peru-ctg24

Worldwide Corporate Tax Guide 2024

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Peru ey.com/globaltaxguides

Lima EY Av. Victor Andres Belaunde 171 San Isidro Lima 27 Peru Principal Tax Contact

 David de la Torre

GMT -5 +51 (1) 411-4400 Fax: +51 (1) 411-4401

+51 (1) 411-4471 Mobile: +51 (1) 993-537-676 Email: david.de.la.torre@pe.ey.com

International Tax and Transaction Services – International Corporate Tax Advisory

Roberto Cores

Ramón Bueno-Tizon

+51 (1) 411-4468 Mobile: +51 (1) 993-536-767 Email: roberto.cores@pe.ey.com +51 (1) 411-4444 Mobile: +51 (1) 987-478-266 Email: ramon.bueno-tizon@pe.ey.com

International Tax and Transaction Services – Transaction Tax

Fernando Tori

Claudia Plasencia

Edwin Sarmiento

+51 (1) 411-4479 Mobile: +51 (1) 993-536-030 Email: fernando.tori@pe.ey.com +51 (1) 411-4486 Mobile: +51 (1) 992-378-288 Email: claudia.plasencia@pe.ey.com +51 (1) 417-3551 Mobile: +51 (1) 943-753-230 Email: edwin.sarmiento@pe.ey.com

International Tax and Transaction Services – Transfer Pricing

Marcial García

Ricardo Leiva

Dionis Arvanitakis

Jose Luis Quiroz

Cecilia Perez

Business Tax Advisory

Humberto Astete

David Warthon

Dario Paredes

+51 (1) 411-4424 Mobile: +51 (1) 993-535-555 Email: marcial.garcia@pe.ey.com +51 (1) 411-7307 Mobile: +51 (1) 991-683-938 Email: ricardo.leiva@pe.ey.com +51 (1) 411-4444 Mobile: +51 (1) 984-121-950 Email: dionis.arvanitakis@pe.ey.com +51 (1) 411-4444 Email: jose.quiroz@pe.ey.com +51 (1) 411-4444 Email: cecilia.perez@pe.ey.com +51 (1) 411-4477 Mobile: +51 (1) 993-536-262 Email: humberto.astete@pe.ey.com +51 (1) 411-7306 Mobile: +51 (1) 993-528-383 Email: david.warthon@pe.ey.com +51 (1) 411-4407 Mobile: +51 (1) 993-530-277 Email: dario.paredes@pe.ey.com

1434 P e ru Javi Rosas

Alvaro Arbulu

Nathalie Ninuma

Pamela Ormeño

Carla Puente

Manuel Rivera

Tax Controversy

Maria Eugenia Caller

Percy Bardales

Evelyn Linares

Melissa Lama

Pryscilla Valle

Nyrka Yangali

Global Compliance and Reporting

Elizabeth Rosado

Marco Camacho

Gladys Chalco

Guillermo Hidalgo

Katherine Olazo

Gabriel Nuñez

Cindy Sanchez

People Advisory Services

Jose Ignacio Castro

Mauro Ugaz

Jaime Cuzquen

Valeria Galindo

Adriana Gianotti

Mauricio Matos

Miguel Rubio

+51 (1) 411-7308 Mobile: +51 (1) 993-530-284 Email: javi.rosas@pe.ey.com +51 (1) 411-4477 Email: alvaro.arbulu@pe.ey.com +51 (1) 411-4477 Email: nathalie.ninuma@pe.ey.com +51 (1) 417-3502 Email: pamela.ormeno@pe.ey.com +51 (1) 411-2199 Email: carla.puente@pe.ey.com +51 (1) 411-4444 Email: manuel.rivera@pe.ey.com + 51 (1) 411-4412 Email: maria-eugenia.caller@pe.ey.com + 51 (1) 411-4470 Mobile: +51 (1) 993-536-363 Email: percy.bardales@pe.ey.com +51 (1) 417-3534 Email: evelin.linares@pe.ey.com +51 (1) 411-2124 Email: melissa.lama@pe.ey.com +51 (1) 411-4444 Email: pryscilla.valle@pe.ey.com +51 (1) 417-3571 Email: nyrka.yangali@pe.ey.com +51 (1) 411-4457 Email: elizabeth.rosado@pe.ey.com +51 (1) 417-3570 Email: marco.camacho@pe.ey.com +51 (1) 417-3556 Email: gladys.chalco.aguilar@pe.ey.com +51 (1) 411-4464 Email: guillermo.hidalgo@pe.ey.com +51 (1) 411-2198 Email: katherin.olazo@pe.ey.com +51 (1) 411-4444 Email: gabriel.nunez-rojas@pe.ey.com +51 (1) 411-2194 Email: cindy.sanchez@pe.ey.com +51 (1) 411-4476 Mobile: +51 (1) 994-718-762 Email: jose-ignacio.castro@pe.ey.com +51 (1) 411-7414 Mobile: +51 (1) 987-946-954 Email: mauro.ugaz@pe.ey.com +51 (1) 411-4476 Email: jaime.cuzquen@pe.ey.com +51 (1) 411-4476 Email: valeria.galindo@pe.ey.com +51 (1) 411-4476 Email: adriana.gianotti@pe.ey.com +51 (1) 411-4476 Mobile: +51 (1) 974-798-319 Email: mauricio.matos@pe.ey.com +51 (1) 411-4476 Email: miguel.rubio@pe.ey.com

P e ru 1435 Private Client Services (Wealth)

Roberto Cores

Nora Orihuela

Indirect Tax

David de la Torre

Giancarlo Riva

Law

Maria del Pilar Sabogal

Mercedes Fernandez

Maria Luisa Peña

+51 (1) 411-4468 Mobile: +51 (1) 993-536-767 Email: roberto.cores@pe.ey.com +51 (1) 411-4468 Mobile: +51 (1) 971-491-681 Email: nora.orihuela@pe.ey.com +51 (1) 411-4471 Mobile: +51 (1) 993-537-676 Email: david.de.la.torre@pe.ey.com +51 (1) 411-4448 Mobile: 51 (1) 993-530-281 Email: giancarlo.riva@pe.ey.com +51 (1) 411-4433 Email: maria.sabogal@pe.ey.com +51 (1) 411-2140 Email: mercedes.fernandez@pe.ey.com +51 (1) 411-2138 Email: maria.luisa.pena@pe.ey.com

A. At a glance Corporate Income Tax Rate (%) Capital Gains Tax Rate (%) Branch Tax Rate (%) Withholding Tax (%) Dividends Interest Royalties Technical Assistance Digital Services Branch Remittance Tax Net Operating Losses (Years) Carryback Carryforward

29.5 (a) 5/30 (b) 29.5 (c) 5 (d) 4.99/30 (e)(f) 30 (e) 15 (e) 30 (e) 5 (c) 0 4/5/Unlimited (g)

(a) Mining companies are subject to an additional Special Mining Tax or to “voluntary” payments. For further details, see Section B. (b) Capital gains derived by nonresident entities are subject to income tax at a rate of 5% if the transfer is made within the Lima Stock Exchange.

Otherwise, the rate is 30%, with the necessity of requesting a basis certification from the Peruvian tax authority. For further details regarding the applicable tax rates, see Capital gains in Section B. Capital gains derived by resident entities are subject to income tax at a rate of 29.5%. (c) Branches and permanent establishments of foreign companies are subject to the same corporate income tax rate as domiciled companies. (d) The Dividend Tax, which is imposed at a rate of 5% and is generally withheld at source, is imposed on profits distributed to nonresidents and individuals.

For further details regarding the Dividend Tax, see Section B. (e) This tax applies to payments to nonresidents. (f) A reduced rate of 4.99% applies to certain interest payments. For further details, see Section B. (g) See Section C.

B. Taxes on corporate income and gains Corporate income tax. Resident companies are subject to income tax on their worldwide taxable income. Resident companies are those incorporated in Peru. Branches, permanent establishments of foreign companies that are located in Peru and nonresident entities are taxed on income from Peruvian sources only.

1436 P e ru Tax rates. The corporate income tax rate is 29.5%.

A Dividend Tax at a rate of 5% is imposed on distributions of profits to nonresidents and individuals by resident companies and by branches, permanent establishments and agencies of foreign companies. This tax is generally withheld at source. However, in certain circumstances, the company must pay the tax directly. For details regarding the Dividends Tax, see Dividends.

Mining tax. Mining companies are subject to an additional Special Mining Tax based on a sliding scale, with progressive marginal rates ranging from 2% to 8.4%. The tax is imposed on a quarterly basis on the operating profits derived from sales of metallic mineral resources, regardless of whether the mineral producer owns or leases the mining concession.

In addition, mining companies that have signed stability agreements with the state are subject to “voluntary” payments, which are calculated based on a sliding scale with progressive marginal rates ranging from 4% to 13.12%. These rates are applied on a quarterly basis to the operating profits derived from sales of metallic mineral resources, regardless of whether the mineral producer owns or leases the mining concession. Higher tax rates apply to higher amounts of operating profits.

Tax incentives. Various significant tax incentives are available for investments in the following: • Mining enterprises • Oil and gas licenses • Certain agriculture, aquaculture and forestry activities • Capital markets • Infrastructure • Textiles Special Development Zone (SDZ) and preferential tax regimes. By way of exception, Peru applies special regimes that consider the place where activities are carried out. Such regimes comprise, among others, the following: • Tacna Free Trade Zone • Special Development Zone (SDZ) Paita • SDZ Matarani • SDZ Illo

Incentives include exemption from income tax, value-added tax (VAT), selective consumption tax, municipal promotion tax and all taxes created or to be created by the three levels of government, with the exception of EsSalud contributions (health contribution for payroll purposes made by employers that is equal to 9% of the worker’s monthly remuneration) and fees.

Law 31110, published in December 2020 and effective since 1 January 2021, enacted a new agribusiness preferential tax regime, establishing new corporate income tax rates for companies engaged in agribusiness. For companies whose income does not exceed 1,700 tax units (approximately USD2,304,553), a 15% rate applies from 2021 to 2030. For companies whose income exceeds 1,700 tax units (approximately USD2,304,553.79), the following gradual reduction of the benefit of the reduced corporate income tax rate is established: • 2021–2022: 15%

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• 2023–2024: 20% • 2025–2027: 25% • 2028 onward: general regime (29.5%) Legislative Decrees 1517 establish that, as of 1 January 2022, taxpayers engaged in aquaculture and forestry activities have the same tax benefits as those applicable to the agribusiness tax regime. For companies whose income does not exceed 1,700 tax units, a 15% rate applies from 2022 to 2030. For companies whose income exceeds 1,700 tax units, the following gradual reduction of the corporate income tax rate is established: • 2022: 15% • 2023–2024: 20% • 2025–2027: 25% • 2028 onward: general regime (29.5%) Capital gains. Peru taxes both the direct and indirect transfers of

Peruvian shares.

Capital gains resulting from the direct transfer of Peruvian shares, which are defined as any disposal of shares issued by companies incorporated in Peru, are subject to Peruvian taxation.

Transactions are subject to transfer pricing regulations. The tax also applies in the case of cross-border intragroup reorganizations.

Capital gains derived from the disposal of bonds issued by the government as well as by Peruvian corporations before 10 March 2007, through public offerings, are exempt from Peruvian income tax.

An indirect transfer of Peruvian shares is deemed to occur if the following conditions are met: • Within the 12-month period before the transfer, the fair market value of the shares issued by the Peruvian entity represents at least 50% or more of the fair market value of the total shares of the nonresident entity.

• At least 10% of the shares of the nonresident entity are transferred within a 12-month period.

In addition, effective from 1 January 2019, an indirect transfer of Peruvian shares is always triggered if the amount paid for the shares of the nonresident entity that corresponds to the Peruvian shares is equal to or higher than 40,000 Tax Units (approximately USD54 million).

In April 2020, Peru’s executive power enacted Supreme Decree 085-2020-EF, amending the Peruvian Income Tax Law regulations and establishing a new procedure for the determination of the market value of indirect disposals. The procedure determines the market value of the shares of resident entities and nonresident entities in cases of indirect disposals with related parties or unrelated parties and establishes that one of the following methods should be used: • Quotation value. This method applies to shares listed on the stock market. The market value is the highest listed value.

• Discounted cash flow method. This method applies if the shares that are not listed on the stock exchange.

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• Equity participation value (EPV) method. If the methods indicated above are not complied with, the EPV is calculated based on the last audited balance sheet.

• Residual method. This method applies if the above methods are not applicable.

From 1 January 2023, the fair market value for the direct transfer of shares is the following: • For securities listed on the Lima Stock Exchange, the market value is not necessarily the quotation value, as this will be used only if such value corresponds to similar or comparable conditions.

• For other cases, the discounted cash flow method applies.

Capital gains derived by nonresident entities are subject to income tax at a rate of 5% if the transfer is made in Peru.

Otherwise, the rate is 30%. The regulations provide that a transaction is made in Peru if the securities are transferred through the Lima Stock Exchange. The transaction takes place abroad if securities are not registered with the Lima Stock Exchange or if registered securities are not transferred through the Lima Stock Exchange. The Central Securities and Settlements Registry (Registro Central de Valores y Liquidaciones, or CAVALI) withholds tax on capital gains in transactions concluded on the Lima Stock Exchange. As a result, nonresidents are not required to pay their income tax liability to the Peruvian tax authorities in transactions executed within the Lima Stock Exchange.

Tax basis certification. For both direct and indirect transfer of shares, to be able to deduct the tax basis, the basis must be certified by the Peruvian tax authority before the transaction is carried out or any payment is made. Otherwise, the tax basis is zero, and the income tax is imposed on the gross revenue and not on the net gain. The tax basis of shares corresponds to the historical cost (for example, acquisition price, capital contribution and capitalizations, and is reduced by, among others, capital reductions).

Administration. The fiscal year mandatory closing date for busi-

ness enterprises is 31 December. Tax returns must be filed by the end of March or beginning of April, depending on the Tax Identification Number.

Companies must make monthly advance payments of income tax.

Such payments can be used as a credit against the annual income tax obligation, or they can be refunded at the end of the fiscal year if requested by the taxpayer.

The monthly advance payments equal the higher of the following amounts: • The amount obtained by applying to the monthly net income the ratio obtained by dividing the amount of tax calculated for the preceding tax year by the total net income for that year. For the January and February payments, the ratio is determined by dividing the amount of tax calculated for the year before the preceding tax year by the net income for that year.

• The amount obtained by applying a 1.5% rate to the net income for the month.

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Companies in a startup process or in a net operating loss position make monthly advance payments equal to 1.5% of their monthly net income.

Monthly advance payments are due on the 9th to the 15th business day, according to a schedule. Taxes and related penalties not paid by due dates are subject to interest charges, which are not deductible for tax purposes.

Interest rates for tax refunds and tax debts. Beginning 1 April 2021, the monthly interest rate for tax debts in national currency was reduced from 1% to 0.9%. The monthly interest rate for tax refunds in national currency is 0.42%. Tax fines are also adjusted by interest for late payments. However, from 1 January 2024, interest on fines is accrued from the date on which the fine resolution is notified. The interest rate applicable to fines will be fixed by the Central Reserve Bank of Peru, as opposed to the monthly interest rate of 0.9% which had previously applied.

Beginning 1 April 2020, the monthly interest rate for tax debts in foreign currency was reduced from 0.6% to 0.5%, and the monthly interest rates for tax refunds in foreign currency was reduced from 0.3% to 0.25% per month.

Dividends. Effective from 1 January 2017, the dividend withhold-

ing tax rate is 5%. This rate applies to dividends that correspond to profits generated since such date. Profits generated up to 31 December 2014 are subject to a withholding tax rate of 4.1%, and profits generated between 1 January 2015 and 31 December 2016 are subject to a withholding tax rate at a rate of 6.8%, even if the relevant profits are distributed in 2017 or future years. For these purposes, first-in, first-out (FIFO) rules apply.

The Dividend Tax applies to profits distributed to nonresidents and individuals.

The Dividend Tax applies to distributions by Peruvian companies, as well as to distributions by Peruvian branches, permanent establishments and agencies of foreign companies. The Peruvian Income Tax Law specifies various transactions that are considered profits distributions by resident entities for purposes of the Dividend Tax. These transactions include the distribution of cash or assets, other than shares of the distributing company, and, under certain circumstances, a capital reduction, a loan to a shareholder or a liquidation of the company. For permanent establishments, branches, and agencies of foreign companies, a distribution of profits is deemed to occur on the deadline for filing their annual corporate income tax return (usually at the end of March or the beginning of April of the following tax year).

The law also provides that if a resident company, or a branch, permanent establishment or agency of a foreign company, pays expenses that are not subject to further tax control, the amount of the payment or income is subject to the Dividend Tax. Dividend Tax for these items is paid directly by the resident entity or the branch or permanent establishment. In this case, the tax rate is 5%.

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The capitalization of equity accounts, such as profits and reserves, is not subject to the Dividend Tax, unless these items are further distributed.

Interest. Interest paid to nonresidents is generally subject to with-

holding tax at a rate of 30%. For interest paid to unrelated foreign lenders, the rate is reduced to 4.99% if all of the following conditions are satisfied: • For loans in cash, the proceeds of the loan are brought into Peru as foreign currency through local banks or are used to finance the import of goods.

• The proceeds of the loan are used for business purposes in Peru.

• The participation of the foreign bank is not primarily intended to cover a transaction between related parties (back-to-back loans).

• The interest rate does not exceed the Secured Overnight Financing Rate (SOFR) plus seven points. For this purpose, interest includes expenses, commissions, premiums and any other amounts in addition to the interest paid. Supreme Decree 137-2023-EF, effective from 30 June 2023, officially established the use of SOFR as a reference for the interest rate.

If the first three conditions described above are satisfied and the interest rate exceeds the SOFR plus seven points, only the excess interest is subject to withholding tax at the regular rate of 30%.

Interest arising from loans granted by international banks to Peruvian banks and financial institutions is subject to a 4.99% withholding tax.

In general, interest derived from bonds and other debt instruments is also subject to a withholding tax rate of 4.99%, unless the holder of the bonds or other debt instruments is related to the issuer or its participation is primarily intended to avoid transactions between related parties (back-to-back transactions).

Interest earned on bonds issued by the government is exempt from tax. Effective from 1 January 2010, interest on bonds issued by Peruvian corporations before 11 March 2007, in general through public offerings, is exempt from tax. Interest from deposits in Peruvian banks is subject to a 4.99% withholding tax if the beneficiary is a foreign entity.

Other withholding taxes. Payments for technical assistance used in

Peru are subject to withholding tax at a rate of 15%. If the consideration exceeds 140 tax units (approximately USD189,786), the local user must obtain and provide to the Peruvian tax authorities a report from an audit company confirming that the technical assistance services were actually rendered.

Payments for digital services that are provided through the internet and used in Peru are subject to withholding tax at a rate of 30%.

Payments for non-technical services provided in Peru are subject to withholding tax at a rate of 30%.

Foreign tax relief. Tax credits are permitted, within certain limits,

for taxes paid abroad on foreign-source income.

Under domestic law, a direct tax credit is allowed. In addition, effective from 1 January 2019, an indirect tax credit is established for foreign tax credit purposes. A Peruvian entity receiving

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foreign income as dividends or profits from nonresident entities are able to deduct the following: • The income tax withheld from the dividends or profits distributed (direct credit) • The income tax paid by the first-tier nonresident entity (indirect credit) To qualify for the indirect foreign tax credit, the Peruvian entity must directly own at least 10% of the shares of the nonresident entity for a period of 12 months before the date on which the dividends are paid.

The indirect foreign tax credit may be claimed for the income tax paid by the second-tier nonresident entity if the following conditions are met: • The Peruvian entity indirectly owns at least 10% of the shares of the nonresident entity for a period of 12 months before the date in which the dividends are paid.

• The second-tier nonresident entity is a resident of a country that has an exchange-of-information agreement with Peru or is a resident of the same country of residence as the first-tier nonresident entity.

In addition, taxpayers must communicate to the Peruvian authorities equity participation in foreign companies, the profits obtained by the first- and second-tier nonresident companies, and the dividends distributed by them.

Resolution 059-2020, effective 21 March 2020, establishes that taxpayers should communicate the following information through the tax authority’s online platform in Excel format: • Equity participation in foreign companies • Profits obtained by the first- and second-tier nonresident companies and the dividends distributed by them An indirect tax credit is also allowed under certain treaties.

C. Determination of trading income General. Taxable income of business enterprises is generally com-

puted by reducing gross revenue by the cost of goods sold and all expenses necessary to produce the income or to maintain the source of income. However, certain types of revenue must be computed as specified in the tax law, and some expenses are not fully deductible for tax purposes. Business transactions must be recorded in legally authorized accounting records that are in full compliance with International Financial Reporting Standards (IFRS). The accounting records must be maintained in Spanish and must be expressed in Peruvian currency. However, under certain circumstances, foreign investors who invest in foreign currency may enter into an agreement with the state or with stateowned corporations that allows them to keep their accounting books in foreign currency.

Research and development expenses. Law 31659 increased the

deduction rates for Scientific Research, Technological Development, and Technological Innovation (R&D) expenses applicable from 1 January 2023 until 31 December 2025. The following are the increased deduction rates: • Taxpayers whose net income does not exceed 2,300 tax units (approximately USD3.1 million) are entitled to deduct 240% if

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the R&D project is carried out directly by the taxpayer or through a Peruvian R&D center, or 190% if the R&D project is carried out through non-Peruvian R&D centers.

• Taxpayers whose net income exceeds 2,300 tax units are entitled to deduct 190% if the R&D project is executed by the taxpayer itself or by a Peruvian R&D center, or 160% if the R&D project is executed by a non-Peruvian R&D center.

This deduction is applicable for Peruvian taxpayers whose R&D projects began in 2016 and subsequent years.

Inflation adjustments. For tax and accounting purposes, inflation

adjustments apply only until 31 December 2004. Consequently, beginning 1 January 2005, transactions are recognized and recorded in local books at their historical value.

Special activities. Nonresident corporations, including their

branches and agencies, engaged in certain specified activities provided partially in Peru are subject to tax on a percentage of their gross income derived from such activities. This tax is withheld at source. The following are the applicable percentages for some of these specified activities.

Activity

Applicable percentage (%)

Air transportation 1 (a)(b) Marine transportation 2 (a)(b) Leasing of aircraft 60 (c) Leasing of ships 80 (c) International news agencies 10 (a) Sale of highly migratory hydrobiological resources 9 (a) (a) The withholding tax rate is 30%. As a result, the effective tax rates are 0.3% for air transportation, 0.6% for marine transportation and 3% for international news agencies. As of 1 January 2022, an effective tax rate of 3.7% applies to income from the sale of highly migratory hydrobiological resources. (b) This percentage applies to services rendered partly in Peru and partly abroad. (c) The withholding tax rate is 10%. As a result, the effective tax rates are 6% for leasing of aircraft and 8% for leasing of ships.

Law 31557, which applies to Peruvian legal entities, nonresident entities and their branches engaged in the business of online gaming and sports betting conducted on digital platforms, sets a 12% rate that applies over the difference between the net monthly income and the digital platform’s maintenance expenses.

Inventories. Inventories must be carried at cost. Cost may be de-

termined specifically or by the first-in, first-out (FIFO), average, retail or basic inventory method. The last-in, first-out (LIFO) method is not permitted.

Provisions. Provisions for bad debts, bonuses, vacations, employ-

ees’ severance indemnities and other expenses are allowed if made in accordance with certain tax regulations.

Tax depreciation. Depreciation rates are applied to the acquisition cost of fixed assets. The following are some of the maximum annual depreciation rates allowed by law.

Asset

Buildings and construction Cattle and fishing nets Vehicles

Maximum rate (%)

5/33.33 (a) 25 20

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Asset

Machinery and equipment for construction, mining and oil activities Machinery and equipment for other activities Data processing equipment Other fixed assets

Maximum rate (%)

20 10 25 (b) 10 (b)

(a) The 5% rate is a fixed rate established in the Peruvian Income Tax Law. However, a new optional rate of 33.33% was introduced. Also, see below. (b) See below.

Taxpayers may apply any depreciation method for their fixed assets other than buildings and structures, taking into account the characteristics of the business as long as the resulting depreciation rate does not exceed the maximum rates stated above.

In general, except for buildings and structures, tax depreciation must match financial depreciation.

Law 31652 establishes optional special depreciation rules under which taxpayers may claim 33.33% depreciation for buildings and constructions if the following conditions are met: • Construction is started on or after 1 January 2023.

• At least 80% of the construction is completed as of 31 December 2024.

The 33.33% depreciation rate also may apply to buildings acquired by taxpayers in the 2022, 2023 and 2024 tax years, provided the assets meet certain requirements.

In addition, Law 31652 entitles taxpayers to use a maximum depreciation annual rate of 50% for hybrid and electric vehicles acquired in 2023 and 2024.

Legislative Decree 1488 also establishes the following annual depreciation percentages for assets acquired in the 2020 and 2021 tax years: • Data processing equipment: 50% • Machinery and equipment: 20% • Ground transportation vehicles (except railways) used by authorized companies that provide transportation service to people and/or goods at the provincial, regional and national level: 33.3% • Hybrid or electric ground transportation vehicles (except railways): 50% Relief for losses. Taxpayers may select from the following two

systems to obtain relief for their losses: • System A: Carrying forward losses to the four consecutive years beginning with the year following the year in which the loss is generated • System B: Carrying forward losses indefinitely, subject to an annual deductible limit equal to 50% of the taxpayer’s taxable income in each year Loss carrybacks are not allowed.

On 8 May 2020, Legislative Decree 1481 was issued, establishing a special rule for carrying forward losses incurred during the 2020 tax year. According to the decree, companies that opt for System A may carry forward losses incurred in the 2020 tax year for five years instead of four, counting from the 2021 fiscal year.

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D. Other significant taxes The following table summarizes other significant taxes.

Nature of tax

Temporal net assets tax; imposed on companies, and on agencies, branches and permanent establishments of foreign entities; the tax base equals the value of the net assets of the taxpayer as of 31 December of the preceding year that exceeds PEN1 million (approximately USD263,157); the tax payments may offset the advance payments required under the general income tax regime or may be claimed as a credit against the income tax payable for the tax year; a refund may be requested for any balance of tax payment that is not used in the current year; the tax does not apply to certain companies; tax is payable beginning in the year following the first year of productive activities (Law 31104, published in January 2021, authorizes the refund of the temporary tax on net assets corresponding to the 2020 tax year to mitigate the impact of the COVID-19 pandemic on the national economy.)

Value-added tax (VAT), on the sale of goods, services and the import of most products and services; tax that is levied on the importation of services (including interest arising on loans granted by nonfinancial institutions) must be paid under a reverse mechanism by the importer or borrower; VAT paid might be used as an input VAT credit if certain conditions are met Excise tax, on goods and imports; the tax is either a fixed amount or an amount determined by applying a percentage rate Social security contributions to the Peruvian Health Social Security Office, on salaries and legal bonuses; paid by employer Pension Fund; paid by employee (Alternatively, employees may contribute approximately 11.8% of their salaries to the Private Pension Funds Trustee [AFP].)

Employees’ profit sharing; calculated on pretax income and deductible as an expense in determining taxable income; rate varies depending on companies’ activities (mining, fishing, manufacturing, telecommunications and other activities) Tax on Financial Transactions; imposed on debits and credits in Peruvian bank accounts

Rate (%)

0.4

18 Various 9 13

5 to 10 0.005

E. Miscellaneous matters Foreign-exchange controls. Peru does not impose foreign-currency controls. Exchange rates are determined by supply and demand.

P e ru 1445 Means of payment. Any payment in excess of PEN1,500 or USD500 must be made through the Peruvian banking system using the so-called “Means of Payment,” which include bank deposits, wire transfers, pay orders, credit and debit cards and nonnegotiable checks. Noncompliance with this measure results in the disallowance of the corresponding expense or cost for income tax purposes. In addition, any VAT (see Section D) related to the acquisition of goods and services is not creditable.

Related-party transactions. Expenses incurred abroad by a non-

resident parent company, affiliates or the home office of a Peruvian subsidiary or branch (or prorated allocations of administrative expenses incurred by those entities) are deemed by law to be related to the generation of foreign revenue and, accordingly, nondeductible, unless the taxpayer can prove the contrary.

Transfer pricing. Peru’s transfer-pricing rules apply to cross-border and domestic transactions between related parties and to all transactions with residents in tax-haven jurisdictions. Effective from 2019, the transfer-pricing rules also apply to transactions with residents in non-cooperating jurisdictions, as well as transactions with residents whose revenue or income is subject to a preferential tax regime.

The transfer-pricing rules are consistent with the Organisation for Economic Co-operation and Development (OECD) guidelines.

Intercompany charges must be determined at arm’s length.

Regardless of the relationship between the parties involved, the fair market value (FMV) must be used in various types of transactions, such as the following: • Sales • Contributions of property • Transfers of property • Provision of services For the sale of merchandise (inventory), the FMV is the price typically charged to third parties in profit-making transactions.

For frequent transactions involving fixed assets, the FMV is the value used in such frequent transactions by other taxpayers or parties. For sporadic transactions involving fixed assets, the FMV is the appraisal value.

In the event that the transactions are performed without using the FMV, the tax authorities will make the appropriate adjustments for the parties to the transaction.

The FMV of transactions between related parties is the value used by the taxpayer in identical or similar transactions with unrelated parties. The tax authorities may apply the most appropriate of the following transfer pricing methods to reflect the economic reality of the transactions: • Comparable uncontrolled price method • Cost-plus method • Resale price method • Profit-based method Transfer-pricing aspects of cross-border commodity transactions. Effective from 1 January 2019, specific rules are introduced for applying the comparable uncontrolled price method to

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the exportation and importation of commodities and other products, with prices set by reference to commodity prices.

The tax regulations provide lists of export and import products whose prices are set by reference to quoted prices. The following is the list of export products: • Copper • Gold • Silver • Zinc • Fishmeal The following is the list of import products: • Corn • Soy • Wheat Advance pricing agreements. The transfer-pricing rules provide for advance pricing agreements between taxpayers and the Peruvian tax authorities.

Intragroup services. To deduct amounts paid for services provided between related parties, taxpayers must comply with the benefit test and provide the documentation and information requested by the tax authorities.

The benefit test is met if the services rendered provide economic or commercial value to the recipient of the service or improves or maintains the commercial position of the recipient. This can be established if independent parties would be satisfied as to the need for the service, whether they perform the services themselves or through a third party. In this regard, the information and documentation provided must evidence the actual performance of the service, the nature of the service, the actual necessity for the service, and the cost and expenses incurred by the service provider.

Regarding low value-adding services, the service provider must apply a profit markup of no more than 5% to the relevant costs incurred in performing the services. Low value-adding services for purposes of this approach are services performed by one member or more than one member of a multinational enterprise group on behalf of one or more other group members. The services must satisfy all of the following conditions: • They must be of a supportive nature.

• They must not be part of the core business of the multinational enterprise group.

• They must not require the use of unique and valuable intangibles and must not lead to the creation of unique and valuable intangibles.

• They must not involve the assumption or control of substantial risk by the service provider and must not give rise to the creation of significant risk for the service provider.

Under tax regulations, the following do not qualify as low valueadding services, unless they meet the above characteristics: • Research and development services • Manufacturing and production services • Purchase activities related to raw materials or other materials that are used in the manufacturing or production process

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• Sales, distribution and marketing activities • Financial transactions • Extraction, exploration or transformation of natural resources • Insurance and reinsurance • Senior management services Transfer pricing documentation and Country-by-Country reporting. From 1 January 2017, taxpayers must file with the Peruvian tax authorities the following reports: • Local File: this file is required if the accrued revenues exceed 2,300 Tax Units (approximately USD3.1 million for the 2024 fiscal year). This report provides detailed information on intercompany transactions (both domestic and cross-border) and transactions between the local taxpayer and residents in tax-haven jurisdictions. In addition, information with respect to the benefit test must be included in the Local File with respect to services. The information required in the Local File helps ensure that the taxpayer has complied with the arm’s-length principle in its transfer-pricing positions. The Local File focuses on information relevant to the transfer-pricing analysis for transactions taking place between a local taxpayer and associated enterprises. Such information includes relevant financial information regarding those specific transactions, a comparability analysis, and the selection and application of the most appropriate transfer-pricing method.

• Master File: the requirements for this file apply only to taxpayers that are members of a domestic or multinational group of companies whose annual revenue for the fiscal year exceeds 20,000 Tax Units (approximately USD27 million for the 2024 fiscal year). Taxpayers exceeding the annual revenue threshold are only required to prepare and submit the Master File if aggregate annual related-party transactions equal or exceed 400 Tax Units (approximately USD542,247 for the 2024 fiscal year) during the relevant year. The Master File provides highlevel information on the group’s business operations, its transfer-pricing policies and its global allocation of income and economic activity. Specifically, the information required in the Master File provides a “blueprint” of the group and contains relevant information that is grouped in the following five categories: — The group’s organizational structure — A description of its business or businesses — The group’s intangibles — The group’s intercompany financial activities — The group’s financial and tax positions In general, the Master File is intended to assist the tax authorities in evaluating the presence of significant transfer-pricing risks and provide an overview of the group to place its transferpricing practices in their global, economic, legal, financial and tax contexts.

• Country-by-Country Report (CbCR): this report is required for taxpayers forming part of multinational groups, in accordance with Action 13 of the Base Erosion and Profit Shifting (BEPS) Action Plan of the OECD. The CbCR must include aggregate worldwide tax jurisdiction information relating to the global allocation of the revenue, profits (or losses), income taxes paid (and accrued) and certain indicators of the location of economic activity among tax jurisdictions in which the multinational

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group operates. The CbCR also must contain a listing of all of the constituent entities of the group. This listing must include the tax jurisdictions of incorporation, as well as the nature of the main business activities carried out by the constituent entities. Under BEPS Action 13, the CbCR should be filed in the jurisdiction of tax residence of the ultimate parent entity of a multinational enterprise group and is shared between jurisdictions through the automatic exchange of information, by a government mechanism under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, bilateral tax treaties or tax information exchange agreements.

The requirements regarding the submission of the Local File apply from the 2017 fiscal year, while the Master File and the CbCR requirements are mandatory from the 2018 fiscal year.

Debt-to-equity rules. As of 1 January 2021, a new set of thin capitalization rules is applicable. Under these rules, the interest that exceeds 30% of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) of the preceding year will not be deductible. Interest that is not deducted may be carried forward for up to four years, but will always be subject to the 30% of EBITDA limitation.

Supreme Decree 432-2020-EF, which was issued on 31 December 2020, provides that, as a result of the COVID-19 pandemic, with respect to the limit on the deduction of interest expenses applicable as of 2021, taxpayers who establish or begin activities in 2021 consider the EBITDA of that year and not of the preceding year (2020) as established in the rule above.

Supreme Decree 402-2021-EF, effective from 31 December 2021, establishes that for taxpayers not having net income in a tax year or for taxpayers that have losses equal to or higher than their net income, the EBITDA is the sum of net interest, depreciation and amortization. It is also established that if, as a result of a reorganization, a new company (NewCo) is created, the NewCo must take into account the EBITDA for the year in which the reorganization takes place. If no NewCo is created as a result of a reorganization, the EBITDA of the previous tax year must be taken into account.

Transactions with residents in tax havens and entities subject to preferential tax regimes. Expenses incurred in transactions with

residents in low-tax jurisdictions and noncooperative jurisdictions (tax havens) as well as entities subject to preferential tax regimes, are not deductible for tax purposes, except for the following: • Toll payments for the right to pass across the Panama Channel • Expenses related to credit operations, insurance or reinsurance, leasing of ships or aircraft and freight services to and from Peru The following jurisdictions are considered to be low-tax jurisdictions or noncooperative jurisdictions.

American Samoa Andorra Anguilla Antigua and Barbuda Aruba

Dominica Gibraltar Guam Guernsey Grenada Hong Kong SAR

Panama St. Kitts and Nevis St. Lucia St. Vincent and the Grenadines Samoa

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Bahamas Bahrain Barbados Belize Bermuda British Virgin Islands Cayman Islands Cook Islands Curaçao Cyprus

Isle of Man Jersey Labuan Liberia Liechtenstein Maldives Marshall Islands Monaco Montserrat Nauru Niue

Seychelles Sint Maarten Tonga Trinidad and Tobago Turks and Caicos Islands US Virgin Islands Vanuatu

A country or jurisdiction may be included in the above list if one of the following requirements is met: • There is no information exchange agreement or double tax treaty including a clause for the exchange of information in force with Peru.

• There is no transparency at a legal, regulatory or administrative level.

• The corporate income tax rate is 0% or lower than 17.7% (60% of the current corporate income tax rate in Peru, which is 29.5%).

A country or jurisdiction may be excluded from the list if one of the following requirements is met: • The country is member of the OECD. • There is a double tax treaty in force with Peru that includes a clause for the exchange of information.

• The country effectively exchanges information with Peru without limitation based on domestic legislation or administrative practice.

Inclusions or exclusions are applicable as of 1 January of the year following the inclusion or exclusion.

In addition to the jurisdictions mentioned above, a jurisdiction is deemed to be a preferential tax regime if at least two of the following requirements are met: • An information exchange agreement or double tax treaty including a clause for the exchange of information is not in force with Peru.

• There is no transparency at a legal, regulatory or administrative level.

• The corporate income tax rate is 0% or lower than 17.7% (60% of the current corporate income tax rate in Peru, which is 29.5%).

• Tax benefits are available for nonresidents, but not residents.

• The jurisdiction has been qualified by the OECD as a harmful jurisdiction as a result of the lack of a requirement that there be a substantive local presence, real activities or economic substance.

The same tax consequences apply for low-tax jurisdictions, noncooperative jurisdictions and jurisdictions deemed to be preferential tax regimes.

Controlled foreign corporations. The Peruvian Income Tax Law contains the International Fiscal Transparency System, which applies to Peruvian residents who own a controlled foreign corporation (CFC). The law provides requirements for a foreign

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company to be qualified as a CFC. For these purposes, the ownership threshold is set at more than 50% of the equity, economic value or voting rights of a nonresident entity.

In addition, to be considered a CFC, a nonresident entity must be a resident of either of the following: • A tax-haven jurisdiction • A country in which passive income is either not subject to income tax or subject to an income tax that is equal to or less than 75% of the income tax that would have applied in Peru The law also provides a list of the types of passive income that must be recognized by the Peruvian resident (such as dividends, interest, royalties and capital gains).

The revenues are allocated based on the participation that the Peruvian entity owns in a CFC as of 31 December.

General anti-avoidance rule. The Peruvian general anti-avoidance

rule (GAAR) is applicable since 19 July 2012.

Under the GAAR, to determine the true nature of a taxable event, the Peruvian tax authorities take into account the events, situations and economic relationships that are actually carried out by the taxpayers.

If the Peruvian tax authorities identify a tax-avoidance case, it may demand payment of the omitted tax debt or decrease the amount of any credits, net operating losses or other tax benefits obtained by the taxpayer.

In addition, the rule establishes specific requirements to determine whether a taxpayer intended to avoid all or part of a taxable event or reduce the tax base or tax liability.

Also, if the Peruvian tax authorities determine that the taxpayer executed sham transactions, it applies the appropriate tax rules to such acts.

The GAAR is applicable for tax audits reviewing facts, acts and situations from 19 July 2012 and thereafter. The regulations establish the following non-exhaustive list of situations in which a tax auditor can apply the Peruvian GAAR: • Acts, situations and business relationships in which there is no connection between the benefits and associated risks, or low or no profitability • Transactions conducted that are not at fair market value or have no economic rationale • Acts, situations and business relationships that are not related to the ordinary operations in achieving the desired legal, economic or financial effects • The use of “non-business structures” to conduct business activities, instead of business structures • Corporate restructures or corporate reorganizations with no economic substance • Acts or operations with countries and jurisdictions that are considered tax havens or noncooperative jurisdictions • Zero-value or low-cost transactions or the use of structures that minimize costs or nontaxable profits for the parties involved

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• The use of unusual legal and business structures, acts or contracts that contribute to the deferral of profits and income or the anticipation of expenses, costs or losses Legal representatives will be jointly liable for the tax debt when the GAAR is applied, provided that the legal representatives have collaborated with the design or implementation of the acts challenged by the Peruvian tax authorities using the GAAR. For entities having a board of directors, the board of directors will be responsible for approving the entity’s tax planning; this obligation cannot be delegated.

To apply the GAAR in tax audits, the Peruvian tax authorities must follow a special procedure that requires the auditor to send the case to the Revision Committee, which will notify the taxpayer of a hearing; the Revision Committee’s opinion is issued within 30 days after the hearing, and the opinion is binding for the Peruvian tax authorities.

On 11 October 2022, the Peruvian tax authority published on its official website an updated version of the list of high-risk schemes for tax planning that could be challenged under the Peruvian GAAR. The updated list includes the following 13 high-risk schemes that could be challenged under the Peruvian GAAR: • Deduction of payment of royalties in a brand or trademark use assignment scenario • Transfer of a Peruvian company using a trust or similar entity • Re-domiciliation of a company and use of double tax treaties • Assignment of trademarks and capitalization of credits • Management contracts and management fees • Assignment of a concession of an extractive industry (mining) with hidden payments for transfer of shares • Sale and further repurchase of an automobile vehicle under a cancellation of contract scenario • Direct transfer of Peruvian shares via capital contribution and subsequent capital reduction structure • Artificial use of preferential tax regimes • Loan via financial leasing structure • Intermediation in the sale of minerals through an entity without economic substance • Nonprofit entity making payments to an overseas supplier • Transfer of real estate to the shareholder and further lease of the real estate by the shareholder to the company Domestic reorganizations. Under the existing Peruvian Income

Tax Law, domestic reorganizations are subject to a tax-free regime, to the extent that the basis of the assets included in the reorganization is kept at historical value. A law, which is effective from 1 January 2013, maintains this regime but establishes a minimum holding period in cases of spin-off reorganizations. The law states that the shareholders of the company being spun off that receive shares in the company to which the assets are contributed must keep the shares of the latter company until the closing of the next fiscal year following the reorganization. If the shares are transferred before that time, the underlying assets are deemed to be transferred by the acquiring company at market value. The tax is determined by the difference between the historic tax basis

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and the market value. In addition, the shareholder selling the shares is subject to the ordinary capital gains tax.

Ultimate beneficial ownership. Peruvian entities and nonresidents are required to disclose the individuals who are the ultimate beneficial owners to the Peruvian tax authorities.

The following entities are required to report and identify their ultimate beneficial owners: • Peruvian entities incorporated in Peru • Legal entities, such as Peruvian trusts, foreign trusts and partnerships • Nonresident entities provided one of the following requirements is met: — The foreign entity has a branch or permanent establishment in Peru.

— The foreign fund or foreign trust is managed by a Peruvian administrator, either an entity or an individual.

— One party of a consortium is a Peruvian resident.

Ultimate beneficial owners are determined by the following criteria: • Property: an individual holds a minimum of 10% of an entity’s capital directly or indirectly • Control: an individual who, directly or indirectly, has the ability to appoint or remove the majority of the administrative, management or supervisory organs of the legal entity and has the decision-making capacity with respect to the financial, operational and/or commercial agreements of the legal entity If it is not possible to determine the ultimate beneficial owner based on the criteria, the ultimate beneficial owner is deemed to be the individual occupying the higher administrative position, such as the general manager or a member of the board of directors.

F. Tax treaties Peru has entered into double tax treaties with Brazil, Canada, Chile, Japan, Korea (South), Mexico, Portugal and Switzerland.

It has also signed an agreement to avoid double taxation with the other members of the Andean Community (Bolivia, Colombia and Ecuador) under which the exclusive right to tax is granted to the source country. The following is a table of treaty maximum withholding tax rates.

Dividends %

Brazil Canada Chile Japan (b) Korea (South) Mexico Portugal Switzerland Non-treaty jurisdictions

10/15 (a) 10/15 (a) 10/15 (a) 10 10 10 (a)(d) 10/15 (a) 10 (a)(d) 5 (c)

Interest %

Royalties %

15 10 (d) 15 10 10 (d) 10 10 (d) 10 (d)

15 15 15 15 10/15 15 10/15 10/15

4.99/30 (c)

30

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