PERU Law and Practice Contributed by: Walter Aguirre, María Angela Vásquez and Sebastian Montes, Aguirre Abogados & Asesores
However, registration and other actions relating to the franchisor’s industrial property rights must be carried out in accordance with the applicable local laws, as well as regional regulations such as Decision No 486 (Common Regime on Industrial Property of the Andean Community), which sets forth binding rules for the protection of industrial property applicable to all member countries, including Peru. 8.3 Mandatory Content Where the franchise agreement is governed by Peru - vian law, the parties are free to determine its content. 8.4 Prohibited Provisions in Local Law Section 1354 of the Peruvian Civil Code provides that parties may freely determine the content of their agreements, provided such content does not contra - vene mandatory legal provisions. There is no statutory “blacklist” of prohibited contractual clauses. 9. Dispute Resolution 9.1 Enforcement of Foreign Judgments With respect to the enforcement of foreign judgments in Peru (exequatur), Section 2106 of the Peruvian Civil Code expressly allows foreign judgments to be enforced in the country, provided certain conditions are met. In addition, pursuant to Section 74 of the Arbitration Act (Legislative Decree No 1071), a foreign arbitral award is defined as one rendered outside of Peruvian territory. Such awards will be recognised and enforced in Peru in accordance with the following instruments: • the Convention on the Recognition and Enforce - ment of Foreign Arbitral Awards, adopted in New York on 10 June 1958; • the Inter-American Convention on International Commercial Arbitration, adopted in Panama on 30 January 1975; or • any other treaty on the recognition and enforce - ment of arbitral awards to which Peru is a party. Unless the parties agree otherwise, the most favour - able treaty for the party seeking recognition and enforcement of a foreign arbitral award shall apply. It
is worth noting that the process for enforcing foreign judgments and arbitral awards in Peru may be pro - longed due to judicial delays and court backlog. 10. Payment and Taxes 10.1 Restrictions or Limits on Franchisee Fees and Royalties There are no restrictions in Peruvian law on payments made under a franchise agreement for initial franchise fees, royalties or services. Likewise, there are no restrictions on making payments in foreign currency, or on the amount of royalties payable. 10.2 Withholding Tax Under Peru’s current Income Tax Act, non-resident taxpayers are subject to tax only on income derived from Peruvian sources. Accordingly, as a general rule, there is an obligation to withhold the applicable tax on behalf of a non-resident franchisor in connection with the payment of the initial franchise fees, royalties and services. The applicable withholding tax rate on royal - ties paid to a non-resident franchisor is currently 30%. These payments may be deducted by the franchisee in accordance with applicable tax regulations. The exact withholding rate will depend on the specific nature of the income and whether any of the dou - ble taxation agreements (DTAs) entered into by Peru are applicable. Peru currently has DTAs in force with Brazil, Canada, Chile, Mexico, Portugal and Switzer - land, among other countries. Therefore, carrying out a case-specific tax analysis to determine the applicable Pursuant to current Peruvian legislation, it is permis - sible to enter into obligations denominated in foreign currency, and the terms set forth in the franchise agreement in this regard are valid and enforceable. It is important to note that no foreign exchange controls are currently in effect in the country. treatment is strongly recommended. 10.3 Foreign Currency Controls
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