Peru: Overview

RENTAL YIELDS

Yields are high in Peru's urban areas at 9%

A 150 sq. m apartment in Lima costs about US$130,000. This can be rented out for around US$1,000 a month, giving the landlord a yield of around 9.25%.

Yields for houses range from about 6.3% to 10.8%. Properties in the provinces have much lower yields at around 2.8% to 4%.

A 300 sq. m. house in Lima might cost about US$270,000, and be rentable for around US$2,100 per month, giving a yield of 10%. A similarly-sized unit in the provinces might cost about US$200,000, but cuuld be rented out at only US$550 a month; a yield of 3.3%.

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TAXES AND COSTS

Rental income tax is high in Peru

Monthly Income

Effective Tax Rate on Rental Income
US$1,500	US$6,000	US$12,000
Tax Rate	24%	24%	24%
Click here to see a worked sample
Source: Disclaimer

Rental Income: Net rental income (80% of gross income) is taxed at flat rate of 30%, without any other deductions.

Additionally, leasing real estate in Peru is subject to VAT, at 17%. VAT is imposed when legal entities (individuals and corporations), resident or not, rent out Peruvian properties.

Capital Gains: Gains earned by nonresidents selling Peruvian property are taxed at a flat rate of 30%.

Inheritance: There are no inheritance or gift taxes in Peru.

Residents: After two years as residents, foreigners in Peru are taxed on a worldwide income basis.

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BUYING GUIDE

Total transaction costs are low in Peru

Total round trip transaction costs, i.e. the total cost of buying and selling a property, are between 6.4% and 8.55%. The biggest cost is the estate agent’s fee, which is between 3% and 5%. Five procedures must be completed to register property, which can be accomplished in about 33 days.

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LANDLORD AND TENANT

Peru's rental laws are pro-tenant

Rent: Although rents may be freely agreed by the landlord and the tenant, strong security of tenure is given to the tenant.

Tenant Eviction: Legal proceedings to evict the tenant can be burdensome and highly time-consuming (even tedious).

Read Landlord and Tenant  »

ECONOMIC GROWTH

Inequality, poverty and politics

Peru has a rich and varied cultural and architectural heritage, with some of the most spectacular and varied scenery in South America. Tourists are attracted to Macchu Picchu and Cuzco, the ancient capital, and to Lake Titicaca, the world’s highest navigable lake. Millions of highland Indians still speak the ancient tongue of Quechua and maintain a traditional way of life.

However, Peru’s development has been held back by endemic corruption and the failure of successive governments to address the problems of social and economic equality. GDP per capita is around US$3,000 in 2006.

Peru’s 28 million people are deeply divided politically and economically. A small elite of Spanish descent controls most wealth and political power. On the other hand, indigenous peoples are largely excluded; they make up majority of the 50% of Peruvians who live below the poverty line. The economy and infrastructure have been neglected, a fact which for years fuelled Peru’s guerrilla insurgencies.

Lima’s historic buildings and modern multistory apartment houses contrast with the shacks of outlying pueblos jovenes (literally, young towns).

Recent history has seen the country switch between democracy and military dictatorship. The economy likewise goes through swings of economic growth, recessions and hyperinflation. Because of these problems, foreign investors have generally given Peru a wide berth.