Steps to Creating a Branch of a Foreign Company in Peru

Establishing a new branch of your company in a foreign country can be a complex strategy, depending on the country of expansion. Often, there are a significant number of intricate regulations and rules that can make the process seem daunting. However, despite these challenges, Peru has become an increasingly attractive destination for foreign investors and companies over the past decade. Nonetheless, there are several key considerations you should keep in mind to ensure that the process of establishing a branch in Peru goes smoothly. Familiarizing yourself with local regulations, understanding the business landscape and seeking guidance from experienced professionals can significantly ease the process of opening a branch in Peru. By skillfully navigating these factors, you can streamline the process and position your business for success in the Peruvian market.

Foreign Branch in Peru – Why do Business in Peru?

The Peruvian economy experienced a 0.6% contraction in 2023 due to social unrest earlier in the year and weather anomalies. However, it is forecast to grow by 3.0% in 2024. Despite the challenges, Peru remains an attractive market for international investors or companies looking to establish their branch office. In terms of ease of doing business, the latest data shows that Peru ranks 76th out of 190 economies. This indicates that the country has made significant progress in creating a favorable business environment.

4 Peru Types of Legal Entities

Peru continues to comply with all norms and has made efforts to break down barriers for foreign corporations. Apart from establishing a branch office, different types of legal structures can be set up in Peru. There are four main types of legal structures in Peru. These include: 

1. Joint Stock Company (Sociedad Anónima or S.A).
2. Private Closed Corporation (Sociedad Anónima Cerrada or S.A.C).
3. Public Corporation (Sociedad Anónima Abierta).
4. Limited Liability Company (Sociedad Comercial de Responsabilidad Limitada or S.R.L).

1. Joint Stock Companies (Sociedades Anónimas, S.A.)

S.A.’s requires a minimum of two shareholders with no minimum capital, except for financial institutions, which require a minimum deposit of $1000 Soles. Joint Stock Companies are characterized by limited liability and centralized management.

2. Closely Held Corporations (Sociedad Anónima Cerrada, S.A.C.)

S.A.C.’s must have a minimum of two shareholders but cannot exceed an amount of 20 shareholders. Liability is limited and shares cannot be registered publicly on the Stock Exchange.

3. Publicly Held Corporations (Sociedad Anónima Abierta, S.A.A.)

S.A.A.’s are usually established if the company has a number of shareholders greater than 750 or if an IPO has been initiated. Liability is limited, management is centralized, and shares must be registered publicly on the stock exchange.

4. Limited Liability Companies (Sociedad Comercial de Responsabilidad Limitada, S.R.L.)

S.R.L.’s can be established with between two and 20 partners and ownership interests determine the amount of capital. As the appellation indicates, S.R.L.’s are characterized by limited liability and management is centralized.

Lastly, a foreign company might establish a branch office. Therefore, we will explain in more detail what a branch office is and how it can be set up in Peru.

What is a Foreign Branch Office?

A branch office, called ‘Sucursal’ in Peru, is a location of business outside of the main office, which must be managed and represented by a permanent legal branch manager residing in Peru. As with all companies domiciled in Peru, branches of foreign companies are subject to a 30% Peruvian corporate tax rate. Nevertheless, foreign branches are not considered legally independent from the parent company but are still managed autonomously by the branch manager, who usually takes orders from the main office. For this reason, the parent company must already be registered and recognized by the Peruvian Mercantile Registry (RMP).

What are the Advantages of Setting Up a Foreign Branch Office

• Foreign companies can access a new market with the help of branch offices and offer its products/services to a new customer base.
  
• A foreign branch office isn’t set up from scratch, but rather takes on the resources and know-how from the parent company. Strategies in the fields of e.g. marketing or general administration can be adopted efficiently without a large number of expenses and time.
  
• Because the branch office is not considered legally independent from its origin, the parent company can still provide support to its branch office, providing investments in case of unexpected losses.

How is the Process of Opening a Foreign Branch Office?

In order to open a foreign branch, a Public Deed of Incorporation of the Branch Office is necessary. In addition, a ‘Certificate of Good Standing’ will be needed by the parent company, including a copy of the articles of association, bylaws or equivalent instruments in the country of origin. Next, a statement of agreement to set up the branch is needed, including information about the capital stock assigned to the branch, the activities to be performed, a statement of the location of the office and the appointment of minimum one legal representative.

There are two different instances, of how this agreement statement can be validated.

1. If the ‘Haag Apostille’ is attached to the parent company’s agreement to incorporate a branch in Peru, the Foreign Affair Ministry of Peru (Ministerio de Relaciones Exteriores, RREE) can directly accept the legal validity of this document.
2. If this is not the case, the Peruvian consulate in the country of origin and the Ministry of Foreign Affairs needs to authenticate the incorporation agreement.

In addition, the company legal representative of the branch shall be given enough authority to deal with any issues that arise. The RREE needs to legalize the power of attorney appointed to the representative and thus a statement written in Spanish must be forwarded. Lastly, it is very important to have legal representation for the branch just as there would be for any other type of company being created in Peru. As with the other company categories, the legal representative must be a Peruvian citizen or a foreigner with a Peruvian residency.

Interested in Doing Business in Peru? Need Local Support?

At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in Lima, Peru, as well as over a dozen other major cities in the region. We also have trusted partners in many other markets.

Our unrivaled reach means we are ideally placed to support multi-jurisdiction market entries and cross border operations.

As well as knowledge about hiring and recruitment outsourcing in Peru, our portfolio of services includes hiring & PEO, accounting & taxation, company formation, bank account opening, and corporate legal services.

Contact us today to find out more about how we can assist you in finding top talent, or otherwise do business in Latin America and the Caribbean.

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