Online Business in Peru

Rossana Rodriguez
Estudio Aurelio García Sayán-Abogados
Publised in World Online Business Law, January 2008, Oxford University Press

I. The Legal Framework.

A. Sources of Law:

Government System

Peru is a republic divided in 25 departments.   It is a country organized under a unitary and decentralized government in a system where The Executive, the Legislative and the Judiciary are separate powers.

The President, who is elected by suffrage the same as the Congress representatives are, represents the Executive Power.  The Legislative Power is represented by the Congress of the

Republic and is the Supreme Body for the approval of laws, which are applicable throughout the Peruvian territory.

Finally, the Body in charge of administering justice is the Judiciary.  Our judicial system is based on the application of laws, as we have as most Latin American countries chosen the Romanic Germanic system.

So that decision-taking process may be decentralized, regional governments have been created with autonomy within the circumscription of a department.  Each department is in turn divided into provinces and provinces into districts, which are subject to local governments. Regional and local governments have restricted competence in laying down rules, as they have limited powers under the Political Constitution, the Organic Law of Regions and the Organic Law of Municipalities.

Power to propose and approve rules

Although the Congress of the Republic is the Supreme Body entitled to propose and approve rules, there are also decentralized bodies depending from the central government which have capacity to issue rules ranking below the Laws enacted by Congress on specific issues within their competence.   Precisely these bodies have approved a number of provisions to regulate the use of electronic means for the operations within their sector and for some of the procedures, as we shall see below:

B. Scheme of Online Business Regulation:

Although On-Line contracting in Peru has not been regulated by specific rules, a number of provisions have been issued during the last years recognizing the validity of the agreements and operations entered into through these means, as follows:

- Law 27269, Law on Digital Signatures and Certificates (published in the Official Gazette on May 28, 2000.
- Law 27291, Law Modifying the Civil Code permitting the Utilization of Electronic Means for Communicating the Expression of one’s Will and the Utilization of Electronic Signature (published on June 24, 2000)
- Law No. 27419, Law on Notices by e-mail.
- Law No. 27310, Law Modifying  Art. 11 of Law 27269 (published on July 17, 2000)
- Law No. 27309, Law incorporating Computer Crimes to the Criminal Law.
- Supreme Decree No.004-2007-PCM, Regulation to the Law on Digital Signatures and Certificates (Published on January 14, 2007).
- Art. 104 of the Tax Code as to Notices of acts by the Tax Administration.
- Article 20 of the Law of General Administrative Procedure referring to notifying administrative acts.  This law regulates the actions of administrative entities.
- Administrative Resolution of INEI Nº 207-2002-INEI that establishes the regulations for assigning domain names in the case of the government entities.

C. Bodies authorized to regulate certain aspects of Online Contracting.

a) National Institute for the Defense of Competition and Protection to Intellectual Property (INDECOPI).

This is the administrative body of the public sector with authority for:
- Accrediting registration and verification entities and recognizing the foreign certifying authorities.
- Approving the registration and verification entities.
- Canceling any accreditations granted.
- Signing mutual recognition agreements with foreign administrative authorities having similar duties.

b) Red Científica Peruana.

This is the sole entity having authorization from the Internet Corporation for Assigned Names and Numbers [ICANN] to register domain numbers in Peru with the suffix “pe” according to international directives for registering Top Level Domains [TLD’s].  This is a private organization.

c) Ministry of Transports and Communications.

This is the Central Government Body entitled to grant permits and licenses to companies rendering “value added services”, which according to Art. 19 of the Single Official Text of the Telecommunications General Law approved by Supreme Decree No. 013-93-TCC are those services that utilize as support carrier or final or diffusion services and add some characteristic or facility to the service on which they are based, such as interpersonal courier service, data storage and re-transmission, teleprocessing and data processing and others.

II. Key Issues in Online Business Regulation.

A. Setting up and Funding a Technology Business.

There are no restrictions in Peru for an individual nor a company to incorporate a business related to technological matters.  Even so, and depending on the activity to be carried out, authorizations and licenses may be required from the Communications Sector.

Where the business to be developed is to engage in certification and registration of electronic signatures, the owner of the business will be required to be incorporated.

Juridical Forms contemplated in Peruvian Legislation:

Firstly, juridical persons engaged in any kind of business can adopt any of the forms contemplated in Law No. 26887, General Law of Corporations, among which:

- Sociedad Anónima:  This is a limited responsibility corporation whose capital is represented by shares.  It may adopt some variations such as “sociedad anónima cerrada” [closed corporation]  with 20 partners at the most, or a “sociedad anónima abierta” [open corporation], in case of corporations that meet among others the following assumptions:  they make public offers of shares, have more than seven hundred and fifty shareholders or more than 35% of their capital belongs to one hundred and seventy five or more shareholders.

- Sociedad Comercial de Responsabilidad Limitada:   This is also a limited liability corporation, but different from a “sociedad anónima”, its capital is represented by “participations” and there is no Board as administrative body.  It may not have more than twenty partners.

There are other forms contemplated by Law No. 26887 which are not commonly resorted to, such as the “collective corporation” where partners are jointly responsible for obligations assumed by the corporations and as the “sociedad en comandita” which is a hybrid between a limited responsibility corporation and a collective corporation, where some partners have limited responsibility and some partners have joint liability.

Corporation Legislation recognizes such entities as consortiums and joint ventures have the capacity to create and regulate relations, but are not incorporated.

Finally, Decree Law No. 21621 regulates the so-called “Empresa Individual de Responsabilidad Limitada”, that is, an entity formed by a single partner who has limited responsibility, with the advantage that the property of a person as a natural person is separate from the property of his business.

B. Domain Name Registration.

The registration of domain names in Peru is in charge of the Red Científica Peruana, which as previously indicated, is the sole organization authorized by the Internet Corporation for Assigned Names and Numbers [ICANN] to register domain names with the suffix “pe”.
 
Any natural or juridical, Peruvian or foreign person is entitled to register in Peru a domain with the suffix “pe”,  without restriction as to the number of domains to be inscribed.

The procedure to register a domain number is as follows:

- Application. An application must be filed together with documentation supporting the trademark registration, distinctive sign, commercial name or name on which you have a prior right.  This application may be opposed by third parties, which opposition should be filed within ten days after your application has been filed. 

The application may be filed electronically or by presenting your written request at the RCP Offices.  If the application has been filed electronically,  the corresponding supporting documentation has to be filed within the 30 days following the approval of the Pe-NIC, otherwise, this registration will be revoked.

- Approval. Once the application has been approved and the documents have been delivered, the pertinent fee  should be paid  and the domain will be granted within 4 days.

- Modifications in the registration data of an existing domain .-  The procedure is quite simple.  No additional fees are payable. it may be done by e-mail at domreg@nic.pe.

C. Electronic Transactions and Contract Fomation.

 A number of rules and modifications have been introduced in the present juridical regulation of Online contracting during the last years, viz:

a) Digital Signatures and Certificates

Law No. 27269 published on May 28, 2000 in the Official Gazette regulates the issuance of Digital Signatures and Certificates.   It regulates the utilization of electronic signatures and grants them the same juridical validity and efficacy of a hand-made or any analogous signature that involves the expression of one’s will.

This Law and its regulation define electronic signature as “any symbol based on electronic means utilized or adopted by one party with the precise intention of obliging himself, authenticating and guaranteeing the integrity of an electronic document or data message, and complies with all or some of the characteristic functions of a hand-made signature.”

These same rules set a difference between electronic signature and digital signature; this latter being the electronic signature utilizing an asymmetric cryptography technique  to assure the integrity of the data message through a verification code, as well as the association between the title-holder of the digital signature and the data message so sent.

As can be seen, Peruvian legislation recognizes as electronic signature any symbol that meets the objective of relating, authenticating and guaranteeing an electronic document, among which the so-called digital signatures.   However, as provided by article 6 of the Regulation, this recognition is subject to express recognition by INDECOPI in its condition of competent administrative authority.

The holder of a digital signature is a person to whom a “digital certificate”  [containing a digital signature] is exclusively granted that identifies him objectively with regard to the data message.  

Digital certificates must be issued by “certification entities” .

This regulation recognizes electronic signatures as well as data messages and electronically signed documents are test means admissible in any kind of processes and procedures.   This is a milestone in Peru as regards test means.  In these cases, it is up to the Judge in charge to request INDECOPI the appointment of a competent expert.

Certain especial considerations related to Digital Signatures are the following:

- The holder of a digital signature may be a natural or a juridical person, and is responsible for the juridical effects generated by such utilization.

- The digital signature must assure that the message has been sent and signed with the holder’s private key, and the integrity of the message.

- The holder of a digital signature may not repudiate or disown a message digitally signed with his private key.

b) Certification and Registration Entities:

Peruvian legislation recognizes the co-existence of certification entities domiciled in Peru and abroad.

In the case of certification entities domiciled in Peru, it is a requirement that they are incorporated, so a natural person is prevented from rendering this type of duties.  These entities can also assume registration and verification duties.

Peruvian rules consider as foreign certification entities those which are not domiciled in Peru or are not inscribed in the Peruvian Public Registries.

The Certification Entities have as their main duty to issue digital certificates, arrange for digital certificates issued abroad and to cancel such documents.

These entities must have sufficient financial backing to operate under the Digital Signature Official Infrastructure, and to face responsibility risks for damages, according to the criterion set forth by INDECOPI in its condition of Competent Administration Authority.

As regards registration Entities, Article 4 of the Regulation defines them as those in charge of collecting and verifying data, as well as accepting and authorizing the requests for canceling such certificates.   Like the Certification Entities, the Registration Entities must have sufficient economic backing to operate under the Digital Signature Official Infrastructure, as well as to face responsibility risks for damages.

c) Utilization of Electronic Means for communicating the Expression of Will and the Utilization of Electronic Signature.

Law No. 27291 has modified the Civil Code by recognizing the utilization of electronic means for communicating the expression of will among persons.   Before the modification achieved through this law, article 141 of the Civil Code was confused as to the means through which the expression of will was formulated.

The modification incorporated by Law No. 27291 made it clear that the means through which the expression of will is made is other than the method in which it is expressed.  Only the oral and the written methods are recognized for expressing one’s will and any means can be used.

As regards the means through which Will can be expressed, manual means are expressly mentioned [among which manuscripts would be included], mechanical means [typewriters], electronic means [e-mail, fax, recordings, etc.], or any other means analogous to these; and the possibility is left open to include any other means that may be created.   So it is recognized that the Will expressed through electronic means such as e-mails, internet or a teleconference generates the same juridical effects as the expression of the Will through a written physical document containing the signature of the parties therein.

Likewise, article 141 a has been incorporated to the Civil Code: in such cases where the law requires the expression of Will to be made through an express formality or requires the signature, it can be generated or communicated through electronic, optical or any other analogous means.

Then, article 1374 of the Civil Code stated that contractual expressions were held as known when they arrived at the hands of the addressee.   This general nature rule cannot necessarily be observed, as these means operate in a totally different structure, which has lead the legislator to add an additional paragraph to this article, which declares that in the offer, its revocation, acceptance or any other contractual declaration is made through electronic, optic or other analogous means, the contractual declaration will be assumed as received when the sender receives the acknowledgement of reception.  Thus, so that the expression of contractual Will may be held as valid, it is not sufficient for the sender to send the message to the addressee but the respective acknowledgement must be generated to evidence that the message (offer, acceptance, revocation, etc) has actually arrived. 

In electronic communications through e-mail, the acknowledgement is often issued automatically, and the addressee just acts on such provision in his e-mail system so that all incoming mail will automatically release an acknowledgement with the words “received” or “read” when such mail is sent or is read by the addressee.

Here, secure electronic commerce in addition to other security mechanisms such as electronic signatures, can be effected by requesting or agreeing to acknowledgement when dealing with expressions of Will of a contractual nature, it being upon the parties to agree to the most convenient system for them and which may be considered as a proof of the expression of the Will of each parties.

d) The utilization of electronic means for notifying acts issued or released by State bodies.

In judicial matters.

The acts released by the State authorities through electronic means deserve a especial mention as it constitutes an innovation in judicial matters.

In judicial matters, the Notice is the “act whose objective is to notify the interested parties as to the contents of judicial resolutions” .  Judicial resolutions are juridically effective only when duly notified and when the requirements of the Civil Procedural Code have been complied with.

Law 27419 has included certain modifications to the Civil Procedural Code relating to notices by e-mail which in turn arose as a result of the modifications made to the Civil Code by Law Nr. 27291, commented above.

This law amended articles 163 and 164 of the Civil Procedural Code and provided that all judicial resolutions (except those containing the notice o the complaint or counterclaim, notices for answering  questions  and judgments), issued by any Court of Justice, including the Supreme Court, may be notified by e-mail provided the interested party has so requested it.  This modification constitutes an innovation in the classic scheme of the judicial process where for many years notices were made by the physical delivery of the document issued by the judicial authority by a messenger and with the acknowledgement signature of the addressee.

The only requirement in the Civil Procedural Law to consider as valid the notices by e-mail is that such means will allow to confirm the reception of the notice by the addressee; i.e. that it will generate an “acknowledgement” confirming the reception.

In administrative matters.

There is in Peru a division what is known as judicial competence and any other procedures dealt with at an administrative authority not belonging to the judicial power, such is the case of procedures developed before several administration bodies whose disputes may reach an Administrative Court, such as the INDECOPI Court, the CONASEV (The National Commission for Corporations and Securities)  Court, the Tax Court, The State Contracting and Acquisition Superior Council, etc.

The administrative procedures dealt with in this kind of offices are ruled by Law Nr. 27444, General Administration Procedural Law published on April 11, 2001 and in some cases also by its especial rules.

Law 27444, article 20 also allows that notices issued or released by the administrative authority may be notified through e-mail or through any other means that will reliably evidence its reception and who received it, provided this means has been expressly requested by the addressee.

D. Computer Crimes

Law Nr. 27309 published on July 7, 2002 includes a number of modifications to the Criminal Code and recognizes several new offenses expressly called Computer Crimes.

We should mention that according to Peruvian Law, even if it is possible a juridical person may have incurred in an act hat qualifies as a crime, the responsibility will fall on a natural person.  This is the spirit that Law Nr. 27309 has also maintained.

This provision includes the following acts as committing such crime:

i) Utilizing or entering a database, system or computers network or any part thereof, to design, execute or alter a scheme or a similar one, or to interfere, intercept, accede to or copy information in transit or contained in a database.

In these cases, the crime will be punished by loss of freedom for no more than two years or rendering of community services from 52 to 104 work days.  If the agent acted in order to obtain economic benefit, this will be an aggravating factor and will be punished by loss or freedom for no more than three years of rendering of community services for no les than 104 work days.

ii) Utilizing, entering or interfering with a database, system or computers network or computers program or any part thereof in order to alter, damage or destroy them.

In this case, the crime will be punished by loss of freedom for no less that three and no more than five years and seventy to ninety days fine.

iii) There are also other aggravating factors for crimes of i) and ii) where the punishment will be loss of freedom for no less than five years and no more than seven, when the agent enters a database, computer system or network using privileged information obtained because of his office or when the agent jeopardizes the national security.

E. Taxation of Online Dealing:

In Peru, the legislation on online operations taxation is quite incipient; this does not mean there are no taxes that may apply to transactions made with electronic means; it should be distinguished if these operations transfer tangible goods, such as digitalized products, which difference will generate the corresponding tax effects.

a) Transfer of tangible goods.

The transfer of tangible goods qualifies as sale for tax purposes and is assessed by the General Sales Tax (which is a Value Added Tax).  The proceeds of this transfer will be income subject to Income Tax for the person who transfers the goods.

According to Article 1 of the Orderly Sole Text of the Law of General Sales Tax approved by Supreme Decree Nr. 055-99-EF published on April 15, 1999, the sale of personal property is taxable in Peru, as well as their importation.  Any act whereby goods are transferred for a price is considered as a sale, aside from any name the parties may wish to give to the operation.

Peruvian tax rules strongly stress on the formalities that operations must observe when they are performed by juridical persons.  Neglecting these formalities may bring about penalties and the non recognition of the expense.

According to these rules it is perfectly possible to carry out online transactions that generate the sale of tangible goods.  The purchase of such goods as well as payment or the transfer of funds to carry out the payments may be through internet or through e-mail, but in case the supplier of the goods is a person domiciled in Peru, this latter will be obliged to issue a payment voucher meeting certain formalities, which in general will be given jointly with the goods so transferred.

If the goods are delivered to another person domiciled in Peru, the voucher so issued shall specify in addition to the amount of the sale, the pertinent General Sales Tax, which is equivalent to 19% of the value of the goods.

If the goods are delivered to a person domiciled abroad, the operation will be considered as an export, which operation is not subject to General Sales Tax; i.e. the obligation to give the pertinent voucher subsists.

In both cases, the earning for the domiciled person will be  considered as assessable for Income Tax which is 30%.

b) Transfer and acquisition of intangible goods.

The rules governing GST consider this operation as the selling of goods, when made between persons domiciled in Peru, to whom provisions on tangible goods are applicable, or as a rendering of services  when the intangible goods are transferred to a person domiciled abroad.

Rights, trade marks, patents, software and similar qualify as intangible.  The so called “digitalized products” would also be in this category.  Consequently, according to these rules, the acquisition of a software program or of a book in PDF format through Internet would constitute an operation subject to GST that should be declared and paid by the buyer of these goods, provided he has the condition of being subject to this tax; natural persons without a business, not being assessable to this tax, are exempt from these obligations.

However, in practice the Tax Administration has not so far launched any campaign to ascertain the payment of GST for operations performed through Internet, and so only those taxes declared by taxpayers themselves would be collected.

Another instance is that referred to the import of intangibles where there do exist specific regulations concerning the payment of custom duties, as is the case of Supreme Decree Nr. 128-99-EF published on July 31, 1999, whereby paragraph 2 of decision 4.1 from the WTO Customs valuation Committee as to Valuation of Computing Supports with software for Data Processing equipment was incorporated to the Peruvian legislation.  This decree has been regulated by resolution of the National Intendance Nr. 000-ADT-1999-0021166 of January 6, 2000.

As regards customs, tax legislation is nothing short of a novelty in comparison with GST or Income Tax rules as it sets forth specific regulations for the treatment to be granted to certain “intangibles” associated to the execution of programs and/or the functioning of equipment or machinery, granting them as in the case of the GST rules the treatment of personal property which on entering Peru are subject to payment of duties and to customs control like any other imported material and tangible goods, when indeed we would be facing an “import of services”.   This implies a certain dichotomy between GST rules and those regulating the application of customs or import duties.

Until 1998, the valuation rules contained in the Brussels Value Definition were applicable.  Since then Peru applies the rules on the WTO customs valuation, of which forms part Decision 4.1 of the WTO Custom Valuation Committee regulating the valuation of computing supports with software.   Peruvian legislation has even expanded the scope of the WTO valuation rules considering as taxable certain type of “software” involving the rendering of services and which enters Peru without any kind of computing support, as we shall see below.

c) Services considered as “software” subject to custom duties:

The Superintendance Resolution Nr. 000546-2003-SUNAT-A published on December 10, 2003 in “El Peruano” official Gazette specifies the valuation procedure of the computing supports imported with software.  Although this resolution regulates in principle the treatment applicable to the import and valuation of computing supports (i.e., diskettes, CD-ROM, etc) including a software, it additionally includes in the “software” concept other type of intangibles and services which for the purposes of customs rules also qualify as “software” and accordingly are subject to customs duties.

According to this Superintendance Resolution the following are considered subject to customs duties:

• Any “software linked to the imported merchandise” designed to operate with certain equipment, machinery, industrial installation or analogous items so that they may carry out a certain operation or function.

• Any software related for entertainment or education purposes.

In these cases it is irrelevant that such goods enter jointly with the imported goods or through any other means (telephone, Internet, e-mail or satellite).

For example, a program used for finding the dimension of the foundations of a building based on an analysis of the actual characteristics of the subsoil, or such program designed to analyze the flow of the gas ducts would result to be liable to the payment of customs duties.

F. Regulation of particular sectors of Online Business

a) Electronic Banking.

Banking operations in Peru are under supervision by the Banking and Insurance National Superintendence.  As in most countries, banking and financial institutions were the first to utilize information technology and to allow payments and money transfers through Internet, which evidently requires the implementation of a especial technology and higher security levels to guarantee these transactions.

So, in addition to general rules contained in Law Nr. 26702, General Law of the Financial and Insurance System, the Superintendence has issued especial provisions.  Such is the case of Circular Nr. G-105-2002 of February 28, 2002 on Information Technology Risks which compels financial companies to set up an Information Security Plan (ISP) which should include the technology assets that must be protected, the methodology utilized, the control objectives and controls as well as the required security degree.

As regards security rules, the above Circular requires the following types of security to be considered: logical security, referred to the system, its access and use; personal security and physical and environmental security.

b) Exchange Operations.

In Peru, as in other markets, it is possible to perform exchange operations electronically; article 5 of the Operations regulation for the Lima Stock Exchange , approved by CONASEV resolution Nr. 021/99-EF-94.10 permits these operations to be performed through electronic negotiations and through other systems as its Governing Council may direct.  This entity is required as a condition to offer access to this system to all corporations in the same conditions.

This system implemented since 1995 is called ELEX and allows the intermediaries agents to enter their proposals and negotiate securities from the terminals locates in their offices, in the Exchange Room or via Internet through the existing modules.  In this way, the user may interact in real time, to a PC installed in his office with the central computer of the Lima Stock Exchange and carry out his day to day exchange transactions.

c) Tax return and payment.

As from this year, SUNAT and CUSTOMS have merged.  These entities were formerly in charge of administering internal taxes and those corresponding to import operations, respectively and individually.

In spite of this merger, the functional independence of each entity is maintained, particularly the simplification of tax returns and payments to each entity, in which CUSTOMS deserves a especial mention as it was the first administration that implemented the return and payment of taxes through and easy access integrated system for the taxpayer  following the input of a code and an access key. The National Intendance resolution Nr. 000 ADR-1999-000233 of September 18, 1999 defines the functions of this system.

As regards the application and utilization of reporting and payment systems by SUNAT, this entity has been gradually and compulsorily incorporating a Program called PDT (Telematic Reporting Program)  which allow taxpayers to electronically prepare their monthly and yearly reports, yet they must support such reports by presenting a diskette to the entity authorized to receive it and collect the payment.  Without any exemption, all persons developing business activities  are obliged to apply this program for reporting and paying the taxes administered by SUNAT, as basically provided by the Superintendence resolution Nr. 044-2000-SUNAT of march 25, 2000 and Superintendence Resolution Nr. 143-2000-SUNAT of December 30, 2000.

Legislation (not included)

Rossana Rodriguez rrodriguez@garciasayan.com.pe

Estudio Aurelio García Sayán - Abogados