If you plan to register a branch in Peru, or enter the market some other way, you are going to need to meet local and international tax obligations. While you may seek to hand responsibility for dealing with those taxes over to a trusted local accounting services provider, it will be beneficial to have a general understanding of international taxes in Peru in order to go into doing business in the country with your eyes wide open.
Peru is one of Latin America’s most popular destinations for foreign direct investment (FDI), seeing $8.9 billion of FDI inflows in 2019. That popularity is partly driven by longstanding economic and political stability in the country, as well as almost unbroken growth in terms of gross domestic product (GDP) and gross national income (GNI) since the turn of the century.
In 2019, GDP hit $226.8 billion and GNI reached $6,740 per capita (all figures in USD unless otherwise stated) — figures that respectively place the Andean country as the sixth-largest economy in Latin America and an upper-middle income nation by international standards.
Peru is party to the Pacific Alliance — a regional economic association that also includes Chile, Colombia, and Mexico, and which is reported to be seeking to expand beyond the region in the future. The country also has multiple free trade agreements (FTAs) in place, providing locally-based companies with preferential access to important economies in Asia, Europe, and North America.
Peru is a major exporter of agricultural products such as fruits and nuts, fish, and animal fodder, with significant developments in the sector over recent decades contributing to a radical reduction in the country’s poverty rates. Other top Peruvian exports include copper, gold, and garments. Some of the main destinations for Peruvian export products include Canada, China, South Korea, Switzerland, and the United States.
If you are interested in doing business in this growing market, read on to learn about international taxes in Peru. Or go ahead and reach out to us now to discuss your business options.
Understanding international taxes in Peru
International taxes in Peru cover all the tax requirements that a foreign company must meet when undertaking commercial operations in the country, based on local and international legislation, as well as international agreements to which Peru is a party.
International taxes can also refer to the tax obligations imposed on foreign sources of income received by Peruvian citizens and locally acquired income from non-citizens, as well as taxes imposed on locally-based enterprises that do business with foreign organizations.
Key international taxes to consider when doing business in Peru
Corporation tax is an important element of the international taxes in Peru that every foreign company operating in the country must pay. This tax is equivalent to 29.5 percent of the total annual income of your locally-based business. Note that to pay this tax, companies must provide a monthly advance of 1.5 percent of their monthly income.
If you do register a branch in Peru, this tax will be applied to the income obtained within the country, including income received by the entity from abroad.
Value added tax
Value Added Tax (VAT) in Peru — known locally as General Sales Tax (IGV) — is set at 18 percent of the value of any goods or services purchased, including real estate. If your company is in a pre-operative phase or if your business exclusively carries out export operations, you will not have to pay this tax.
Keep in mind that to pay VAT in Peru, individuals and legal entities must register with the National Superintendency of Customs and Tax Administration (SUNAT) and request a tax identification number (RUC).
Temporal net asset tax (ITAN)
The Temporary Tax on Net Assets or ‘impuesto temporal a los activos netos’ (ITAN) is a key element of international taxes in Peru and is equivalent to 0.4 percent of the total assets of any company with assets that exceed PEN 1 million (approximately $270,000 at time of publication).
Note that any company that is required to pay corporation tax must also pay ITAN if it meets that assets threshold.
Real estate property tax
This tax applies to any real estate owned by foreign companies operating in Peru. It is paid once a year and its rates are based on the value of the property calculated by multiples of Peruvian tax units. In 2020, one Peruvian tax unit stood at PEN 4,300 (approximately $1,140).
- A rate of 0.2% on property valued at up to 15 tax units (up to approximately $17,100)
- A rate of 0.6% on property valued at between 15 and 60 tax units (between approximately $17,100 and $68,400)
- A rate of 1.0% on property valued at over 60 tax units (over approximately $68,400)
Excise tax is applied to certain products marketed in Peru, such as beer, fuel, liquor, and tobacco. In addition, this tax also applies to gaming and betting activities such as bingo, casinos, sports gambling, and lotteries.
Keep in mind that this tax rate depends on the product or service that your company markets. For instance, hard liquors have a rate set at 40 percent, while sugary drinks with more than 6 grams per 100 milliliters are subject to a rate of 25 percent.
Biz Latin Hub can help with international taxes in Peru
At Biz Latin Hub, our multilingual team of locally-based tax specialists has the knowledge and expertise to assist you in navigating Peru’s tax system and remain in good standing with local authorities. With our complete portfolio of back-office solutions, including accounting, legal, company formation, and recruitment services, we are equipped to be your single point of contact to support your business expansion in Peru, or in any of the other 15 countries across Latin America and the Caribbean where we operate.
Contact us today for personalized assistance or a free quote.
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