A country’s tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed?
A person’s liability for Peruvian tax is determined by their residence status. A person can either be a resident or a nonresident for Peruvian tax purposes.
A resident is defined as someone who has spent 183 calendar days in Peru within any 12-month period. This status is lost after the individual is absent from the country at least 184 days (in total) during the previous year.
A change in the tax bracket applies at the start of the following Peruvian tax year.
As a general rule, a person who is a resident of Peru is assessable on the individual’s foreign income. Nonresidents are generally assessable on income derived directly or indirectly from sources in Peru. Extended business travelers are considered nonresidents of Peru for tax purposes.
Double Taxation Treaties
In addition to Peru’s domestic legislation that provides some relief from international double taxation, Peru has entered into double taxation treaties with six countries (Bolivia, Brazil, Canada, Colombia, Chile, and Ecuador) to prevent double taxation and allow cooperation between Peru and overseas tax authorities in enforcing their respective tax laws. No treaty has been entered into with the United States or members of the EU as of yet.
Responsibilities of Peruvian Permanent Residency
There is the potential that a permanent residency (PR) could be created as a result of extended business travel, but this would depend on the type of services performed and the level of authority the employee has. Simply assigning employees to Peru will not result in a PR to Peru; it does not occur by default, it is as a direct result of initiating a proper procedure before the immigration authorities and meeting their tedious requirements.
MONTEBLANCO & ASSOCIATES have Peruvian Tax Law specialists who are here to provide tax advice on a personal or corporate level. Whether it is regarding the liable taxes of your property in Peru or determining the best long-term bracket for your start-up or existing corporation, our team can help.