Peruvian Tax Regime
The main taxes imposed to the activities developed in Peruvian territory for legal entities are the following:
- Income Tax (IR)
- Value Added Tax (IGV)
- Temporary Tax on Net Assets (ITAN)
- Excise Tax (ISC)
- Financial Transaction Tax (ITF)
- Municipal Tax
Income Tax (IR)
The IR levies on profits determined by the taxpayer during the tax year, which is computed from January 1 to December 31. The applicable rate to non-domiciled individuals is 30% and only the Peruvian source income is affected to IR. In this sense, Peruvian source income consider, among others, the income from real state property located in the country, credits, equity investments, technical assistance and digital services used economically in Peru, royalties and goods located or used economically in Peruvian territory, and those income from civil, commercial, business or any other activity in the national territory activities. In such cases when a domiciled subject is involved, the Peruvian withholding would be applied on the Peruvian source income by the non-domiciled.
Likewise, the IR applicable rate on dividends paid to individuals non-domiciled in Perú, which shall be withhold by the domiciled individual that pay, amounts:
|2015 y 2016||6.8%|
|2017 en adelante||5%|
the business income rates for domiciled individuals are the following:
|2015 y 2016||28%|
|2017 en adelante||29.5%|
Now domiciled subjects including the subsidiaries- are sympathetic to the IR regarding their worldwide income. Thus, the IR rate is applied to net income, i.e. after additions and deductions. As an exception in the case of foreign companies’ branches located in Peru only their Peruvian source income are considered subjected to IR.
Further still, for domiciled individuals we should consider making payments in advance of the IR, withholding for transactions with non-domiciled individuals and the existence of a fiscal transparency system. It is also possible to carryover losses from one year to another according to the chosen system.
In addition, it must be stated that for tax purposes the transaction value in sales, transfers of ownership and provision of services is the market value, regardless of economic conditions agreed between the parties. Similarly, in the agreed prices between related parties or entities domiciled in tax havens the market value would be applicable.
On the other hand, tax also applied to indirect disposal of shares and securities of a non-domicile company, which at the same time is direct or indirect owner of one or more companies of shares, or securities of domiciled legal entities capital in the country.
In regards to the IR the Peruvian state has subscribed the following Agreements to avoid Double Taxation (CDI): (i) Decision N° 578 with the countries Members of the Andean Community of Nations (as of today Peru, Bolivia, Colombia and Ecuador); (ii) Brazil; (iii) Canada; (iv) Chile; (v) South Korea; (vi) Mexico; (vii) Portugal; and, (v) Switzerland. It is worth mentioning that as of today Peru is negotiating CDIs with Thailand, France, Sweden, Italy and UK.
Value Added Tax (IGV)
The VAT levied on the sale of goods and provision of services in Peru, the execution of construction contracts in Peru, the first sale of properties carried out by the manufacturer, and import of goods and services in the Peru by any entity. Transactions subject to VAT are subject to a rate of 18%, including the Municipal Promotion Tax. In this sense, VAT taxpayers are all those entities that sells real state or personal property, entities that provide services, manufacturers or importers. VAT paid by the buyer of goods, the service user, the manufacturer or importer constitutes a tax credit that may be credited against the VAT levied corresponding sales or services.
It should be noted that the export of goods and some services is not subject to VAT. However, exporters are entitled to recover the VAT paid on imports and local purchases of goods, services and/or construction contracts, as long as they meet certain requirements.
For its part, by the so-called Tax Payment System with the Central Government Obligations (SPOT), for certain transactions subject to VAT tax discounts must be made, which constitute an advance payment of VAT. Under SPOT a percentage of the selling price in most cases 10% – must be deposited as required by the buyer of the good or service in the seller’s bank account open at “Banco de la Nación” for this purpose. Thus, the amounts deposited in the account may be used only by the holder for payment of tax debts to the central government.
Temporary Tax on Net Assets (ITAN)
The ITAN is a tax to the equity that applies to the carrying amounts of the net assets as of December 31 of the previous the payment corresponds to.
ITAN’s rate amounts 0.4% as long as its value is higher than PEN 1,000,000 (aprox. USD 307,977).
It is important to indicate that the payment of ITAN can be made in a single payment in cash or in equal monthly installments (March to November) and can be used as a credit against IR down payments and the IR regularization payment.
Excise Tax (ISC)
The ISC is levied on sales in the country at the level of producer of certain goods, import and sale by the importer of certain goods (i.e, petrol, liquor, new and used vehicles, soft drinks and cigarettes. In addition, the ISC also applies to gambling and betting quotes, such as lotteries, bingo, raffles, lotteries and horse racing events (casino games and slot machines are not included).
It is calculated by the following systems, depending on the type of good: (i) Value system; (ii) Specific System; or, (iii) Value system according to Selling Price to the Public.
Financial Transaction Tax (ITF)
The ITF applies to determine bank operations made in Peru, whether performed in local currency or not. It is paid on the amount of the operation made. Since April 1, 2011 the rate is 0.005%.
The main Municipal Taxes are the following:
- Real Estate Tax
It is an annual determination tax that applies to the value of urban or rural real state property according to the following Cumulative and Progressive ScaleReal Estate payers are the individuals that as of January 1 of each year are owners of taxable real state property.
- Car Ownership Tax
This annual tax levies on ownership of vehicles (cars, vans, station wagons, trucks, buses and mini-buses) during the 3 years following the registration is the Public Registry. In this sense, the taxpayer is the individual who owns a vehicle taxed at January 1 of each year. The rate is 1% of the original purchase, import or income to equity price, which in no case would be less than the reference table approved annually by the Ministry of Economy and Finance.
- Sales Tax
The Sales Tax levied on transfers of ownership of urban or rural property against payment or free of charge, whatever its shape or form. The rate is 3% of the transfer value, which may not be less than the value of appraisal. The purchaser of the property is obliged to pay the tax.