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
Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment” rules that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in every jurisdiction where it has customers that are not taxable persons. In Peru, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. Transfer of going concern rules do not apply in Peru. As such, VAT applies to all sales of a business or part of a business capable of separate operation including assets.
Transactions between related parties. In Peru, there are no specific rules that indicate the value for VAT purposes for transactions between related parties.
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 (who do not engage in business activities) are liable to VAT if they perform such activities on a “habitual” basis, when they import intangible goods over the internet or when they use digital services in the country provided by non-established businesses.
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.
Fixed establishment. An entity qualifies as a permanent establishment if the conditions stipulated on 14-B Article of Peruvian Income Tax Law are verified. In general terms, the following cases qualify as a permanent establishment:
• Any fixed place of business through which a company incorporated abroad conducts its business
• Construction projects or similar only if such project continues for more than 183 days within any 12-month period, unless a shorter period has been established in the Double Taxation Avoidance Agreements
• The furnishing of services when they are carried out in the country for the same project for more than 183 days within any 12-month period, unless a shorter period has been established in the Double Taxation Avoidance Agreements
The VAT rates are:
• Standard rate: 18%
• Reduced rate: 10%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for an exemption.
The government reduced the standard VAT rate from 18% to 10% from 13 August 2022 to 31 December 2024, which applied to taxable persons that meet certain requirements. Law 31556 temporarily reduced the VAT rate from 16% to 8% for certain supplies. This resulted in an effective tax rate for such supplies of 10% (comprised of the reduced 8% VAT rate plus the 2% promotion municipal tax). The objective of the reduced VAT rate (10%) was to support the economic reactivation of restaurants, hotels and tourist accommodations, and it was in force from 1 September 2022 to 31 December 2024. There are no plans to extend this benefit.
The following requirements must be met to apply the reduced VAT:
• The taxable persons must be individuals or legal entities that obtain corporate income and are subject to VAT.
• The taxable persons must qualify as micro and small companies in accordance with the Promotion of Productive Development and Business Growth Law.
• Companies that are not part of an economic group that together do not meet such characteristics, have economic ties with other companies or national or foreign economic groups.
• Their main activity, which represents at least 70% of their income, must be related to restaurants, hotels and tourist lodging.
Examples of goods and services taxable at 10%
• Accommodation services (hotels and tourist accommodation)
• Restaurants (food and beverage sales)
• Catering services (provision of goods and drinks services)
• Food concessionaries
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 requirements and conditions laid down. This request comprises all the exempt goods, not specific categories 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.
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 PEN206,000 (USD54,642) based on the tax unit approved for year 2024, PEN5,150 (USD1,366)
• Business entertainment expenses, if the value does not exceed 0.5% of the taxable person’s annual gross revenues, with a maximum of 40 tax units equivalent to PEN206,000 (USD54,642) based on the tax unit approved for year 2024, PEN5,150 (USD1,366)
• 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 maintain 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 (i.e., input tax). A tax credit arising from the acquisition of capital goods may be offset with debit VAT (i.e., output tax) in the month in which capital goods are acquired.
Refunds. If the amount of input tax (i.e., credit VAT) recoverable in a month exceeds the amount of output tax (i.e., debit VAT) payable, the excess credit may be carried forward to offset output tax in the following tax period. The referred amount may be applied as credit VAT in the following months until it is used up.
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 recoverable in Peru.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses that are not registered for VAT 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 two
surcharges, where applicable. The applicable tax rate is 3.5%, 5% or 10%, depending on the situation of the importer and/or the goods to be cleared through customs. Like VAT, the amount paid may be used by the importer as a tax credit. However, there are certain cases in which prepaid VAT does not need to be paid; for example, when the import is performed by VAT withholding agents or in the case of certain goods from the system.
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 are not required in Peru.
Special schemes. No special schemes are available in Peru.
Annual returns. Annual returns 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 determined is equal or greater than the previous tax return. If the tax obligation is less than the previous 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.
From 1 January 2024 (with specific exceptions), the Peruvian Tax Administration has mandated the use of the Integrated Electronic Records System (SIRE, for its Spanish acronym). It is a digital platform implemented to facilitate the generation of the Purchase Book and the Sales Book from electronic invoicing.
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 PEN5,150 (USD1,366) based on the tax unit approved for year 2024.
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 PEN5,150 (USD1,366) based on the tax unit approved for year 2024.
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.
As of 1 January 2024, unpaid fines must be updated with the legal interest rate that is set by the Central Reserve Bank of Peru (BCRP) as of the date on which the Peruvian Tax Administration requires such payment.
Some penalties may arise if any omitted tax is determined after the filing of the new tax return.
There are no specific penalties associated with the late notification or failure to notify the tax authorities of changes to a taxable person’s VAT registration details. However, a taxable person must ensure that the information provided to the tax authorities is correct and updated within the specified time periods. If a taxable person does not meet this obligation, it will commit the infraction stated on numeral 5 of the Article 173 of Tax Code. For further details, see the subsection Changes to VAT registration details above.
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 nonpayment 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, and prescribes after four years, calculated from 1 January following the date on which the right to request in return said amounts has begun.