Nº 757 and the Regulations of the Private Investment Guarantee Systems, approved by Supreme Decree Nº 162-92-EF; as well as modifying regulations.
The legal framework governing foreign investments in Peru is based on national treatment. Foreign investments are allowed, without restrictions, in most economic activities. No prior authorization is required for foreign investments; acquisition of national investors shares is fully allowed through stock exchange or other mechanism.
As to ownership, foreign individuals or corporate bodies are in the same conditions as Peruvians. However, foreigners may not acquire mines, lands, woods, water, fuels, energy sources, within fifty kilometers from the borders, except in case of public necessity, expressly declared by Supreme Decree and approved by the Cabinet.
WTO commitments are fully abided by. No selection mechanisms or performance requirements are applied or demanded of foreign investors. In cases where investments enjoy benefits derived from the subscription of legal stability agreements with the State, requirements are the same as those established for national investors.
Every enterprise has the right to organize and develop its activities under the form it deems appropriate. All legal provisions establishing production methods or production indexes have been repealed. No prohibition or requirement to use certain inputs or technological processes, and in general, no intervention in production processes of companies over the type of economic activity, installed capacity, or any other similar economic factor is allowed. Exceptions are made for legal provisions over hygiene and industrial security, environment and health.
Foreign investment may be made in any income-generating activity, under any of the following forms established by Law :
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Foreign Direct Investment, as contribution to stock equity. |
Contributions to the development of contractual joint ventures. |
Investment in goods and properties located within national land. |
Portfolio investments |
In intangible technological contributions |
Any other investment modality contributing to the development of the country. |
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E. BASIC RIGHTS OF FOREIGN INVESTORS |
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Right to receive non-discriminatory treatment versus national investor. |
Freedom to conduct commercial and industrial activities and to perform import and export operations. |
Right to remit abroad profits or dividends, after payment of the corresponding taxes. |
Right to use the most favorable exchange rate existing in the market for any exchange operation. |
Right to free re-exportation of invested capital, whether from a sale of shares, reduction of capital or total or partial liquidation of investments. |
Unrestricted access to domestic loans, under the same conditions than national investors. |
Free acquisition of technology and free remittance of royalties. |
Freedom to acquire shares of national investors. |
Right to acquire insurances for investments. |
Right to subscribe Legal Stability Agreements with the State over investment in the country. |
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F. LEGAL STABILITY AGREEMENTS
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Empowered by the Political Constitution, and under the Foreign Investment Promotion Law and the Framework Law for the Growth of the Private Investment, the State guarantees the legal stability to foreign investors and to the enterprises where they invest, through the subscription of agreements with law-contract status, and abide by the general provisions on contracts established in the Civil Code. |
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1. Guarantees granted by the State to Foreign Investors |
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Stability of the right to non discrimination. |
Stability of the Income Tax System, applicable to investors, in force when the agreement is concluded. |
Stability of the system of free availability of foreign currency and remittance of profits, dividends and royalties. |
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2. Guarantees granted by the State the Enterprise receiving the investment |
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Stability of the systems of labor engagement in force when the agreement is concluded. |
Stability of the system of export promotion applicable when the agreement is concluded. |
Stability of the Income Tax System. |
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3. Who may subscribe Legal Stability Agreements?
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Investors and enterprises receiving the investment, in the case of new enterprises or in the case of capital increases of the enterprises already established. Also in the case of investors participating in the privatization process and the enterprises involved in such process, whenever they fulfill the following requirements: : |
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a. Investment commitment by Foreign Investors
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The investor shall fulfill one of the following investment commitments: |
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To make, in a two-year term, capital contributions for an amount not under US$ 5 million in any economic activity, except mining and hydrocarbon sectors. |
To make, in a two-year term, capital contributions not under US$ 10 million in mining and hydrocarbon sectors |
To acquire more than 50% of shares of an enterprise participating in the privatization process. |
To make capital contributions in a concession contract, fulfilling the investment requirements established in the pertaining contract. |
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b. Requirements for Receiving Enterprises |
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One of its shareholders shall have concluded the corresponding Legal Stability Agreement. |
In case tax stability is requested, contributions shall account for 50% increase in relation with the total amount of capital and reserves, and shall be destined to the expansion of the production capacity or to the technological development of the enterprise. |
The case of transfer of more than 50% of shares of an enterprise participating in the privatization process. |
The case of an enterprise involved in a concession contract, fulfilling the investment requirements established in the pertaining contract. |
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c. Term
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The term of Legal Stability Agreements is 10 years. In case of concessions, the term of the legal stability agreement shall extend to the term of the concession. |
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d. Settlement of Disputes
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Legal stability agreements derive settlement of disputes to arbitral tribunals. |
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G. Investment Agreements in the International Scope
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Peru has had a very active participation in the negotiation of instruments of bilateral, regional and multilateral nature, in order to consolidate the juridical framework that guarantee and protect investments and aid the creation of an adequate climate to encourage bigger foreign investment flows. Those instruments have the purpose of setting forth guarantees for the treatment, protection and access to mechanisms of settlement of controversies applicable to investments.
Up to date, 31 bilateral treaties on the promotion and reciprocal protection of investments have been signed with countries of the Pacific Basin, Europe and Latin America, as well as the FTA with the United States of America (already approved by both Congress), includes an Investment Chapter. Likewise, Peru has subscribed the OPIC agreement that facilitates operations granting coverage to investments from USA carried out in Peru. Peru is also member to MIGA and a signatory to the ICSID Convention, as well as to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
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Bilateral Investment Treaties signed by Peru |
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The FTA between Peru and the USA was subscribed in Washington D.C. last April 12, 2006, and ratified by the Peruvian Government on June 29, 2006. |
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H. Tax Regime
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Peruvian tax regime is composed by, among others, Income Tax, Value Added Tax, Excise Tax, Temporary Tax on Net Asses and Financial Transactions Tax, besides the custom duties regime. |
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1. Income Tax |
Income Tax is annually applied to every income earned by domiciled or non-domiciled taxpayers, regardless the nationality of individuals, companies’ place of incorporation, or location of the income source. Non-domiciled taxpayers are subject to income tax only with respect to their Peruvian-source income.
In the case of enterprises, income tax applies to any gains or profits derived from transactions with third parties calculated at the end of each financial year.
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| a. Income Tax Rates: |
| Domiciled |
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| Tax payable by corporate bodies shall be determined by applying 30% of their net income. |
| Tax payable by individuals shall be determined by applying the following progressive accumulative rate over the annual whole net rent.. |
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Up to 27 UIT................................................... 15% |
| Over 27 UIT and up to 54 UIT ...................... 21% |
| For excess of 54 UIT .................................... 30% |
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| Dividends and other forms of distribution of profits received from corporate bodies: 4,1%. |
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| Non Domiciled |
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| Interests coming from external credits: 4.99%, whenever entrance of currency to the country can be proved and annual interest on the balance due is not superior to the preferential rate existing in the market where it comes from, plus 3 points. |
| Interest paid abroad by banking and financial companies established in Peru, derived from their foreign lines of credit used in the country: 1%. |
| Dividends and other types of profit distribution received by corporate bodies: 4.1%. |
| Royalties: 30%. |
| Technical assistance: 15% |
| Other incomes: 30%. |
| Individuals shall calculate their tax applying a 30% rate on pension benefits or remunerations for personal services rendered in the country, royalties and other incomes. |
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b. Agreements to Avoid Double Taxation
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Peru is developing a process to subscribe “Agreements to Avoid Double Taxation” with the purpose of solving problems derived from international double taxation. Up to date, agreements with Chile and Canada have been subscribed. |
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2. Value Added Tax
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This tax applies to domestic sale of goods and chattels, render or use of services in the country, construction contracts, the first sale of real estate made by the constructor thereof and import of goods. The applicable rate is 19%, which includes the Municipal Promotion Tax. |
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3. Excise Tax
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This tax applies on the domestic sale, at producer level, and importation of goods, such as cigarettes, alcoholic beverage, mineral and carbonated water, other luxury articles, fuels, gambling and bets. Rates runs between 0% to 300%, according to the type of good or service. |
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4. Temporary Tax on Net Assets
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It is a temporary tax applied on the value of Net Assets as of December 31 of the foregoing year. This tax shall be in force up to December 31, 2007. This tax rate shall be determined by applying the following progressive accumulative scale over the taxable basis: |
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| Rate: 0.0% Net Assets: Up to S/. 1 000 000 |
| Rate: 0.5% Net Assets: Over S/. 1 000 000 |
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The tax duly paid could be considered as tax credit against installments or regularization of Income Tax. |
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5. Financial Transactions Tax
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It is a temporary tax that levies with a 0.08% proportional rate banking operations in national or foreign currency (both debits and credits). This tax will be in force up to December 31, 2007. It will be deductible for Income Tax purposes. |
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I. Customs Duties Regime
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The current tariff structure includes five levels: 0, 12, 17, 20 and 25%, with 7 351 total tariff items. |
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PERU: TARIFF STRUCTURE
TARIFF LEVELS |
TARIFF ITEMS |
IMPORTS 2006 CIF VALUE |
AD-VALOREM + OVER RATES |
Number |
Percentage (%) |
Millions US$ |
Percentage (%) |
0% |
3,658 |
49.8 |
1,0920 |
71.2 |
9% |
2,628 |
35.7 |
3,798 |
24.8 |
17% |
1,052 |
14.3 |
599 |
3.9 |
20% |
13 |
0.2 |
11 |
0.1 |
Total |
7,351 |
100.0 |
15,327 |
100.0 |
AVERAGE NOMINAL TARIFF |
5.7 |
TARIFF DISPERSION (STANDARD DEVIATION) |
6.2 |
| AVERAGE EFFECTIVE TARIFF 1_/ |
2.2 |
1_/ Effective Tariff = (Amount of total Advalorem CIF contribution / Total amount of imports CIF)*100 |
Source: Prepared on the basis of Customs Tariff (Arancel de Aduanas) 2007, approved by Supreme Decree Nro 017-2007-EF |
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| J. Regimes of Customs Improvement |
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1. Temporary Admission Regime
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This regime implies the suspension of taxation on imports destined to “active improvement” process for further exportation of goods. |
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2. Drawback
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Customs regime that enables the refund of, upon the export of goods, 5% of customs duties levied on the importation of goods used in the elaboration of such exported goods or consumed during their production. |
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3. Replacement of Raw materials and Input /1
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This regime allows duty- and import tax-free replacement, in kind, by importing an equal amount of material identical to what was nationalized and used to produce exported goods. The term to enjoy this benefit is one year as from the importation of good to be replaced. |
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K. Labour Regime
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Peruvian legislation sets forth different modalities of hiring, including fixed-term contracts of temporary, occasional and for specific work or service.
Local companies are entitled to hire foreigners up to 20% of their work force, provided that their salaries do not exceed 30% of the total wages paid by the company. Employers shall be exempt from the limiting percentage in the case of highly skilled technical and professional personnel, or management personnel in case of a new business activity or company restructure. Contracts of foreign workers shall be written and subscribed for specific term, which could be renewed for a maximum period of 3 years.
Employers may request exemption from limit percentages in case of professionals or skilled technicians, and in case of management staff or executives of new business activities or company re-conversion. Employers may hire temporary workers through Cooperatives of Job Encouragement and labour intermediation companies. In those cases, there is no direct labour link between the worker and the employer. A maximum percentage of 20% applies related to the number of workers with direct labour link.
Companies may subscribe, under Formation Programs, agreements relating theoretical and practical learning by means of the assignment of planned professional training and formation tasks. In the case of Youth Labour Formation Program, the number of young people shall not exceed 20% of the total workers of the area assigned or 20% of the total staff of the company. This limit may be increased by 10%, provided this percentage is exclusively composed of handicapped young people or by young women with family responsibilities
Labour regime establishes a 8-hour labour day or a maximum of 48 hours per week for workers older than 18 years. A surplus shall be paid for overtime work. This surplus shall not be under 25% of the normal hour value for the first two hours, and 35% for the remaining hours. The worker shall have the right to a minimum rest of 24 consecutive hours per week, and resting days for holidays established by law.
Workers have the right to:
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| To be ensured with the Social Health Insurance (ESSALUD). The employer shall contribute to ESSALUD a rate equivalent to 9% of workers’ income. |
| To be affiliated with the National Pension System (NPS) or to the Private Pension System (PPS). In the first case, workers shall contribute 13% of its wage; and, in the second, approximately 10% to the Pension Fund Private Manager he had chosen. |
| Life insurance hired by the employer once the worker has a continuous 4-year labour period. |
| Compensation for arbitrary firing. The amount paid shall be one and a half remuneration per each year worked up to 12 remunerations. |
| Compensation for Time of Service (CTS), considered a social benefit as prevision for contingencies derived from work stoppage. CTS payment shall be made twice a year, in May and November. |
| Vacation period: 30 days for each year full worked. |
| Bonus: 2 bonus per year, in July and December, equivalent to one monthly wage each bonus. |
| Company’s profit sharing: Percentage of participation runs from 5% to 10% of a company’s net income, according to the economic activity in which the company is engaged in. Companies with no more than 20 workers are not compelled to share profits between their workers. |
| The Minimum Vital Wage (minimum amount that a worker must receive from his employer) is S/. 530.00 (Five hundred and thirty and 00/100 nuevos soles) equivalent to US$ 171.00 (One hundred and seventy one and 00/100 US dollars). Minimum bases used to apply certain percentages can not be lower than the minimum vital wage in force. |
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L. Investment Incentives
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1. Anticipated Recovery Regime /2 |
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1. General Regime
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This regime allows the refund of tax paid on imports and/or domestic acquisitions of capital assets carried out by individuals or corporate bodies engaged in production activities of goods and services destined to be exported or whose sale is burdened with the Value Added Tax, provided they have not yet started their commercial activities.
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| 1.2. Special Regime of Anticipated Recovery of the Value Added Tax |
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| This regime allows the refund of VAT paid for imports and/or domestic acquisitions of new capital goods, new intermediate goods, services and construction contracts, made in the pre-operation stage to be used by the beneficiary of this Regime directly for the execution of projects foreseen in Investment Contracts and that has been used for operations burden with the VAT or exports. |
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| 1.2.1. To enjoy the Regime |
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| Natural or corporate bodies investing in any sectors of the economic activity that gnereate third class income (corportate bodies) and fulfill the following requirements: |
| Subscription of Investment Contract with ProInversión and the pertaining sector, on behalf of the State, with investment commitment, during the pre-operation stage, for no less thatn US$ 5 0000 0000.00 (Five million dollars). Said amount does not include the VAT. MInimum amount mentioned will not applied to agriculture projects. |
| The project requires a pre-operation stage equal or larger than two years, counted as from the starting date of the investment schedule included in the Investment Contract. |
| To have the Supreme Resolution signed by the Minister of Economy and the minister of the pertaining sector, approving the persons entitled to enjoy this regime, as well as goods, services and construction contracts that will grant the Anticipated Recovery of VAT, for each contract. |
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| 2. Tax Refund of Value Added Tax |
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| This regime allows the refund of tax paid or trasferred on imports and/or domestic acquisitions of capital assets, intermediate goods, services and construction contracts during the pre-operation stage of infrastructure and public utilities, provided that they have been destined to opeartions not burdened with such tax and are used directly in the execution of investment projects in infrastructure works and public utilities. This regime will apply upon the subscription of the Investment Contract. |
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| 2.1. To enjoy the Regime |
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| Corporate bodies who have subscribed a Concession Contract under the Supreme Decree Nº 059-96-PCM and modifying regulations, and fulfill the following requirements are entitled to enjoy this regime. |
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| Subscription of Investment Contract with ProInversión and the pertaining sector, on behalf of the State, to invest in infrastructure and public utilities a minimum amount of US$ 5 0000 0000.00 (Five million dollars) as total investment amount included the pre-operation stage than. Said amount does not include the VAT. |
| To have the Supreme Decree that qualify to enjoy the regime, issued by the Ministry of Economy and Finance, with the approving vote of the Cabinet. |
| To be in the pre-operation stage of the infrastructure or public utilities project matter of the Investment Contract. |
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3. Agriculture Sector Incentives
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The State has declared that investment and development of agriculture sector have the highest priority. Thus, it has devised incentives applicable to individuals or corporate bodies that develop cultivations and/or breeding, excepted forestry industry. Likewise, individuals or corporate bodies carrying out agribusiness activities may also enjoy those incentives, provided they mainly use agrofarming goods directly produced or acquired by people developing and/or breeding activities in zones where such goods are produced, outside Lima Province and Constitutional Province of Callao. Agribusiness activities related to wheat, tobacco, oleaginous seeds, oils and beer are herein excluded. |
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| a. Tax Benefits |
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| Income tax shall be determined by applying 15% rate over the net income |
| Corporate bodies may depreciate 20% per year, the amount invested in hydraulic infrastructure and irrigation works. |
| During pre-production stage and in a maximum term of 5 years, individuals or corporate bodies may request the refund of the Value Added Tax paid for the acquisition of capital goods, inputs, services and construction contracts. |
| Tax benefits apply up to December 31, 2021. |
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b. Labour and Social Security Regime
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Employers of the agriculture sector are entitled to hire personnel for indefinite or definite term. If the latter, contracts term shall depend on the agriculture activity to be developed. Accumulative working hours may be established due to the special nature of work, provided the number of working hours during the term of the contract does not exceed in average maximum limits set forth by Law. Overtime payment shall be granted only when such average is surpassed.
A special labour and social security regime, with the following characteristics, has been created: A four-hour working day, vacations of 15 calendar days, compensation equivalent to 15 daily salary per worked year (180 salaries maximum). Monthly contribution to Health Insurance system for workers engaged in agriculture activity, borne by the employer, shall be 4% of each worker’s monthly wage. |
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4. Aquaculture Sector Incentives
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The State promotes aquaculture activity, which includes organized and technical cultivation of hydrobiological species in selected, controlled, natural, conditioned or artificial environment; in partial or complete biological cycle; in sea, continental or salty waters. Aquaculture activity also includes research and primary processing of products resulting of such activity. |
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| a. Tax Benefits |
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| Individuals and corporate bodies engaged in aquaculture activities shall pay a 15% rate over the net income for purposes of Income Tax. |
| Tax benefits shall be in force up to December 31, 2010, and shall be applied without prejudice on any other tax benefit granted to promote economic activities in specific zones of the country. These specific benefits shall be in force according to the relevant legislation. |
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b. Labour and Social Security Regime
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Employers of the aquaculture sector are entitled to hire personnel for indefinite or definite term. If the latter, contracts term shall depend on the aquaculture activity to be developed. Accumulative working hours may be established due to the special nature of work, provided the number of working hours during the term of the contract does not exceed in average maximum limits set forth by Law. Overtime payment shall be granted only when such average is surpassed.
A special labour and social security regime, with the following characteristics, has been created: A four-hour working day, vacations of 15 calendar days, compensation equivalent to 15 daily salary per worked year (180 salaries maximum). Monthly contribution to Health Insurance system for workers engaged in agriculture activity, borne by the employer, shall be 4% of each worker’s monthly wage. |
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5. Amazon Region Law
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With the aim of encouraging sustained and integral development of the Amazon Region, special tax conditions have been established in order to favor private investment: |
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| Taxpayers located in the Amazon Region, mainly engaged in the following activities: agro-farming, aquaculture, fishing, tourism; manufacturing activities related to the processing, transformation and commercialization of primary products derived from the before mentioned activities and forestry transformation, provided those products are produced in that zone; and, activities of forestry extraction, shall apply, for purposes of Third Category Income Tax, a 10% or 5% rate, according to their geographic location. |
| Taxpayers of Amazon Region who are mainly engaged in agriculture activities and/or transformation or processing of products considered as native and/alternate culture in such zone, shall be exempt from the Income Tax. |
| In the case of oil palm, coffee and cacao, the exemption shall be applicable only to the agrarian production. Transformation or processing companies of those products shall apply a 10% or 5% rate, according to their geographic location. |
| Companies engaged in commerce activities in the Amazon Region that reinvest a minimum of 30% of their net income in the Investments Projects may apply, for purposes of the Third Category Income Tax, a 10% or 5% rate, according to their geographic location. |
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Companies located in Loreto, Ucayali or Madre de Dios Departments are exempt from VAT and Excise Tax for sales made in those Departments for internal consumption. |
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6. Special Zones
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a. Centers of Export, Transformation, Industry, Commercialization and Services– CETICOS.
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CETICOS are geographical areas duly delimited with custom primary zone status and special treatment, destined to generate development poles through industrial, maquila, assembling or storage activities. CETICOS are located in Paita, Ilo and Matarani cities.
Agribusiness and agro-exporting activities could be developed at CETICOS. Agribusiness activity is primary transformation of agrofarming products produced in the country. Said transformation must be carried out at CETICOS.
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Tax Benefits
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Companies engaged in industrial, maquila or assembling activities, established or set up in the CETICOS, until December 31, 2012, are exempt from Income Tax, VAT, Excise Tax, Municipal Promotion Tax, as well as from any other tax, fee, contribution levied by the Central Administration, even those tributes that require express exempt regulation.
Companies established at CETICOS Tacna that carry out repairing and reconditioning activities of used vehicles may continue carrying out their activities within ZOFRATACNA up to December 18, 2008. |
| Entry to CETICOS of goods unloaded in Ilo, Matarani and Paita ports are not levied by Custom Duties, VAT, Municipal Promotion Tax, Excise Tax or any other tribute levied on importation. |
Entry of national goods and rendering of services coming from national territory to Ilo, Matarani and Paita CETICOS shall be considered to be exportation. In the case of definite exportation, regulations on simplified refund of Custom Duties and VAT, as well as any other tax regulation related on exportation, shall apply. |
Entry of goods from abroad, through any Customs of the Republic, destined to CETICOS, provided those goods are to be destined to the re-shipment to abroad or foreign goods that once transformed at the Centers are to be exported abroad. The entry of goods through Customs under a jurisdiction different to any CETICOS, shall be made under the Transit Customs Regime. |
Goods produced by users of CETICOS may enter the rest of the national territory under the Regimes of Temporary Admission, Temporary Importation and Replacement of Raw Materials and Input. |
Income derived from the re-sending abroad of foreign goods are exempt from Income tax. |
| Entry of goods to the rest of the national territory coming from CETICOS are subject to custom duties, Value Added Tax, Excise Tax, Municipal PromotionTax, and other pertaining import tributes |
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b. Tacna Duty-Free Zone (ZOFRATACNA)
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The Tacna Duty-Free Zone –ZOFRATACNA- was created to contribute to the sustainable socio-economic development of the Tacna Department. There, industrial, agribusiness, assembly /3 and service activities can be carried out. Also included are storage, distribution, disassembly, packaging, packing, marking, labeling, division, exhibition and sorting of merchandises, among others. Additionally there can be activities such as mining machinery, motor and equipment repair, reconditioning and/or maintenance, among others, according to a list approved by a Ministerial Resolution from the Ministry of Production in coordination with the Ministry of Economy and Finance /4.
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| Tacna Industrial Zone |
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| Tacna Free Zone is a closed space with a total area of 390 hectares. 120 hectares have services such as optical fiber, electric power, water, sewage, roads, sidewalds, parking, green areas, etc. |
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| Tax Benefits |
| Users that set up or establish at ZOFRATACNA to carry out activities above mentioned, are exempt from the Income Tax, Value Added Tax, Excise Tax, Municipal Promotion Tax, Solidarity Tax, as we all from every tribute from the national, regional and municipal administrations, created or to be created , even those requiring express exemption rule, exemption is made to ESSALUD contribution and fees. |
Operations arranged between Duty Free, users are exonerated from the Value Added Tax and from the Municipal Promotion Tax, previous authorization from the ZOFRATACNA Adminsitration. |
| Goods coming from outside that enter ZOFRATACNA through Ilo and Matarani ports, Tacna airport and Peruvian port in Arica, may enter ther Tacna Trade Zone, provided they com from Free Warehouses located in ZOFRATACNA, paying a Special Tariff. |
| Final entry of goods produced in the country and supply of services coming from the rest of the national territory to ZOFRATACNA will be considered as export. It will apply the regulations regarding simplified restitution of customs duties and Value Added Tax, as well as any other concerning taxing issues in connection with exports. Goods entering with termporary status, qualify as temporary exports. At re-entry of goods resulting from passive perfecting to the rest of the national territory, import taxes will be calculated on the added value. |
Import of residuals, wastes and/ or sub-products with commercial value resulting from goods exported temporarily for passive improvement is not burden with any tribute. |
| Users of ZOFRATACNA may enter machinery and equipment, tools and spare parts imported to ZOFRATACNA and will benefit from a special regime of suspension of tariff, duties and other taxes on imports . |
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| Tacna Trade Zone |
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| It is a commercial area that includes Tacna district and part of the district of Alto de la Alianza in Tacna Department, in the south of Peru. |
| Goods coming from Free Wharehouses of the Free Zone may enter this area only paying 8% CIF value. |
| Many malls sell tax-free goods at low prices. |
| To enjoy those prices, the visitor of Tacna must has the status of tourist. In such a case, the tourist must present a "Declaración Jurada de Equipaje" (Affidavit of Bagagge) at the land terminal or at the airport, in order to guarantee that his/her products arrive to their destination without any problem. |
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7. Exchange Regime |
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As to the exchange regime, the State guarantees free availability, use and disposal of foreign currency by individuals and corporate bodies residents of Peru. Likewise, the State guarantees free convertibility of foreign currency at a unique exchange rate. |
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8. Free competition and protection to intellectual property |
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The State regulates the exercise of dominant position in the market and protects intellectual property.
The National Institute of Protection of Intellectual Property – INDECOPI, is the agency in charge of applying legal provisions on the Defense of Competition and protecting market from monopolistic practices, which may control and restrict competition in the production and commercialization of goods and rendering services, as well as practices that may generate unfair competition and those affecting market agents and consumers.
INDECOPI, as well, controls and punishes application of dumping and subsidies practices; defends consumers’ right; and, looks after the fulfillment of regulations that punish practices against commercial good faith; defends regulations on free trade; controls provisions establishing non-tariff restrictions. It also revises actions and provisions of Public Administration entities, included within municipal or regional scope, which may impose bureaucratic obstacles impeding or hindering, unlawfully or irrationally, the access or permanence of economic market agents.
Besides, INDECOPI shall protect intellectual property rights, under any expression, and shall act as registration office of intellectual property. |
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9. Technology Transfer
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Contracts for the use of technology, patents, trademarks or any other element of industrial property of foreign origin, as well as technical assistance, basic and detail engineering, management and franchising contracts are freely agreed by the parties therein involved and further registered with INDECOPI.
Remittance of after-tax royalties is freely allowed through the national financial system. |
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M. PROMOTION OF PRIVATE INVESTMENT ON PUBLIC INFRASTRUCTURE WORKS AND UTILITIES
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The Single Arranged Text approved by Supreme Decree Nº 059-96-PCM /5 establishes that promotion of private investment on public infrastructure works and utilities is to be carried out through concessions.
PROINVERSION, is the competent national agency in charge of promoting investment projects under concession modality. At regional or local level, the regional or municipal governments themselves are competent for promoting investment projects within their jurisdictions.
The Special Committee on Assets and State Projects and Companies and the Special Committee on Infrastructure and Utilities Projects at PROINVERSION awards concession for public infrastructure works and utilities.
The concessions are awarded through national or international Special Public Call for Tenders or Integral Projects Competitive Bids and are formalized with the subscription an administrative agreement.
The concession agreements awards the concessionaire the execution /6 and exploitation of certain public infrastructure works or the delivery of utility services for a certain term.
The concession agreement shall establish in its case the mechanisms that will assure the concessionaire the receipt of revenues for toll, prices, user fees or any other systems to recover investments, according to the nature of the concession. The concessionaire may not exempt any one user. |
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Concessions may be awarded under any of the following modalities:
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By payment (the concessionaire is required to make a cash payment or pay a
percentage of its total revenues to the Peruvian State). |
| For free |
Co-funded by the State (with gradual payments during the construction or
exploitation stages, refundable or not). |
| Mixed, when more than one of the above modalities concur. |
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As compensation for the works and services it exploits, the concessionaire shall receive: |
| The fare, price, toll or any other investment recovery system established. |
| Additional benefits expressly agreed in the agreement, such as concessions for tourist services, self-service stores, advertising, and others. |
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The concession term is that stated in the agreement, which in no case shall exceed sixty (60) years. The term shall be computed as from the date the respective agreement was entered into.
The State may submit equity controversies derive from concessions to national or international arbitration, as provided in the Political Constitution of Peru, even if the agreement is not entered into.
Likewise, concessionaires may hire insurances, in the country or abroad, to cover their investments against commercial and non-commercial risks.
Concessionaires may include the following benefits in the agreements: |
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| Regime of the Anticipated Recovery of the Value Added Tax. |
| Annual depreciation of goods under concession, or, total depreciation of such goods during the remaining period until the concession term is due. |
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When the concessionaire requires it or by default, the State may enforce the regulations and sanctions corresponding to users of the service under concession, as foreseen in the corresponding legal regulations and concession agreement provisions. |
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N. Promotion of private investment in the field of enterprises included in the State Entrepreneurial Activity and State Entities (Legislative Decree Nº 674, Law for Promoting Private Investment in State Companies and Law Nº 26440) |
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The Private Investment Promotion Agency –PROINVERSIÓN- centralizes decision making as the highest ruling body in charge of designing and leading investment promotion in the field of companies included in the State’s Corporate Activities and other State entities. Therefore:
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It establishes in which companies included in the State’s Corporate Activity any of the promotion modalities shall be applied. |
| It defines the modality to be employed. |
It approves, prior to its execution, the Private Investment Promotion Plan regarding each one of the respective companies. |
It publishes the agreement draft and the definitive agreement on the transfer of State’s shares and assets in the official gazette “El Peruano”. |
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The modalities through which private investment promotion is conducted are the
following: |
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1. Transfer of shares and/or assets |
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| Sale of State owned shares and/or assets must be made by public offer, by: |
Sale through Stock Exchange, over the Counter or Floor Transactions.
Shares not listed in the Stock Exchange may be listed in it. Transactions with stock shall be conducted as per regulations concerning this subject. Likewise, shares not listed in the Stock Exchange may be assigned through the Floor Transactions. |
| Sale in public bidding |
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The following shall be applied for sales of State-owned shares and/or assets in
public biddings: |
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| The bidding procedure shall be approved, as well as the payment procedure and the system to evaluate and score proposals. |
| Calls for tenders shall be made through Peru’s official gazette “El Peruano” and two newspapers sold nationwide. |
Shareholders shall have full access to all the information concerning
the company’s situation. |
| A Notary Public shall participate in the reception of proposals and contract award. |
| The contract shall be awarded to the best proposal submitted. |
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In addition, the sale may be subject to the commitment of making new investments in the way and conditions defined.
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2. Capital increase
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Selection of new shareholders shall be carried out through calls for public tenders approved by PROINVERSIÓN.
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3. Joint ventures, partnerships, service delivery, leasing, management, concession or other similar.
The Special Committees, established by Supreme Resolution and approved by PROINVERSIÓN, shall select among several candidates, considering that their service quality and cost conditions proposed are among the most competitive in the market.
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4. Disposal of or sale of company assets, when carried out, due to their dissolution and liquidation.
When applying this modality, the company shall be understood as legally dissolved and the respective liquidation procedure as started, as per the relevant legal provisions.
PROINVERSIÓN is the competent agency to promote private investment in State owned companies and assets. Regional and Local government are authorized by law to promote their own private investment projects on companies and assets they own.
The Special Committee on Assets, State Projects and Companies and the Special Committee on Infrastructure and Utilities Projects lead processes executed under Legislative Decree Nº 674. |
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O. LEGAL FRAMEWORK TO PROMOTE DECENTRALIZED INVESTMENT
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By Law Nº 27783, Base Law for Decentralization, issued in 2002, the first stage of the country’s decentralization process starts and the chapter on decentralization of the Political Constitution –regulating the State organization in a democratic, decentralized and de-concentrated fashion- is developed in what corresponds the national government and the regional and local governments.
Likewise, the regulations on administrative, economic, productive, financial, tax and fiscal decentralization are defined. On the other hand, the aforementioned law establishes the organization of regions (at this first stage the regional governments are established as constituted on the territorial jurisdiction of Peru’s departments) and municipalities. The law establishes exclusive, shared and delegated competencies at the three governmental levels and determines the local and regional governments’ assets and resources. It also regulates government relations in its different levels.
Law Nº 27867, the Organic Law on Regional Governments, establishes that regional governments exercise certain general duties subject to the juridical order established by the Constitution, the Base Law for Decentralization and other laws of the Republic. Also, these laws develop specific functions, based on regional policies, which are formulated as per national policies on that subject matter.
By virtue of this law, Regional Governments are authorized to promote private investment projects in their territorial jurisdictions and within the framework of their functions and operations. To that effect, they may grant concessions and enter into any kinds of agreements seeking to promote private investment on regional property. However, the law establishes that to do so regional governments may request technical assistance from specialized entities such as PROINVERSIÓN.
Law N° 27972, which approves the new Organic Law of Municipalities, lays the foundations, among other aspects, for local governments to be able to undertake their own private investment promotion processes both in what refers to the sale, leasing of assets or similar modalities and to granting concessions for public infrastructure works and utilities. This means that each municipality is legally authorized to promote the execution of private investment projects as per its jurisdiction and functions, be it directly or with the technical support of PROINVERSIÓN.
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Decentralized Investment Promotion
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Law Nº 28059, Framework Law for the Promotion of Decentralized Investment and its regulations approved through Supreme Decree N° 015-2004-PCM, sets forth the regulatory framework so that the State, at its three government levels (national, regional and local), may promote decentralized investment as a tool to achieve integral, harmonic and sustainable development in each region, through strategic alliances among regional and local governments, private investment and civil society. |
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1. Private Initiatives on State Resources |
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Treatment of private investment promotion involving State resources –assets, companies, projects, services, public infrastructure works and utilities- and resulting from private initiatives has been regulated. In this regard, there are certain requirements and a procedure by virtue of which, once a private initiative is approved and published, and interested third parties do not come forth, the initiative author shall be favored with direct adjudication or concession.
It must be noted that the document through which the private initiative is approved will acknowledge duly substantiated expenses, which shall be assumed by the grantee. |
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2. Relationship between Regional Governments and National Government |
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The following minimum criteria shall be observed in the relationship between regional governments and the national government in connection with investment projects: |
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| National projects developed in the regions shall foster participation of the regional government(s) of said jurisdictions. |
| Projects developed with the participation of the national government shall benefit from the relevant national and regional regulations concerning investment existing at the time of execution at any government level. |
| National projects shall foster the constitution of Interregional Coordination Councils, thus promoting development of the necessary capacities for the decentralized administration of assets, companies and projects. |
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| 1/ Articles 78 - 80 of the Single Arranged Text of the General Customs Law, approved by Supreme Decree N° 129-2004-EF. |
| 2/ Legislative Decree Nº 818 and amending regulations. |
| 3/ Amendments introduced as per Law Nº 28599, a Law modifying the Tacna Duty-Free Zone and the Commercial Zone - Law Nº 27688 and Amendments-, will enter into effect starting from the ten (10 ) days following publication of their regulations. |
| 4/ According to Supreme Decree countersigned by the Ministers of Foreign Trade and Tourism, Production, and Economy and Finance, other activities may be included. |
| 5/ This regulation gathers provisions of Legislative Decree Nº 757 and Legislative Decree Nº 839. |
| 6/ Execution means construction, repair and/or enlargement of the works, whereas exploitation refers to operation of said works or service delivery. |