Tax residence and fiscal domicilei Corporate residence
Whether owned by local or foreign investors, entities incorporated in Peru are resident for tax purposes.
Without prejudice to the comments below regarding branches and PEs, a non-locally incorporated entity may not be considered a tax resident itself unless it agrees to transfer its legal domicile to the country and be registered as a local company with the Public Registry.ii Branch or permanent establishment
A non-locally incorporated entity can have a fiscal presence in the country through a formal branch or agency, as explained in Section III, as well as through PEs.
According to the Income Tax Law and its regulations, a PE is deemed to exist in any of the following cases:
- a fixed place of business where a foreign entity develops activities such as administrative offices, factories, workshops, places where natural resources are extracted, and any fixed or mobile facilities used for the exploration or exploitation of natural resources;
- a building site or construction, installation or assembly project, as well as related supervision activities, exceeding 183 calendar days within any 12-month period, unless an applicable tax treaty has set forth a shorter term, in which case such term will apply;
- the furnishing of services, conducted in the country for the same or a connected project or service, for a period or periods aggregating more than 183 calendar days within any 12-month period, unless an applicable tax treaty has set forth a shorter term, in which case such term will apply;
- an individual acting in the country on behalf of a non-locally incorporated sole proprietorship enterprise, company or entity, provided that such individual habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the non-locally incorporated sole proprietorship enterprise, company or entity, and these contracts are:
- in the name of the said entities;
- for the transfer of the ownership of, or the granting of the right to use, property owned by them or that they have the right to use; or
- for the provision of services by them; or
Branches, agencies and PEs are subject to taxation in respect of their Peruvian-source income only.
Double taxation treaties entered into by Peru do not provide for special protection with respect to the generation of PEs. Nonetheless, such agreements allow income arising from certain activities to be subject to reduced tax rates or even exempted from taxation that otherwise would have been levied owing to the generation of a PE pursuant to domestic law.