Investing from Peru

When you sell shares or ETFs on the Lima Stock Exchange (BVL), you pay 5 percent of the gain. CAVALI, the institution that settles the trades, withholds it for you. This also applies to foreign ETFs traded on the BVL. The tax exemption for BVL gains ended on 31 December 2023. If you sell foreign securities through a foreign broker, the gain is added to your work income and taxed at 8 to 30 percent. Losses abroad cannot lower your gains in Peru.

Dividends from Peruvian companies carry a final withholding of 5 percent. For US shares and funds, the US keeps 30 percent of dividends, because Peru and the US have no tax treaty. Peruvian sovereign bonds, Letras del Tesoro and the sovereign bond ETF are not taxed. Interest on bank deposits is tax-free until 31 December 2026.

For retirement you choose between the ONP, the public system, and an AFP, a private fund with an account in your name. The ONP takes 13 percent of your salary for a shared pool. An AFP puts 10 percent into your own account, plus an insurance premium and a commission. At retirement, AFP members can take out 95.5 percent of their fund, but they then lose the state guarantee. Voluntary AFP savings without a retirement purpose, called sin fin previsional, earn returns without tax.

Bank deposits are protected by the Fondo de Seguro de Depósitos up to 123,000 soles per person per bank, a limit updated every three months. Shares and funds are not covered. Brokers, called SAB, are supervised by the Superintendencia del Mercado de Valores (SMV). The Banco Central de Reserva del Perú targets 2 percent inflation, within a range of 1 to 3 percent.

Where you sell changes the tax on the same gain. A foreign broker can cost you more in tax, because the gain is taxed at the rate of your work income. Tax-free sovereign bonds are a simple option for the part of your savings you want to keep safe.

Four pages go deeper. Government bonds in Latin America explains sovereign bonds and Letras del Tesoro. Currency risk explains what the exchange rate does to savings in dollars. Diversification explains why a portfolio needs more than local mining companies. How a stock exchange works explains what happens when you buy on the BVL.