Peru

DOING BUSINESS IN THE PACIFIC LEGAL ALLIANCE

OVERVIEW OF THE COUNTRY AND ITS ECONOMY

Peru has experienced constant growth in its Gross Domestic Product (GDP) for over a decade, driven mainly by the production and export of commodities. After a year of deceleration, the country’s economy has recovered, and Peru’s expected growth remains on the top three of the region (4.1%), very close to Bolivia’s (4.3%) and Chile’s (4%).

The economy’s rate of growth has recovered, mainly, thanks to the continuing recovery in metals’ prices, which translates in stronger investments in mining. This improvement has risen business confidence and, according to the World Bank, growth will remain at around 4% annually. Peru also performs better than the region average in time needed to obtain municipal licenses and building safety technical inspections from the district council, which facilitates starting a business.

With the objective of remaining one of the leading economies in the region, and in line with its commitment to boost the country’s competitiveness, Peru has also carried out some reforms to improve business climate and promote foreign investment.

FOREIGN INVESTMENT

Economy and Finance Minister affirmed Peru’s investment projects portfolio for 2019-2022 exceeds US$10 billion.The official currently leads the Inca country’s delegation at InPERU’s 16th Road Show Europe 2019 which started on February 25 in London and will continue in Madrid (Spain) until February 28.

This event is aimed at attracting investments and promoting Peru as a solid nation for business.

 

“Peru maintains stable indicators, a strong institutional framework, and an economic growth that stands out among the countries of the region,” Minister Oliva expressed. Likewise, he will participate in the seminar “Development in Peru: Foreign investment and economic progress.”

 

Furthermore, the official will hold diverse work meetings with Permanent Secretary at HM Treasury Tom Scholar, as well as with London investors, and businesspeople. Afterwards, the Economy and Finance Head will close the Peru-Spain Business Meeting in Madrid.

 

On the occasion, he will be joined by Spanish Industry, Trade, and Tourism Minister Reyes Maroto and Telefonica’s Hispam South CEO Bernardo Quinn.

 

Central Reserve Bank (BCR) Governor Julio Velarde, CEOE International Chairwoman Marta Blanco, National Confederation of Private Business Institutions (Confiep) Vice-Chairman and BBVA Peru CEO Eduardo Torres will also participate in the event.

CORPORATE LAW

First, in order to set up a corporation in Peru, it is advisable to carry out a previous search before the Public Register of Companies. It is very fit to point out that the Public Register of Companies and the National Institute of Defense of the Competition and Protection of the Intellectual Property- INDECOPI are independent government entities, which are not interconnected.

 

Then, it must be decided the business company line, that is the corporation’s purposes, which must be indicated in a very clear way. Likewise, the aforesaid purpose has to be activities that can be carry out by a corporation, being them lawful.

 

After that, it must be decided the kind of Corporation that would be the most convenient to establish. Regarding these matter, we usually recommend to our clients establish a Held Company, due to the fact that they are capital corporations.

 

About choosing the Type of Company Foreign investors can find a large variety of companies that can be established in Peru. There are many kinds of limited liability companies, i.e., shareholders are liable up to the money they have contributed to the company’s share capital. Among such companies, we find: the SRL (Sociedad Comercial de Reponsabilidad Limitada– Limited Liability Commercial Company that may be compared with a limited liability company) and the Sociedad Anónima – Corporation.

 

It may be stated that there are 3 kinds of Sociedad Anónima in Peru which are the following: Sociedad Anónima Ordinaria – Standard Corporation. This Sociedad Anónima Ordinaria must have up to 750 shareholders and its corporate name must be followed by the abbreviation “S.A.” There is also the Sociedad Anónima Abierta which must have more than 750 shareholders. This kind of structure is normally used by big corporations with a lot of shareholders. Its corporate name must be followed by the abbreviation “S.A.A”. Finally, there is the Sociedad Anónima Cerrada – Closed Corporation which must have no more than 20 shareholders. Its name must be followed by the abbreviation “S.A.C.” This is a very popular company since its organization may be very flexible. For instance there is no need for a board of directors.

SECURITIES MARKET

One of the fundamental criticisms of the Peruvian economic model, implemented by the government of the day, is that through the unrestricted opening of the domestic market to foreign investment can be achieved sustained economic growth. This is reflected in Article 63 of the 1993 Constitution, which reads: “The domestic and foreign investments are subject to the same conditions. So the foreign investors can enter any economic sector, from oil, mining, petrochemicals, airlines, ports, financial sector, telecommunications, etc. In this view, there are strategic sectors or enterprises; therefore, the State should be excluded from any interference or attempt to control.

The objective of this research is to present proposals to reserve to-face strategic sectors of national capital funding in the Lima Stock Exchange, and take the opportunity to develop the capital market, looking for transparency in financial reporting, as companies open corporations, and avoid future cases such as Doe Run Peru, established as a Limited Liability Company Commercial. The methodology of this study is a descriptive, because it seeks to analyze, evaluate and explain the effects of current funding model for private investment by the indiscriminate opening of the domestic market to foreign direct investment.

Collection was made documentary information from the Ministry of Economy and Finance (MEF), Central Bank of Peru (BCRP), National Supervisory Commission for Companies and Securities (CONASEV), analysts and other national and foreign experts in market capital. The results of this study will be reported in the 2010 Research Workshop of the School of Accounting of San Marcos, to be published an article in the Journal of Research “Quipukamayoc” of the Faculty and its findings submitted to the National Congress of the Republic, CONASEV, and Lima Stock Exchange (BVL). The objective of this research is to present proposals to amend the Constitution of Peru in the sense of maintaining a presence in strategic sectors of the national capital required to finance the Lima Stock Exchange, and take the opportunity to develop the capital market looking for transparency in financial reporting, as open corporations, and avoid future cases such as Doe Run Peru, established as a Limited Liability Company Commercial. Participating units are: the Ministry of Economy and Finance, Agency for Promotion of Private Investment (PROINVERSIÓN), the National Supervisory Commission for Companies and Securities (CONASEV), the Lima Stock Exchange

TAXATION

Peru has signed double tax treaties currently in force with Brazil, Canada, Chile, Korea, Mexico, Portugal, Switzerland, and with the member countries of the Andean Community (i.e., Bolivia, Colombia, and Ecuador).

 

Any subsidiary or branch incorporated or established in the country must obtain its Single Taxpayers Registration or or Taxpayer ID (Registro Unico de Contribuyentes – RUC) number.

However, though from the point of view of company law there are no restrictions to the general manager being a foreign individual, the Tax Administration requires that the general manager of a Peruvian company be a Peruvian citizen, or a foreign citizen but with an immigration card. The purpose of this requirement is that such person may be registered as the legal representative of the company in the Single Registry of Taxpayers.

 

Companies incorporated in Peru are subject to Income Tax, both from domestic and foreign source income. The fiscal year ends on December 31st. There are no exceptions. The tax return is normally filed by March 31st of each year.

Monthly payments are generally required to be made based on the estimated annual tax.

Labor

The hiring system in Peru has different characteristics depending on whether it is a contract for domestic workers or foreign workers.

For domestic workers are intermediate term, notwithstanding which, exceptionally, holding fixed and part-time contracts are allowed.

 

The recruitment of foreign workers is regulated by employment contracts of foreign personnel. These workers are entitled to the same benefits provided for workers in the labor of private activity, and are subject to the same contributions and taxes. Foreign employees should not exceed 20% of total staff.

 

The rendering of personal, subordinated and remunerated services is deemed an indefinite term labor contract.The only requirement for hiring local personnel is that the employee must be of the age of majority (i.e. 18 years). Minors between 15 and 18 years must have parental permission and the approval of the Ministry of Labor.

Local personnel is usually hired for an indefinite period. In this case it is not mandatory to enter into a written labor contract. In case of part-time, fixed-term or foreign employees the agreement must be executed mandatorily in writing. Fixed-term employment agreements are allowed but only in cases provided by law.

WORKING VISAS

Foreigners who have a correctly signed and valid work contract with a duration of at least 12 months with a Peruvian company that was approved by the Peruvian Labor Ministry can apply for a resident work visa at the immigration authority “Migraciones” in Peru.

 

While the actual application for the work visa is basically a simple and straightforward process, at least if you are familiar with Peruvian bureaucracy, it is only the last step. The tricky part, especially when you aren’t working for a big international company, is the necessary groundwork you have to do before being able to apply for the work visa.

 

According to Peruvian law the company has to support the future foreign employee with all the red tape. As the Peruvian employer, who sponsors your visa, has to prove the professional competence and occupational qualification of his future foreign employee it is advisable to bring work related certificates, decrees, titles, etc. with you that need an Apostille (or have to be legalized in your home country by the Peruvian consulate and later by the Peruvian Foreign Ministry) and then translated by an official translator.

FOREIGN TRADE

Peru’s international trade sector is an important contributor to its economic output, and one of the main reasons for its rapid expansion. More and more small to medium-sized companies are offering their products abroad and are becoming part of the Peruvian international trade sector. Still, the legal processes of exporting and importing can be challenging, depending on the extent of the company’s trade requirements.

 

The biggest export sectors are natural resources, such as copper ore and gold, whereas the most important imports into Peru are refined petroleum and cars. Fundamental to Peru’s international trade success are its strategic free trade agreements (FTA). Peru is a member of the World Trade Organization and has FTAs with several key Latin America economies including Mexico and Chile. In Asia, Peru has FTAs with China and Singapore, among others. Additionally, Peru fosters an important FTA with the European Union, established in 2013.

Most exporting companies in Peru are small-medium sized entities (SMEs), accounting for around 82% of all exporting companies. The President of the Foreign Trade Society (Comex Peru), Alfonso Bustamante explains: “Exporters are aimed to have higher aspirations after selling abroad for the first time”. SMEs that engage in exporting activities are able to expand their target market immensely, enlarging it by six to seven times, which motivates more SMEs to start exporting their products.

ENVIRONMENTAL LAW

Peru’s Constitution provides that each person has a fundamental right to “enjoy a balanced environment” that can support human development. It also places a duty on the government to promote “sustainable development in the Amazon” and the “conservation of biological diversity and protected natural areas.”

 

On April 2018 the first specialized court on environmental issues was launched in Madre de Dios, Peru.The court or juzgado ambiental, building on it’s recent efforts to bolster the environmental rule of law, particularly in response to illegal mining, deforestation, environmental degradation, and illicit trade in wildlife, mining equipment, and hazardous waste. In November 2017, Peru’s Judiciary held a prominent International Congress on Environmental Justice in Puerto Maldonado—the event included judges Peru, Brazil, and Chile, as well as legislators, public officials, and environmental law experts from throughout the region. At the meeting, judges, prosecutors, and the Ministry of Environment signed the Madre de Dios Pact for Environmental Justice in Peru.

ALIANZA LEGAL DEL PACÍFICO

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