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Roberto Cores
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Indirect Tax
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Law
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A. At a glance
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(a) Mining companies are subject to an additional Special Mining Tax or to “voluntary” payments. For further details, see Section B.
(b) Capital gains derived by nonresident entities are subject to income tax at a rate of 5% if the transfer is made within the Lima Stock Exchange. Otherwise, the rate is 30%, with the necessity of requesting a basis certification from the Peruvian tax authority. For further details regarding the applicable tax rates, see Capital gains in Section B. Capital gains derived by resident entities are subject to income tax at a rate of 29.5%.
(c) Branches and permanent establishments of foreign companies are subject to the same corporate income tax rate as domiciled companies.
(d) The Dividend Tax, which is imposed at a rate of 5% and is generally withheld at source, is imposed on profits distributed to nonresidents and individuals. For further details regarding the Dividend Tax, see Section B.
(e) This tax applies to payments to nonresidents.
(f) A reduced rate of 4.99% applies to certain interest payments. For further details, see Section B.
(g) See Section C.
B. Taxes on corporate income and gains
Corporate income tax. Resident companies are subject to income tax on their worldwide taxable income. Resident companies are those incorporated in Peru. Branches, permanent establishments of foreign companies that are located in Peru and nonresident entities are taxed on income from Peruvian sources only.
• Equity participation value (EPV) method. If the methods indicated above are not complied with, the EPV is calculated based on the last audited balance sheet.
• Residual method. This method applies if the above methods are not applicable.
From 1 January 2023, the fair market value for the direct transfer of shares is the following:
• For securities listed on the Lima Stock Exchange, the market value is not necessarily the quotation value, as this will be used only if such value corresponds to similar or comparable conditions.
• For other cases, the discounted cash flow method applies.
Capital gains derived by nonresident entities are subject to income tax at a rate of 5% if the transfer is made in Peru. Otherwise, the rate is 30%. The regulations provide that a transaction is made in Peru if the securities are transferred through the Lima Stock Exchange. The transaction takes place abroad if securities are not registered with the Lima Stock Exchange or if registered securities are not transferred through the Lima Stock Exchange. The Central Securities and Settlements Registry (Registro Central de Valores y Liquidaciones, or CAVALI) withholds tax on capital gains in transactions concluded on the Lima Stock Exchange. As a result, nonresidents are not required to pay their income tax liability to the Peruvian tax authorities in transactions executed within the Lima Stock Exchange.
Tax basis certification. For both direct and indirect transfer of shares, to be able to deduct the tax basis, the basis must be certified by the Peruvian tax authority before the transaction is carried out or any payment is made. Otherwise, the tax basis is zero, and the income tax is imposed on the gross revenue and not on the net gain. The tax basis of shares corresponds to the historical cost (for example, acquisition price, capital contribution and capitalizations, and is reduced by, among others, capital reductions).
Administration. The fiscal year mandatory closing date for business enterprises is 31 December. Tax returns must be filed by the end of March or beginning of April, depending on the Tax Identification Number.
Companies must make monthly advance payments of income tax. Such payments can be used as a credit against the annual income tax obligation, or they can be refunded at the end of the fiscal year if requested by the taxpayer.
The monthly advance payments equal the higher of the following amounts:
• The amount obtained by applying to the monthly net income the ratio obtained by dividing the amount of tax calculated for the preceding tax year by the total net income for that year. For the January and February payments, the ratio is determined by dividing the amount of tax calculated for the year before the preceding tax year by the net income for that year.
• The amount obtained by applying a 1.5% rate to the net income for the month.
Companies in a startup process or in a net operating loss position make monthly advance payments equal to 1.5% of their monthly net income.
Monthly advance payments are due on the 9th to the 15th business day, according to a schedule. Taxes and related penalties not paid by due dates are subject to interest charges, which are not deductible for tax purposes.
Interest rates for tax refunds and tax debts. Beginning 1 April 2021, the monthly interest rate for tax debts in national currency was reduced from 1% to 0.9%. The monthly interest rate for tax refunds in national currency is 0.42%. Tax fines are also adjusted by interest for late payments. However, from 1 January 2024, interest on fines is accrued from the date on which the fine resolution is notified. The interest rate applicable to fines will be fixed by the Central Reserve Bank of Peru, as opposed to the monthly interest rate of 0.9% which had previously applied.
Beginning 1 April 2020, the monthly interest rate for tax debts in foreign currency was reduced from 0.6% to 0.5%, and the monthly interest rates for tax refunds in foreign currency was reduced from 0.3% to 0.25% per month.
Dividends. Effective from 1 January 2017, the dividend withholding tax rate is 5%. This rate applies to dividends that correspond to profits generated since such date. Profits generated up to 31 December 2014 are subject to a withholding tax rate of 4.1%, and profits generated between 1 January 2015 and 31 December 2016 are subject to a withholding tax rate at a rate of 6.8%, even if the relevant profits are distributed in 2017 or future years. For these purposes, first-in, first-out (FIFO) rules apply.
The Dividend Tax applies to profits distributed to nonresidents and individuals.
The Dividend Tax applies to distributions by Peruvian companies, as well as to distributions by Peruvian branches, permanent establishments and agencies of foreign companies. The Peruvian Income Tax Law specifies various transactions that are considered profits distributions by resident entities for purposes of the Dividend Tax. These transactions include the distribution of cash or assets, other than shares of the distributing company, and, under certain circumstances, a capital reduction, a loan to a shareholder or a liquidation of the company. For permanent establishments, branches, and agencies of foreign companies, a distribution of profits is deemed to occur on the deadline for filing their annual corporate income tax return (usually at the end of March or the beginning of April of the following tax year).
The law also provides that if a resident company, or a branch, permanent establishment or agency of a foreign company, pays expenses that are not subject to further tax control, the amount of the payment or income is subject to the Dividend Tax. Dividend Tax for these items is paid directly by the resident entity or the branch or permanent establishment. In this case, the tax rate is 5%.
the R&D project is carried out directly by the taxpayer or through a Peruvian R&D center, or 190% if the R&D project is carried out through non-Peruvian R&D centers.
• Taxpayers whose net income exceeds 2,300 tax units are entitled to deduct 190% if the R&D project is executed by the taxpayer itself or by a Peruvian R&D center, or 160% if the R&D project is executed by a non-Peruvian R&D center.
This deduction is applicable for Peruvian taxpayers whose R&D projects began in 2016 and subsequent years.
Inflation adjustments. For tax and accounting purposes, inflation adjustments apply only until 31 December 2004. Consequently, beginning 1 January 2005, transactions are recognized and recorded in local books at their historical value.
Special activities. Nonresident corporations, including their branches and agencies, engaged in certain specified activities provided partially in Peru are subject to tax on a percentage of their gross income derived from such activities. This tax is withheld at source. The following are the applicable percentages for some of these specified activities.
Air transportation 1 (a)(b)
Marine transportation 2 (a)(b)
Leasing of aircraft 60 (c)
Leasing of ships 80 (c)
International news agencies 10 (a)
Sale of highly migratory hydrobiological resources 9 (a)
(a) The withholding tax rate is 30%. As a result, the effective tax rates are 0.3% for air transportation, 0.6% for marine transportation and 3% for international news agencies. As of 1 January 2022, an effective tax rate of 3.7% applies to income from the sale of highly migratory hydrobiological resources. (b) This percentage applies to services rendered partly in Peru and partly abroad. (c) The withholding tax rate is 10%. As a result, the effective tax rates are 6% for leasing of aircraft and 8% for leasing of ships.
Law 31557, which applies to Peruvian legal entities, nonresident entities and their branches engaged in the business of online gaming and sports betting conducted on digital platforms, sets a 12% rate that applies over the difference between the net monthly income and the digital platform’s maintenance expenses.
Inventories. Inventories must be carried at cost. Cost may be determined specifically or by the first-in, first-out (FIFO), average, retail or basic inventory method. The last-in, first-out (LIFO) method is not permitted.
Provisions. Provisions for bad debts, bonuses, vacations, employees’ severance indemnities and other expenses are allowed if made in accordance with certain tax regulations.
Tax depreciation. Depreciation rates are applied to the acquisition cost of fixed assets. The following are some of the maximum annual depreciation rates allowed by law.
Maximum
Asset
Buildings and construction 5/33.33 (a)
Cattle and fishing nets 25 Vehicles
Machinery and equipment for construction, mining and oil activities
(b)
(a) The 5% rate is a fixed rate established in the Peruvian Income Tax Law. However, a new optional rate of 33.33% was introduced. Also, see below. (b) See below.
Taxpayers may apply any depreciation method for their fixed assets other than buildings and structures, taking into account the characteristics of the business as long as the resulting depreciation rate does not exceed the maximum rates stated above.
In general, except for buildings and structures, tax depreciation must match financial depreciation.
Law 31652 establishes optional special depreciation rules under which taxpayers may claim 33.33% depreciation for buildings and constructions if the following conditions are met:
• Construction is started on or after 1 January 2023.
• At least 80% of the construction is completed as of 31 December 2024.
The 33.33% depreciation rate also may apply to buildings acquired by taxpayers in the 2022, 2023 and 2024 tax years, provided the assets meet certain requirements.
In addition, Law 31652 entitles taxpayers to use a maximum depreciation annual rate of 50% for hybrid and electric vehicles acquired in 2023 and 2024.
Legislative Decree 1488 also establishes the following annual depreciation percentages for assets acquired in the 2020 and 2021 tax years:
• Data processing equipment: 50%
• Machinery and equipment: 20%
• Ground transportation vehicles (except railways) used by authorized companies that provide transportation service to people and/or goods at the provincial, regional and national level: 33.3%
• Hybrid or electric ground transportation vehicles (except railways): 50%
Relief for losses. Taxpayers may select from the following two systems to obtain relief for their losses:
• System A: Carrying forward losses to the four consecutive years beginning with the year following the year in which the loss is generated
• System B: Carrying forward losses indefinitely, subject to an annual deductible limit equal to 50% of the taxpayer’s taxable income in each year
Loss carrybacks are not allowed.
On 8 May 2020, Legislative Decree 1481 was issued, establishing a special rule for carrying forward losses incurred during the 2020 tax year. According to the decree, companies that opt for System A may carry forward losses incurred in the 2020 tax year for five years instead of four, counting from the 2021 fiscal year.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax
Temporal net assets tax; imposed on companies, and on agencies, branches and permanent establishments of foreign entities; the tax base equals the value of the net assets of the taxpayer as of 31 December of the preceding year that exceeds PEN1 million (approximately USD263,157); the tax payments may offset the advance payments required under the general income tax regime or may be claimed as a credit against the income tax payable for the tax year; a refund may be requested for any balance of tax payment that is not used in the current year; the tax does not apply to certain companies; tax is payable beginning in the year following the first year of productive activities
0.4 (Law 31104, published in January 2021, authorizes the refund of the temporary tax on net assets corresponding to the 2020 tax year to mitigate the impact of the COVID-19 pandemic on the national economy.)
Value-added tax (VAT), on the sale of goods, services and the import of most products and services; tax that is levied on the importation of services (including interest arising on loans granted by nonfinancial institutions) must be paid under a reverse mechanism by the importer or borrower; VAT paid might be used as an input VAT credit if certain conditions are met 18 Excise tax, on goods and imports; the tax is either a fixed amount or an amount determined by applying a percentage rate
Various Social security contributions to the Peruvian Health Social Security Office, on salaries and legal bonuses; paid by employer 9 Pension Fund; paid by employee 13 (Alternatively, employees may contribute approximately 11.8% of their salaries to the Private Pension Funds Trustee [AFP].) Employees’ profit sharing; calculated on pretax income and deductible as an expense in determining taxable income; rate varies depending on companies’ activities (mining, fishing, manufacturing, telecommunications and other activities) 5 to 10
Tax on Financial Transactions; imposed on debits and credits in Peruvian bank accounts 0.005
E. Miscellaneous matters
Foreign-exchange controls. Peru does not impose foreign-currency controls. Exchange rates are determined by supply and demand.
• Sales, distribution and marketing activities
• Financial transactions
• Extraction, exploration or transformation of natural resources
• Insurance and reinsurance
• Senior management services
Transfer pricing documentation and Country-by-Country reporting. From 1 January 2017, taxpayers must file with the Peruvian tax authorities the following reports:
• Local File: this file is required if the accrued revenues exceed 2,300 Tax Units (approximately USD3.1 million for the 2024 fiscal year). This report provides detailed information on intercompany transactions (both domestic and cross-border) and transactions between the local taxpayer and residents in tax-haven jurisdictions. In addition, information with respect to the benefit test must be included in the Local File with respect to services. The information required in the Local File helps ensure that the taxpayer has complied with the arm’s-length principle in its transfer-pricing positions. The Local File focuses on information relevant to the transfer-pricing analysis for transactions taking place between a local taxpayer and associated enterprises. Such information includes relevant financial information regarding those specific transactions, a comparability analysis, and the selection and application of the most appropriate transfer-pricing method.
• Master File: the requirements for this file apply only to taxpayers that are members of a domestic or multinational group of companies whose annual revenue for the fiscal year exceeds 20,000 Tax Units (approximately USD27 million for the 2024 fiscal year). Taxpayers exceeding the annual revenue threshold are only required to prepare and submit the Master File if aggregate annual related-party transactions equal or exceed 400 Tax Units (approximately USD542,247 for the 2024 fiscal year) during the relevant year. The Master File provides highlevel information on the group’s business operations, its transfer-pricing policies and its global allocation of income and economic activity. Specifically, the information required in the Master File provides a “blueprint” of the group and contains relevant information that is grouped in the following five categories:
The group’s organizational structure
A description of its business or businesses
The group’s intangibles
The group’s intercompany financial activities
The group’s financial and tax positions
In general, the Master File is intended to assist the tax authorities in evaluating the presence of significant transfer-pricing risks and provide an overview of the group to place its transferpricing practices in their global, economic, legal, financial and tax contexts.
• Country-by-Country Report (CbCR): this report is required for taxpayers forming part of multinational groups, in accordance with Action 13 of the Base Erosion and Profit Shifting (BEPS) Action Plan of the OECD. The CbCR must include aggregate worldwide tax jurisdiction information relating to the global allocation of the revenue, profits (or losses), income taxes paid (and accrued) and certain indicators of the location of economic activity among tax jurisdictions in which the multinational
group operates. The CbCR also must contain a listing of all of the constituent entities of the group. This listing must include the tax jurisdictions of incorporation, as well as the nature of the main business activities carried out by the constituent entities. Under BEPS Action 13, the CbCR should be filed in the jurisdiction of tax residence of the ultimate parent entity of a multinational enterprise group and is shared between jurisdictions through the automatic exchange of information, by a government mechanism under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, bilateral tax treaties or tax information exchange agreements.
The requirements regarding the submission of the Local File apply from the 2017 fiscal year, while the Master File and the CbCR requirements are mandatory from the 2018 fiscal year.
Debt-to-equity rules. As of 1 January 2021, a new set of thin capitalization rules is applicable. Under these rules, the interest that exceeds 30% of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) of the preceding year will not be deductible. Interest that is not deducted may be carried forward for up to four years, but will always be subject to the 30% of EBITDA limitation.
Supreme Decree 432-2020-EF, which was issued on 31 December 2020, provides that, as a result of the COVID-19 pandemic, with respect to the limit on the deduction of interest expenses applicable as of 2021, taxpayers who establish or begin activities in 2021 consider the EBITDA of that year and not of the preceding year (2020) as established in the rule above.
Supreme Decree 402-2021-EF, effective from 31 December 2021, establishes that for taxpayers not having net income in a tax year or for taxpayers that have losses equal to or higher than their net income, the EBITDA is the sum of net interest, depreciation and amortization. It is also established that if, as a result of a reorganization, a new company (NewCo) is created, the NewCo must take into account the EBITDA for the year in which the reorganization takes place. If no NewCo is created as a result of a reorganization, the EBITDA of the previous tax year must be taken into account.
Transactions with residents in tax havens and entities subject to preferential tax regimes. Expenses incurred in transactions with residents in low-tax jurisdictions and noncooperative jurisdictions (tax havens) as well as entities subject to preferential tax regimes, are not deductible for tax purposes, except for the following:
• Toll payments for the right to pass across the Panama Channel
• Expenses related to credit operations, insurance or reinsurance, leasing of ships or aircraft and freight services to and from Peru
The following jurisdictions are considered to be low-tax jurisdictions or noncooperative jurisdictions.
American Samoa Dominica Panama
Andorra Gibraltar
Anguilla Guam
Antigua and Guernsey
St. Kitts and Nevis
St. Lucia
St. Vincent and Barbuda Grenada the Grenadines
Aruba
Hong Kong SAR Samoa
• The use of unusual legal and business structures, acts or contracts that contribute to the deferral of profits and income or the anticipation of expenses, costs or losses
Legal representatives will be jointly liable for the tax debt when the GAAR is applied, provided that the legal representatives have collaborated with the design or implementation of the acts challenged by the Peruvian tax authorities using the GAAR.
For entities having a board of directors, the board of directors will be responsible for approving the entity’s tax planning; this obligation cannot be delegated.
To apply the GAAR in tax audits, the Peruvian tax authorities must follow a special procedure that requires the auditor to send the case to the Revision Committee, which will notify the taxpayer of a hearing; the Revision Committee’s opinion is issued within 30 days after the hearing, and the opinion is binding for the Peruvian tax authorities.
On 11 October 2022, the Peruvian tax authority published on its official website an updated version of the list of high-risk schemes for tax planning that could be challenged under the Peruvian GAAR. The updated list includes the following 13 high-risk schemes that could be challenged under the Peruvian GAAR:
• Deduction of payment of royalties in a brand or trademark use assignment scenario
• Transfer of a Peruvian company using a trust or similar entity
• Re-domiciliation of a company and use of double tax treaties
• Assignment of trademarks and capitalization of credits
• Management contracts and management fees
• Assignment of a concession of an extractive industry (mining) with hidden payments for transfer of shares
• Sale and further repurchase of an automobile vehicle under a cancellation of contract scenario
• Direct transfer of Peruvian shares via capital contribution and subsequent capital reduction structure
• Artificial use of preferential tax regimes
• Loan via financial leasing structure
• Intermediation in the sale of minerals through an entity without economic substance
• Nonprofit entity making payments to an overseas supplier
• Transfer of real estate to the shareholder and further lease of the real estate by the shareholder to the company
Domestic reorganizations. Under the existing Peruvian Income Tax Law, domestic reorganizations are subject to a tax-free regime, to the extent that the basis of the assets included in the reorganization is kept at historical value. A law, which is effective from 1 January 2013, maintains this regime but establishes a minimum holding period in cases of spin-off reorganizations. The law states that the shareholders of the company being spun off that receive shares in the company to which the assets are contributed must keep the shares of the latter company until the closing of the next fiscal year following the reorganization. If the shares are transferred before that time, the underlying assets are deemed to be transferred by the acquiring company at market value. The tax is determined by the difference between the historic tax basis
and the market value. In addition, the shareholder selling the shares is subject to the ordinary capital gains tax.
Ultimate beneficial ownership. Peruvian entities and nonresidents are required to disclose the individuals who are the ultimate beneficial owners to the Peruvian tax authorities.
The following entities are required to report and identify their ultimate beneficial owners:
• Peruvian entities incorporated in Peru
• Legal entities, such as Peruvian trusts, foreign trusts and partnerships
• Nonresident entities provided one of the following requirements is met:
The foreign entity has a branch or permanent establishment in Peru.
The foreign fund or foreign trust is managed by a Peruvian administrator, either an entity or an individual.
One party of a consortium is a Peruvian resident.
Ultimate beneficial owners are determined by the following criteria:
• Property: an individual holds a minimum of 10% of an entity’s capital directly or indirectly
• Control: an individual who, directly or indirectly, has the ability to appoint or remove the majority of the administrative, management or supervisory organs of the legal entity and has the decision-making capacity with respect to the financial, operational and/or commercial agreements of the legal entity
If it is not possible to determine the ultimate beneficial owner based on the criteria, the ultimate beneficial owner is deemed to be the individual occupying the higher administrative position, such as the general manager or a member of the board of directors.
F. Tax treaties
Peru has entered into double tax treaties with Brazil, Canada, Chile, Japan, Korea (South), Mexico, Portugal and Switzerland. It has also signed an agreement to avoid double taxation with the other members of the Andean Community (Bolivia, Colombia and Ecuador) under which the exclusive right to tax is granted to the source country. The following is a table of treaty maximum withholding tax rates.