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Structuring a lending transaction


Who are the active providers of secured finance in your jurisdiction (eg, international banks, local banks or non-bank financial institutions)?

The most active providers of secured finance in Peru are banks. No licence or similar authorisation is required; as a result, international banks (ie, banks that are not licensed to perform banking activities in Peru) and, to a lesser degree, non-financial institutions also provide secured finance in Peru.

The only applicable limitations are those regarding the maximum interest rate. Non-banking entities (including international banks that are not licensed to operate in Peru) may not charge compensatory or default interest in excess of the maximum rates established by the Peruvian Central Bank (currently 44.25% for compensatory interest and 6.64% for default interest for obligations in Peruvian sol, and 7.98% for compensatory interest and 1.59% for default interest for obligations in foreign currency; in each case per annum).

Is well-established market-standard facility documentation used in your jurisdiction for secured lending transactions?

There is a relatively well-established market standard with respect to local security documents; however, the forms of local loan agreements are considerably more varied.


Are syndicated secured loan facilities typical in your jurisdiction?

Syndicated secured loan facilities are most commonly used for large-scale financings of acquisitions or infrastructure projects; however, they are also used in other scenarios. 

How are syndicated facilities normally structured? Does the law in your jurisdiction allow a facility agent to be appointed to act on behalf of other banking syndicate members?

To the extent that syndicated facilities are commonly used in Peru with respect to large-scale financings by international banks, such facilities are usually structured in accordance with international market standards pursuant to documentation governed by foreign law (ie, through the execution of inter-creditor, agency, security and similar agreements among the syndicate members). Peruvian law does not require the appointment of a facility agent to act on behalf of other syndicate members; in the case of the financing of certain public infrastructure projects, this concept is expressly acknowledged in the relevant concession agreements.

Does the law in your jurisdiction allow security and guarantees to be held on trust by a security trustee for the benefit of the banking syndicate?


Special purpose vehicle financing

Is it common in secured finance transactions for special purpose vehicles (SPVs) to be used to hold the assets being financed? Would security generally be given over the shares in the SPV or would lenders require direct asset security?

Although SPVs may be used in Peru, it is more common for a trust to be established in order to hold the assets being financed. Pursuant to Peruvian law, a trust is an autonomous estate which is separate and independent from the borrower’s estate, and which must be administered by a trustee in strict accordance with the terms and conditions of the trust agreement. This legal instrument may be used in order to hold in trust, for the benefit of the lenders, any assets such as credit and collection rights, cash flows, real estate, moveable assets (eg, vehicles, equipment, machinery, inventory), intellectual property and others. Thus, a trust may be used in connection with a finance transaction both as means of holding assets as security and as a means of payment of the secured obligations. A security is usually granted over both the shares of the company or SPV and the assets being financed.


Is interest most commonly calculated by reference to a bank base rate or a market standard variable reference rate (eg, LIBOR, EURIBOR or HIBOR)? If the latter, which is the most commonly used reference rate in your jurisdiction?

This will depend on the specific transaction and whether it is a cross-border transaction. However, interest is most commonly calculated by reference to a market standard variable reference rate (with LIBOR being the usual reference rate).

Are there any regulatory restrictions on the rate of interest that can be charged on bank loans?

Financial institutions such as banks that are licensed to operate by the Superintendency of Banking, Insurance and Private Pension Fund Administrators are subject to no restrictions on the rate of interest that they may charge on loans. However, non-banking entities (including international banks that are not licensed to operate in Peru) may not charge compensatory or default interest in excess of the maximum rates established by the Peruvian Central Bank (currently 44.25% for compensatory interest and 6.64% for default interest for obligations in Peruvian sol, and 7.98% for compensatory interest and 1.59% for default interest for obligations in foreign currency; in each case per annum).

Use and creation of guarantees

Are guarantees used in your jurisdiction?


What is the procedure for their creation?

Guarantees may take the form of either a general corporate guarantee or a bond. In each case, the guarantee is created through execution of a private document or agreement. This document may also be executed as a public deed before a notary public in order to give the guarantee added value as evidence in the event of enforcement or foreclosure; however, this is not necessary for the purposes of the validity of the guarantee.

Additionally, guarantees such as stand-by letters of credit and insurance policy certificates are recognised under the local regulations and may be issued by authorised financial institutions and insurers, respectively, as guarantees for the performance of obligations.

Do any laws affect or restrict the granting or enforceability of guarantees in your jurisdiction (eg, upstream guarantees)?

Under Peruvian law, in certain circumstances companies are restricted from guaranteeing the borrowings of one or more members of their corporate group. Article 106 of the Corporate Act prohibits Peruvian corporations from making loans, granting guarantees or creating security interests on their assets to fund the acquisition of their own shares. In this regard, a company is prohibited from guaranteeing or granting security in order to secure borrowings incurred in order to finance or refinance the direct or indirect acquisition of its shares. A corporate resolution granting security in breach of this prohibition may be declared null and void (any interested party, including the obligor, may file a judicial claim within one year of adoption of the resolution), and the directors approving the transaction may be subject to liability. However, there is no case law on this matter and it is thus uncertain how a Peruvian court would rule on such claim. 

There are no restrictions in other scenarios. However, the granting of a guarantee to secure obligations of a related company or a third party could make directors or managers liable if it is outside the corporate purpose of the company (ie, it is ultra vires) or has no economic benefit for the company.

Subordination and priority

Describe the most common methods of structuring the priority of debts and security.

The subordination of debt in Peru is usually performed through a private agreement whether through a provision in the relevant credit agreement, execution of a debt subordination agreement with the intervention of the creditors or the issuance of subordinated debt obligations. However, although these types of structure are common (in both the international and, more recently, the local market), Peruvian insolvency law does not acknowledge the existence, priority in payment, subordination of rights or any other aspect relating to contractually subordinated obligations. In that sense, in case of the borrower’s insolvency, the subordination arrangements will not be enforceable with respect to the Peruvian insolvency authority (INDECOPI) and creditors (subordinated and senior) shall be subject to the statutory ranking of claims.

Regarding the priority of security interests, Peruvian law recognises the priority of a specific security against third parties to the extent that such security has been registered before the rights of such third parties. Therefore, a security interest that has been registered before others in relation to the same collateral enjoys priority in using the proceeds from disposing of the collateral to satisfy obligations secured by the security interest. 

Documentary taxes and stamp duty

Are any taxes, stamp duty or other fees payable on the granting of a loan, guarantee or security interest, or on its enforcement?

For the purposes of this analysis, it is assumed that the lender is a non-resident that does not have a permanent establishment  in Peru. Further, it is assumed that the lender is not a resident in a country that has signed a tax treaty with Peru. Otherwise, tax consequences may vary.

Interest payments to domestic lenders (resident entities or individuals) are not subject to withholding income tax. Conversely, in the case of loans granted by foreign lenders (non-resident entities or individuals) to local borrowers, interest will be subject to withholding of the Peruvian income tax.

Interest paid to foreign lenders qualifies as Peruvian-source income and is thus subject to the Peruvian income tax whenever the loan proceeds are placed or economically used in Peru or if the payer of such interest is domiciled in Peru.  In this case, if the Peruvian borrower is an entity and agrees to assume the economic burden of the withholding tax, such borrower can deduct such amount as an expense for its income tax determination, provided that the interest was granted at fair market value.

The withholding tax rate applicable to interest paid to non-resident entities is 4.99%, provided that the following conditions are met:

  • in case of loans in cash, the foreign currency proceeds enter into Peru (deposited in a bank account in Peru);
  • the borrower uses the proceeds of the loan in the ordinary course of its business, or to refinance existing loans;
  • the debt service does not accrue an annual interest rate exceeding LIBOR +7; and
  • the borrower and lender are not deemed to be related parties (the operation cannot be structured as a back to back loan).

For this purpose, the definition of ‘interest’ includes expenses, commissions, premiums and any other additional fee paid in excess of the interest agreed.

If these conditions are not met, the applicable withholding tax rate will be 30%. However, if only the third condition is not met, only the interest that exceeds the limit will be subject to the withholding tax rate of 30%. Nonetheless, please note that these conditions will not have to be met, and the interest will always be subject to a 4.99% rate, when they correspond to bonds or other securities issued to non-domiciled entities.

The withholding tax rate applicable to interest paid to non-resident individuals is also 4.99%, when such interest is paid by a domiciled subject that generates corporate income. Nevertheless, the applicable withholding tax rate will be 30% if:

  • the borrower and the lender qualify as related parties; or
  • the loan qualifies as a transaction made from, to or through tax havens.

The interest will be determined according the transfer pricing rules, when the credit:

  • is agreed between related parties;
  • is made to, from or through non-cooperative countries, territories or tax havens; or
  • is agreed with an entity whose income or profit arising from this transaction is subject to a beneficial tax regime.

These transfer pricing rules will aim to determine whether the interest meets the arm’s-length principle.

Value-added tax Interest paid to the lender will be exempt from value-added tax (VAT), provided that the lender is a financial institution (ie, a local or foreign bank).

If the lender is not a financial institution, the interest to be paid by the domestic borrower will be subject to VAT at a rate of 18%, provided that such credit is used or consumed within Peruvian territory. For this purpose, the taxpayer will be the borrower, which will be to offset the VAT paid against its debit or output VAT (under certain circumstances).

Please be aware that interest paid on notes is not levied with VAT (under certain circumstance). 

Financial transactions tax A financial transactions tax is levied at a rate of 0.005% on any debit or credit made using an account opened with a Peruvian bank or any other financial institution, whether in national or foreign currency. Hence, if the loan is disbursed and deposited in a Peruvian bank account, the transaction will be taxed at the corresponding rate. Likewise, interest and principal paid from or deposited in a Peruvian bank account will also be subject to the financial transactions tax. The taxpayer is the holder of the Peruvian bank account.

Other costs and fees The costs payable in connection with the granting of security usually comprise notary public fees (to execute the security document as a public deed) and public registry fees (to register the security). Notary public fees will vary depending on the designated notary public and are usually calculated on the basis of the secured amount (in a range from $500 to $5,000). 

In the case of mortgages, registration fees are set at 0.75/1,000 over the total secured amount for sums of up to approximately $10,000 and 1.5/1,000 over the total secured amount for sums in excess of approximately $10,000, up to a limit of one referential tax unit (currently S4,150, equivalent to approximately $1,245). An additional S33 (equivalent to approximately $10) qualification fee is payable.

The costs of registering a pledge over moveable assets likewise depend on the secured amount. At the time of writing, registration fees are set at 1.5/1,000 of the total secured amount, up to a limit of one referential tax unit. An additional S10 (equivalent to approximately $3) qualification fee is payable.

Finally, the costs of enforcing the security will include the fees of the common representative (in the case of pledges) and the costs of court proceedings (in the case of mortgages).

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