EY
Víctor Andrés Belaúnde 171 San Isidro Lima 27 Perú
Indirect tax contacts
Humberto Astete
+51 (1) 411-4477 humberto.astete@pe.ey.com
Giancarlo Riva +51 (1) 411-4448 giancarlo.riva@pe.ey.com
Manuel Rivera +51 (1) 411-4444 manuel.rivera@pe.ey.com
David Warthon +51 (1) 411-4444 david.warthon@pe.ey.com
Darío Paredes Bermúdez +51 (1) 411-4407 dario.paredes@pe.ey.com
Alvaro Arbulu +51 (1) 411-4444 alvaro.arbulu@pe.ey.com
Javi Rosas +51 (1) 411-4444 javi.rosas@pe.ey.com
Carla Puente +51 (1) 411-4444 carla.puente@pe.ey.com
Nathalie Ninuma +51 (1) 411-4444 nathalie.ninuma@pe.ey.com
A. At a glance
B. Scope of the tax
VAT applies to the following transactions:
• The sale of movable property in Peru
• The provision of services in Peru
• The use of services in Peru rendered by non-established businesses
• Construction contracts
• The first sale of real property by the builder
• The importation of goods from outside Peru, regardless of the status of the importer
C. Who is liable
A taxable person is any business entity that performs any taxable transaction in the course of doing business in Peru. In addition, individuals are liable to VAT if they perform such activities on a “habitual” basis. The Peruvian VAT law does not define “habitual” for transactions performed by individuals; the nature, amount and frequency of the operations must be considered.
No registration threshold applies. The definition of a taxable person applies to branches, agencies and other permanent establishments of a foreign business in Peru.
Exemption from registration. The VAT Act in Peru does not contain any provision for exemption from registration.
Voluntary registration and small businesses. The VAT law in Peru does not contain any provision for voluntary VAT registration or special VAT registration rules for small businesses.
Group registration. Group VAT registration is not allowed in Peru.
Non-established businesses. A “non-established business” is a business that has no fixed estab lishment in Peru. A non-established business must register for VAT if it performs any of the tax able transactions, such as the sale of movable goods or the provision of services in Peru.
Tax representatives. Any person may be appointed by the company’s legal representative to represent the taxable person before the tax administration. For that purpose, the company’s legal representative must be registered before the tax administration.
Reverse charge. The reverse charge applies to the import of goods and the use of services ren dered by non-established businesses in Peru. Under this mechanism, the importer of goods and the resident user of services is charged with an output tax. This VAT is recoverable by taxable persons as a credit against future output tax charges from the following month of its payment.
Domestic reverse charge. There are no domestic reverse charges in Peru.
Digital economy. For business-to-business (B2B) transactions, the digital service charged to a local taxable person by a non-established business is subject to VAT under the reverse-charge mechanism. Under this mechanism, the local customer accounts for output tax (18%) on the value of the digital service payment, and in the following month the customer may recover this VAT as a credit against output tax. The non-established business is not required to register and account for VAT in Peru or register in any local registry for services provided from abroad.
The sale of intangible goods is subject to VAT if it is performed within Peru. According to Peruvian legislation, it is understood that a sale of intangible goods is performed within Peru when the buyer and the seller are domiciled entities.
For business-to-consumer (B2C) transactions, the operation is not subject to VAT in Peru, provided that the consumer doesn’t perform taxable VAT activities on an “habitual” basis. To date, there is no procedure for individuals to pay VAT on B2C transactions (rendered by nonresident entities). At the time of preparing this chapter, a bill has been presented to the Parliament in
September 2020, with potential implementation in 2021. However, to date these have neither been approved nor included on the agenda for debate.
There are no other specific e-commerce rules for imported goods in Peru.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Peru.
Registration procedures. To register for VAT in Peru, a tax identification number (Registro Unico de Contribuyente or RUC) must be obtained before SUNAT. To do so, the tax representative must complete the Form 2119 and provide an identification document, as well as the company’s elec tronic record, provided by the Peruvian Public Registry and any document to accredit its resi dence. The registration process can be done: (i) online (only for individuals) by using the app “Personas SUNAT,” (ii) in person at the offices of the Peruvian Tax Administration or (iii) through the Virtual Reception Desk (MPV-SUNAT).
Deregistration. Under Peruvian tax legislation, there is no VAT registration as such. However, taxpayers must register in a “Taxpayer Register” (called in Spanish “RUC”) in order to be able to comply with its tax obligations before the tax administration (i.e., obtaining a tax ID, filing of tax returns and payment of taxes, among others).
In that sense, when a company stops its business operations in Peru (i.e., due to a transfer of busi ness, bankruptcy, etc.), it must request before the tax administration the cancellation of its regis tration in the RUC. The tax administration will approve the cancellation of the taxable person’s register in the RUC. However, it is important to mention that this situation does not release the taxable person from complying with other tax obligations that might be applicable.
In addition, according to VAT law, a company that stops its business cannot claim any refund of the remaining input tax.
Changes to VAT registration details. Under Peruvian tax legislation, there is no VAT registration as such. However, taxable persons must communicate any change in the data contained in their RUC (i.e., address, business name, etc.). In case they do not comply with this obligation, they may be sanctioned by the Peruvian tax administration. The deadline for communicating the change of tax domicile is one working day. The deadline for modifying or updating other data registered in the RUC is five working days after the events.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT.
The VAT standard rate is 18%.
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for an exemption.
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Fruits and vegetables
• Educational services
• Public transportation
• Exports of goods
Option to tax for exempt supplies. It is possible to waive exemption of VAT for the sale and importation of goods listed in Appendix I of the Peruvian VAT law (which principally includes some
animals, fruits and vegetables), but not for the provision of services. In this regard, the taxable person must communicate its decision to the tax administration and comply with all the require ments and conditions laid down. This request comprises all the exempt goods, not specific cat egories or goods. After the tax administration is notified, it has 45 days to approve or deny the request. Should the request be approved, the VAT will be applicable as of the first day of the month after the request is approved. The election to waive exemption is definitive.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” The following are the rules for determining the basic time of supply for goods and services:
• Sale of movable property within the country: when the goods are delivered or when the invoice (or payment voucher) is issued or should be issued, whichever is earlier
• Provision of services in the country: when the invoice (or payment voucher) is issued or should be issued or when the payment is made, whichever is earlier
• Use of services in the country rendered by non-established businesses: when the invoice (or payment voucher) is registered in the domiciled taxable person’s accounting records or when the payment is made, whichever is earlier
• Construction contracts: when the invoice (or payment voucher) is issued or should be issued or when the payment is totally or partially made, whichever is earlier
• First sale of real property sold by the builder: when the payment is either totally or partially made
The following are the rules for determining the time of issuing invoices:
• Sale of movable property within the country: when the goods are delivered or when the pay ment is made, whichever is earlier
• Provision of services in the country: when the service has concluded, when the payment is partially or totally made or when the deadline established for the payment of the services has expired, whichever is earlier
• Construction contracts: when the payment is totally or partially made
• First sale of real property sold by the builder: when the payment is totally or partially made Deposits and prepayments. In general terms, prepayments related to taxable transactions are subject to VAT (there are some exceptions, such as guarantees that do not exceed the 3% value). Thus, partial payments received in advance to the delivery of goods are subject to VAT on the date of the transaction and for the amount of the partial payment.
Continuous supplies of services. There are no special time of supply rules in Peru for supplies of continuous supplies of services. As such, therefore the general time of supply rules apply (as outlined above).
Goods sent on approval for sale or return. There are no special time of supply rules in Peru for supplies of goods sent on approval for sale or return. As such, therefore the general time of sup ply rules apply (as outlined above).
Reverse-charge services. The reverse charge applies to the import of goods and the use of ser vices rendered by non-established businesses in Peru. The time of supply for the supply of reverse-charge services is the following:
• For the import of goods, on the date they are requested to be released for consumption
• For services provided by non-established businesses, on the date when the proof of payment is recorded in the purchase register or on the date when the remuneration is paid, whichever occurs first
Leased assets. There are no special time of supply rules in Peru for supplies of leased assets. As such, therefore the general time of supply rules apply (as outlined above).
Imported goods. The time of supply for the import of goods is either when goods clear customs or when the goods leave a duty suspension regime. In the case of import of intangible goods, the time of supply is when the payment is either totally or partially made or when the invoice (or payment voucher) is registered in the domiciled taxable person’s accounting records, whichever is earlier.
F. Recovery of VAT by taxable persons
For all of the transactions listed in Section B, VAT payable is determined on a monthly basis by deducting from the gross tax (output tax) the corresponding VAT credit (input tax).
There is no set time limit for a taxable person to reclaim input tax in Peru. This means that, effectively, the input tax (VAT credit) may be carried forward indefinitely until its complete recovery. The input tax that is not applied for the monthly determination of VAT (output tax minus input tax) can be carried forward to the following months until it is exhausted. The exception to this is acquisitions taxed with VAT that are destined to goods and services export (i.e., sale of goods and services). See the subsection Exporters below.
VAT paid on imports of goods or the use of services in the country must be paid directly to the tax administration. For such supplies, VAT payable equals the gross tax and no deduction for VAT credit is allowed. After the VAT is paid, it may be used as VAT credit. As a result, a financial cost may be incurred for the time period beginning with the date of payment and ending on the date on which the VAT credit is used to offset the gross tax on the transactions listed in Section B.
The gross tax corresponding to each taxable operation is determined by applying the VAT rate of 18% to the tax base (for example, the value of goods and services or the value of construction contracts). The VAT credit consists of the VAT separately itemized in the payment voucher (or corresponding document) relating to any of the activities listed in Section B.
The following are requirements for the use of the VAT credit:
• The acquisition cost is allowed as an expense or cost for income tax purposes, and the acquisi tion is intended for operations in which the obligation to pay the VAT will arise
• The tax must be stated separately in the payment voucher, and the payment voucher must be completed according to applicable law and registered in the purchase book appropriately
Exporters. Exporters are reimbursed for any VAT paid on the acquisition of goods and services. Exporters can apply such reimbursement as a credit to offset VAT or income tax liabilities. Any balance may be refunded by the tax administration.
General and enhanced early recovery systems. The law provides for a general and enhanced early recovery system for enterprises performing productive activities.
Under the general system, which applies to all productive companies in a preoperative stage, the VAT paid on the acquisition of capital goods is reimbursed through negotiable credit notes.
The early recovery VAT system allows an early recovery of the VAT credit with respect to acqui sitions of goods and services, construction contracts, importations and other transactions without having to wait to recover such amount from a client when the corresponding invoice for sales of goods, services or construction contracts, including VAT, is issued to the client.
This regime provides relief of the financial costs (cost of money) with respect to projects that have a significant preoperative stage and if advance invoices transferring the VAT burden cannot be issued periodically to the client.
The enhanced system is restricted to companies that satisfy the following conditions:
• They must file a sworn statement describing its investment project and features, detailing the equipment and services under the project
• They make a minimum investment commitment of USD5 million to projects with a preoperative stage of at least two years
Under the enhanced system, VAT paid on construction contracts and on the acquisition of new capital goods and intermediate goods and services can be recovered through negotiable credit notes filed on a monthly basis and taxable persons can request the VAT accumulated for up to six months. The negotiable credit notes are able to be exchanged by check as requested by the ben eficiary. The use of one system does not preclude using the other system for different items.
Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for making taxable supplies or that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). If expenditure relates to both business and nonbusiness activities, only the portion related to the business may be recovered. In addition, input tax may not be recovered for some items of business expenditure.
• Personal expenses
Examples of items for which input tax is nondeductible
Examples of items for which input tax is deductible (if related to a taxable business use)
• Advertising and sponsorship
• Business gifts, if the value does not exceed 0.5% of the taxable person’s annual gross revenues, with a maximum limit of 40 tax units (equivalent to PEN176,000 based on the tax unit approved for year 2021, PEN4,400)
• Business entertainment expenses, if the value does not exceed 0.5% of the taxable person’s annual gross revenues, with a maximum limit of 40 tax units (equivalent to PEN176,000 based on the tax unit approved for the year 2021, PEN4,400)
• Mobile phones
• Parking
• Fuel
• Taxis
• Travel expenses
Partial exemption. If a taxable person makes both taxable and nontaxable transactions, it may not deduct input tax in full, from output tax. It may deduct only the amount of input tax related to the goods and services used in taxable transactions. For this purpose, taxable persons must main tain separate accounts for taxable and nontaxable transactions, as well as for the services and goods purchased for conducting such transactions. If it is not possible, the amount of input tax subject to deduction in each reporting period must be prorated based on a procedure established by the Regulations of the VAT law.
Approval from the tax authorities is not required to use the partial exemption standard method in Peru. Special methods are not allowed in Peru.
Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. VAT paid on the acquisition of capital goods may be used as a tax credit (input tax). A tax credit arising from the acquisition of capital goods may be offset with debit VAT (output tax) in the month in which capital goods are acquired.
Refunds. If the amount of input tax (credit VAT) recoverable in a month exceeds the amount of output tax (debit VAT) payable, the excess credit may be carried forward to offset output tax in the following tax period.
Pre-registration costs. Input tax incurred on pre-registration costs in Peru is not recoverable.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) cannot be recovered in Peru.
Noneconomic activities. Input tax incurred in relation to noneconomic activities is not recover able in Peru.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses in Peru is not recoverable.
Tourists refund scheme. Under Peruvian VAT law, reimbursement of the VAT paid when acquiring goods is allowed if the purchaser is a nonresident tourist who remains within Peru between 2 and 60 calendar days, and the acquired goods are taken abroad by the nonresident tourist. The non resident tourist must request the reimbursement when leaving the country and satisfy all require ments in the VAT law and its regulations.
H. Invoicing
VAT invoices. A taxable person must generally provide a VAT invoice for all taxable supplies made, including exports. A VAT invoice is necessary to support a claim for input tax credit.
Credit notes. A VAT credit note may be used to reduce the VAT charged on a supply of goods and services in certain circumstances (for instance, for rebates, trade discounts, bonuses, returned goods or errant charges). A credit note must refer to the VAT invoice for the original transaction and contain the same basic information.
Electronic invoicing. Electronic invoicing is allowed in Peru, but not mandatory. The use of elec tronic invoices, credit notes and debit notes are required for taxable persons nominated by the tax administration. Such taxable persons are mainly legal entities that have been designated by the tax administration (SUNAT) as main taxpayers. The condition as “main taxpayers” must also be approved by a Superintendence Resolution and communicated to the taxable persons. Other tax able persons may voluntarily use electronic invoices, credit notes and debit notes, provided they comply with certain conditions.
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Peru. As such, full VAT invoices are required.
Self-billing. Self-billing is not allowed in Peru.
Proof of exports. Exported goods and services are exempt from Peruvian VAT.
For a service to qualify as an export, it must meet the following requirements:
• It is provided for a consideration from another country, which must be demonstrated with the payment receipt issued and recorded in the sales and income register
• The exporter is a resident taxable person in Peru
• The user or beneficiary of the service is an individual nonresident in Peru
• The use or exploitation of the services provided to the nonresident takes place abroad
• The exporter of services must be previously registered in the Register of Exporters of Services of the tax administration (SUNAT)
Also, there is a list of operations that qualify as exports, even when they do not meet the above requirements. These operations include the sale of goods, national or nationalized, to establish ments located in an international zone of ports or airports; transportation services for passengers or merchandise rendered by national shipping companies within the country to abroad; and the air cargo transportation services carried out within the country to abroad etc.
For exports of goods, the sale must be performed from a resident in Peru to a nonresident, and the customs documents must provide evidence that the goods have left the country.
Exporters may recover VAT paid on the acquisition of goods and services. Exporters may apply to be reimbursed for VAT paid through credit notes. Credit notes may be used to offset either output tax or income tax liabilities.
Foreign currency invoices. If a VAT invoice is issued in a foreign currency, the value must be converted to the domestic currency, which is the Peruvian sol (PEN), using the sales exchange rate in force according to the time of supply for each transaction.
Supplies to nontaxable persons. There are no special rules in Peru for invoices for supplies to nontaxable persons. As such, therefore full VAT invoices are required.
Records. Taxable persons must keep their purchase and sales registers to record their acquisitions and sales transactions. For VAT purposes, only these books must be kept.
Record retention period. Taxable persons must store, archive and keep the purchase and sales registers for five years or during the statutory period of limitation for taxes.
Electronic archiving. The tax administration has progressively implemented the obligation of taxable persons of keeping electronic accounting books and registers for a five-year period or the statutory period of limitation.
I. Returns and payment
Periodic returns. VAT returns must be submitted monthly. Taxable persons must fulfill their tax obligations between the 7th business day and the 16th business day of the month following the date on which the tax obligation arises.
Periodic payments. The VAT payment must be done on the exact date approved by the taxable person, which depends on the Tax Terms Schedule, which is approved annually by the Peruvian tax administration. The Tax Terms Schedule indicates the due date for taxable persons based on the last digit of their tax identification number (RUC). Return liabilities must be paid in PEN.
VAT withholding systems must be applied in certain transactions (supply of certain goods and services). Those systems imply an advanced collection of the tax and were designed by the tax administration to prevent tax evasion.
The payment of VAT may be done online by SUNAT Virtual webpage, by debit to an affiliated bank account of an authorized bank, by credit or debit card, by debit on a SPOT account opened in the Peruvian National Bank or in person at any of the offices of the authorized banks.
Electronic filing. Electronic filing is mandatory in Peru for all taxable persons. VAT returns should be submitted monthly using the Virtual Program No. 00621. Taxable persons use the electronic account known as “CLAVE SOL” (http://www.sunat.gob.pe/) to submit returns. Once the RUC is obtained, the tax administration provides each taxable person the ID and password for CLAVE SOL.
Payments on account. Payments on account regarding VAT are not required in Peru.
Special schemes. No special schemes are available in Peru.
Annual returns. Annual returns for VAT are not required in Peru.
Supplementary filings. No supplementary filings are required in Peru.
Correcting errors in previous returns. To correct any errors filed in previous returns, the taxable person must file a rectifying tax return with the correct information online by SUNAT Virtual webpage (tax ID and password are required), using the Virtual Program No. 0621.
The rectifying tax return will be effective immediately after it is filed, if the tax obligation deter mined is equal or greater than the previous tax return. If the tax obligation is less than the previ ous tax return, the rectifying tax return will be effective within 45 business days after it was filed, and the tax administration does not issue any observation on the veracity and accuracy of the information contained therein.
Digital tax administration. Sales book. Taxable persons are obliged to file periodic reports (sales book or Registro de Ventas) detailing their electronic invoices issued and account books to the tax administration.
J. Penalties
Penalties for late registration. If taxable persons do not follow the registration procedures, there is a penalty of one tax reference unit (UIT), equivalent to PEN4,400 based on the tax unit approved for year 2021.
Penalties for late payment and filings. No penalties apply in Peru for late payment of VAT. However, interest will be charged for the unpaid taxes (at a monthly rate of 0.9%). For the late filing of the VAT return, there is a penalty of one UIT, equivalent to PEN4,400 based on the tax unit approved for year 2021.
Penalties for errors. The penalty for failure to include taxable transactions in the VAT return is 50% of the omitted tax if an amount of VAT is payable. Interest is charged at a monthly rate of 0.9% on late payments or underpayments of VAT. This fine can be reduced by up to 95% under certain conditions.
Some penalties may arise if any omitted tax is determined after the filing of the new tax return.
Penalties for fraud. Criminal tax evasion may be punished by a term of imprisonment, a fine or both, depending on the severity of the case.
Personal liability for company officers. Legal representatives (i.e., company officers and directors and others designated by the legal entities) are considered jointly and several liable for the non payment of taxes, only when due to fraud, gross negligence or abuse of powers.
Statute of limitations. The statute of limitations in Peru is 4 to 10 years. The action of the tax authorities to determine the tax obligation, as well as the action to demand its payment and apply sanctions, prescribes after four years and after six years for those who have not presented the respective declaration. Said actions expire after 10 years when the VAT withholding or perception agent has not paid the tax received.
The statute of limitations is calculated from 1 January following the date on which the tax obligation is due.
On the other hand, the action to request or effectuate the setoff, as well as the request in return the amounts paid unduly or in excess,n prescribes after four years, calculated from 1 January following the date on which the right to request in return said amounts has begun.