China is Peru's main trading partner, the largest destination of exports and the main source of imports for Peru. Peru is China's second largest investment destination in South America. The two countries have established a comprehensive strategic partnership and signed a free trade agreement. In the next five to 10 years, Peru will become another destination for Chinese enterprises going global. More Chinese companies will enter Peru and expand into the broader South American market through Peru. AllBright Law is actively exploring the legal service market in South America, providing reliable host country legal service resources and doing legal research on various host countries for Chinese enterprises going to South America, so as to provide legal protection for serving China's high-level opening-up and the "the Belt and Road" strategy. To this end, AllBright Law, together with Rodrigo, El í as &Medrano Law firms in Peru, launched this Series of Articles on Peru Business Environment, including Peru's going global, Peru's corporate structures, Peru's promotion of investment and legal stability, operational legal environment, business winding up and restructuring a business.
I. OPERATIONAL LEGAL ENVIRONMENT
A. Foreign Exchange
There are neither foreign exchange controls, registrations, authorizations or other similar restrictions in place for remittance of foreign currency to or from Peru; nor a requirement to obtain authorization in order to undertake foreign exchange transactions or to carry foreign currency. Any currency can be exchanged to Peruvian Soles and may be used in any transaction in Peru, provided that the parties agree to do so.
Bank accounts of any kind can be opened in USD and other currencies. Also, credit facilities may be contracted in USD or other currencies without any special authorizations.
B. Immigration and Visa Requirements
Any foreign citizen –tourist, business person or resident– desiring to enter the Peruvian territory shall present a passport issued by a State with a minimum six-month validity counting from his or her entry to the Peruvian territory.
Below is an overview of the most relevant types of immigration status for corporate and business purposes.
• Business
Business visas are issued to foreign citizen who enter the country for corporate, legal, or contractual purposes, or to provide specialized technical assistance or similar purposes, and who do not intend to work or earn incomes from a Peruvian-source company.
Business visas are issued by Peruvian Consulates abroad after complying with the requirements (valid passport, a letter of invitation and introduction letter, form, fee payment, etc.). Business visa may be issued from 5 to 10 business days.
In case of countries with which Peru has entered into international business visa exemption agreements, immigration status will be granted by the National Immigration Agency at immigration and/or border checkpoints. Some of the countries with this benefit are: Chile, Colombia, Mexico, Brazil, Costa Rica, India, China, Bulgaria, Croatia, Cyprus, Romania, Iceland, Switzerland, Liechtenstein, Norway, and European Union member countries that are part of the Schengen Area.
A foreign citizen who obtains this type of visa may stay in the country up to 183 calendar days per year, continuously or in different periods, without extension.
• Designated Worker (Foreign Worker from Non-Resident Company)
This immigration status is granted to foreign workers who are relocated to Peru by their non- resident employer in order to render contractual services on the employer’s behalf.
This immigration status entails the existence of two companies. The first company must be domiciled in Peru and operate in the country. The second company must be domiciled abroad.
The designated worker immigration status allows the foreigner to work in national territory, performing activities involving specific tasks or roles or work requiring specialized professional, business or technical knowledge.
The current Immigration Law differentiates between temporary designated workers and resident designated workers.
The term of stay for the resident designated worker is 365 days, extendable; while for the temporary designated worker, it is 183 days, extendable for the same term.
• Resident Worker
Foreign workers who wish to work for a local employer and reside in Peru may opt for the migratory status of a resident worker.
To do so, they must sign an employment contract that must be registered before the Labor Administrative Authority.
This migratory status may also be granted to workers of a transnational company or international corporation who are displaced to Peru to work with a company of the same economic group or holding company to work as senior management or trustworthy personnel or as specialist or specialized personnel.
A foreign citizen who obtains this immigration status shall have the right to work legally for one year, renewable on a yearly basis.
C. Customs
The General Customs Law establishes the legal framework applicable to the entry and exit of goods to and from Peru.
• Import
Only domiciled entities or individuals may act as importers of foreign goods to be used or consumed in the country.
As a general rule, there are no restrictions to the import of goods, although some restrictions based on specific regulations (regarding matters like health and safety, security, environment, etc.) may apply. In such cases, importation is conditioned on the approval of the corresponding authorities.
Duties and taxes applied to import of goods are ad valorem duties, additional variable duty, Selective Consumption Tax (ISC” for its Spanish acronym) and Value added tax (VAT). In addition, the import of goods is subject to advance VAT payments.
The applicable ad valorem rates are 0%, 6%, or 11%, depending on the tariff sub-category of the imported merchandise. More than 70% of the merchandise listed in the current customs tariff is subject to a 0% ad valorem rate.
Additional variable duties apply only to certain agricultural products. The rate will depend on the type of merchandise and the reference price established at the time of import.
As a general rule, the tax base for calculation of ad valorem duties is cost, insurance and freight (CIF value). This value is determined according to the Relative Agreement on Implementation of Article VII of the General Agreement on Customs Tariffs and Trade (GATT) of 1994 (Valuation Agreement) of the World Trade Organization (WTO).
Excise Tax applies only to a certain group of products: petrol (gasoline), gas-oil (diesel), spirits, cigars, tobacco and certain vehicles. The rate or amount will depend on the type of product involved (as discussed in the section on “Taxation and Cross-Border Transactions”).
VAT applies to most imported goods. There is only a limited group of products that are tax exempted, according to the type of merchandise or the place to where the goods are imported (e.g., import benefits of certain types of goods in the jungle region). The applicable rate is 18%.
The VAT’s perceptions system applies, as a general rule, in the importation of all types of goods (However, there are cases in which said system does not apply). The applicable rate is: (i) 10% when, among other cases, the importer carries out for the first time an operation and/or customs regime, (ii) 5% when the importer nationalizes used goods, and (iii) 3.5% in the rest of cases. To calculate the VAT, the calculation basis is the customs value plus all the importation taxes.
• Temporary Imports
Temporary entry of goods is also allowed. Such entries can be of two types: (i) for internal use and subsequent re-export (applicable to equipment and machinery included in a closed list of goods approved for this purpose); and (ii) for transformation and subsequent export of the final product obtained (applicable to raw materials). In both cases the payment of customs duties and import taxes is suspended by submitting a guarantee covering the amount of such duties and taxes plus interests.
• Export
Export operations are tax-free and, as a general rule, there are no restrictions to the export of goods. However, exportation of some goods such as endangered animals, vegetable species, and archeological findings, among others, is prohibited or restricted depending on the type of good.
Only domiciled entities or individuals may act as exporters.
Temporary exports of goods are also allowed and can be of two types: (i) to be used abroad and returned to the country in the same condition as they were when exported; and (ii) to be transformed, repaired or replaced abroad. In these cases, the re-import of the goods is subject to special tax regulations.
• Drawback
Peruvian regulations allow the refund of duties upon import of raw materials required for the production of the exported goods. From January 1, 2019, this refund is (a fixed rate of) 3% of the FOB export value up to a cap of 50% of its production value.
Only companies that manufacture or produce goods in the country (by themselves or by hiring third parties), using imported raw materials, can obtain this benefit after said goods have been exported. Specific conditions and requirements provided by applicable regulations must be fulfilled to obtain a restitution of the duties.
• Good Replenishment with Customs Exemption
This regime allows goods to be imported (raw materials/inputs) with an automatic exemption of customs duties and import taxes. The exemption applies for the same quantity of equivalent goods (identical or equivalent) that was previously imported (without exemption) and was transformed to obtain goods that were exported.
This regime allows exporters to replenish, free of duties and import taxes, the raw materials and inputs used in the process of manufacturing goods to supply to their foreign clients.
• Other Customs Procedures
• Entry into, or exit from Peru of goods contained in parcels carried by international cargo carriers, express mail, or courier services.
• A duty free system that allows duty free storage and sale to inbound or outbound passengers of domestic or foreign merchandise in authorized establishments inside international ports or airports.
• Entry into and exit from Peru of samples for exhibition purposes.
• Entry into and exit from Peru of baggage and household items.
• International Trade Agreements
Peru has entered into several trade agreements that establish the reduction of customs duties and facilitate the trade of goods with countries in Asia, the Pacific Basin, Europe and South America.
• Antidumping and Countervailing Duties
In accordance with the WTO’s general rules on antidumping and countervailing measures, Peru has adopted rules to prevent and correct distortions of competition in the market caused by dumping and subsidies. Peruvian provisions try to prevent unfair trade practices resulting from sale prices that are below the production cost of exported products, or from granting subventions.
Antidumping and countervailing duties are imposed by the National Institute for the Defense of Competition and Intellectual Property (“INDECOPI” for its Spanish acronym). The customs authority is in charge of their collection.
Source: AllBright Law Offices
Contributor：Peru Rodrigo, Elías & Medrano Law Office
Chinese Translation: WANG Liang, E-mail: wangliang@allbrightlaw.com
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