Peru

In Peru, employers face various tax obligations related to payroll, social security, and other contributions.

Employer Obligations

• Income Tax Withholding: Employers withhold income tax from employee salaries monthly, based on a progressive scale. A 7 UIT deduction is applied before calculating the tax. The rates for 2025, using the updated UIT value of PEN 5,150 are:
  • Up to 5 UIT (PEN 25,750): 8%
  • 5 to 20 UIT (PEN 25,751 - PEN 103,000): 14%
  • 20 to 35 UIT (PEN 103,001- PEN 180,250): 17%
  • 35 to 45 UIT (PEN 180,251 - PEN 231,750): 20%
  • Above 45 UIT (PEN 231,751+): 30%
• Social Security Contributions (ESSALUD): Employers contribute 9% of each employee's salary to the national health system (ESSALUD or EPS). Agricultural companies contribute a reduced rate of 6%.
• Pension Fund Contributions: Employers withhold and remit employee pension contributions. Employees contribute 13% for the National Pension System (ONP) or around 12.5% for the Private Pension System (AFP).
• Compensation for Length of Service (CTS): Employers contribute 9.72% of an employee's salary to the CTS, a compensation fund accessible under certain conditions like dismissal or resignation.
• Life Insurance: Employers generally provide mandatory life insurance for employees, with premiums varying depending on the policy.
• Family Allowance: For employees with children under 18 (or up to 24 if pursuing higher education), employers pay a monthly allowance of 10% of the minimum wage (PEN 1,130 in 2025), resulting in a PEN 113 allowance.
• T-Registro Reporting: Employers must register new hires and employee departures with the SUNAT (tax authority) via the T-Registro system, providing details like employee ID, position, contract type, start date, and reason for leaving.
• AFPnet for Pension Funds: Employers must register with AFPnet to manage pension contributions electronically if using a private pension fund administrator (AFP).
• Annual Tax Return: Employers must file an annual income tax return by the first week of April, summarizing the year's withholdings and payments.

Additional Considerations

• Non-Domiciled Employees: Foreign employees working in Peru for less than 183 days are considered non-domiciled and are taxed a flat 30% on Peruvian-sourced income. No deductions apply.
• 13th and 14th Salary: Employers pay two additional months' salary, one in July and one in December.

This information is current as of February 5, 2025, and might be subject to change. Consulting with a tax professional is recommended for specific situations.

In Peru, employers must deduct various taxes and contributions from employee salaries, remitting them to the appropriate government agencies. This overview covers the key deductions for 2025. Note that as of today, February 5, 2025, some of the official rates and figures for 2025 may not be finalized, so these values represent the latest available and are subject to change.

Income Tax

• Progressive Rates: Income tax is withheld based on a progressive scale. The tax unit (UIT) value for 2025 is PEN 4,600, though this needs further confirmation.
• Tax Brackets (based on 2024 rates, pending 2025 updates):
  • Up to 5 UIT: 8%
  • 5 to 20 UIT: 14%
  • 20 to 35 UIT: 17%
  • 35 to 45 UIT: 20%
  • Above 45 UIT: 30%

Social Security (Essalud)

• Employee Contribution: While the employee does not directly see this as a deduction, it constitutes a portion of their total compensation package that the employer pays to Essalud (9% of the employee's salary, up to a maximum amount based on the current UIT)

Pension Fund (AFP)

• Employee Contribution: Employees contribute between 12.50% and 13.00% of their salary to their chosen AFP. The employer withholds and remits this contribution.

Additional Deductions

• Standard Deduction: Residents are entitled to a standard deduction of 7 UIT against income from employment or self-employment, plus 3 additional UIT for other personal expenses, which may need proper documentation for validation. This remains constant for 2025, pending any legislative changes.
• Other Deductions: There are provisions for deductions related to charitable contributions, limited to a percentage of net taxable income.

Employer Obligations

• Besides withholding and remitting employee contributions, employers pay Essalud contributions for their employees and may also face obligations related to 13th and 14th-month payments.
• Employers can benefit from deductions by hiring employees aged between 18 and 29 years old (50% of employee salary, subject to specific conditions), and for expenses related to Research and Development, though the specifics require further consultation.

Important Considerations

• Tax Unit (UIT): The annual update to the UIT value is crucial for all calculations, and precise amounts will need confirmation from official sources when published.
• Year-End Adjustment: A year-end adjustment reconciles any overpaid or underpaid income tax.
• Compliance: Employers must adhere to T-Registro reporting requirements and use the AFPnet system for pension contributions.

This information is for general guidance and reflects our best understanding as of February 5, 2025. It's vital to consult official resources or legal counsel for specific situations and updated 2025 regulations once officially announced.

In Peru, the Value Added Tax (VAT), locally known as Impuesto General a las Ventas (IGV), is levied on most goods and services.

VAT Rates and Application

• The standard VAT rate is 18%, consisting of 16% IGV and 2% Municipal Promotion Tax (Impuesto de Promoción Municipal, IPM). This applies to most goods and services.
• A 0% rate applies to exports of goods and services.

VAT Registration

• There's no registration threshold. Businesses must register with SUNAT (Superintendencia Nacional de Administración Tributaria) and obtain a RUC (Registro Único de Contribuyentes) before conducting their first taxable supply. This applies to both resident and non-resident businesses.
• Non-resident providers of digital services to consumers in Peru must also register, collect, and remit VAT.

VAT Filing and Payment

• VAT returns (Form 119) are filed monthly, between the 7th and 16th working day of the following month.
• Filing can be done online or in person at authorized banks.
• Large taxpayers must also file an annual supplementary declaration (Declaración Annual de Operaciones con Terceros).
• VAT payment is due at the same time as the return. Payments can be made in PEN or USD.
• Non-resident digital service providers must file a separate VAT return (Virtual Form N° 0623 - IGV - Digital Economy) within 10 business days of the month following the tax obligation.

Exempt Goods and Services

Several goods and services are exempt from VAT. These include certain foodstuffs (e.g., fish, crustaceans, mollusks, fresh or refrigerated potatoes, beans, artichokes), public transportation (excluding rail and air), international cargo transport, live cultural shows, and specific financial services like interest from credits transferred to securitization companies.

VAT for Digital Services (Effective December 1, 2024)

• An 18% VAT applies to digital services provided by non-residents to consumers in Peru.
• Non-resident providers must register for VAT and collect the tax.
• If the provider fails to register, payment facilitators (banks, credit card companies) become responsible for withholding the VAT.
• Affected services include software, social media access, streaming services, online publications, advertising, online auctions, website access, and online training.

Additional Information

• Input VAT can generally be recovered, subject to specific rules and documentation requirements. Input VAT on purchases of USD 1,000 or more is deductible/refundable only if the payment was made through the banking system.
• A system for early recovery of input VAT exists for companies with substantial investments (over USD 2 million) and a pre-operative stage.

This information is current as of February 5, 2025, and is subject to change. Consulting with a tax professional is recommended for specific situations.

Peru offers several tax incentives to promote specific sectors and activities as of February 5, 2025. These incentives can significantly reduce tax burdens and enhance returns. Keep in mind that these regulations may be subject to change.

Research and Development (R&D)

Peru provides substantial tax deductions for expenses related to scientific research, technological development, and technological innovation.

• Deduction Rates: Businesses with net income not exceeding 2,300 Tax Units (approximately US$2,996,000 as of 2022) can deduct:

  • 240% of qualifying R&D expenses if the project is conducted directly by the taxpayer or a Peruvian R&D center.
  • 190% if the project is carried out through a non-Peruvian R&D center.

• For businesses exceeding the 2,300 Tax Unit threshold:

  • 190% deduction for projects executed by the taxpayer or a Peruvian R&D center.
  • 160% deduction for projects executed by a non-Peruvian R&D center.

• Expiration: This incentive is currently valid until December 31, 2025.

Energy Sector

• Accelerated Depreciation: Companies investing in electricity generation using hydraulic or other renewable resources can benefit from accelerated depreciation. A global annual depreciation rate of up to 20% is applicable to machinery, equipment, and construction work. This benefit has been extended until December 31, 2030.

Capital Gains and Interest Exemption

Capital gains and interest earned from securities issued by the Peruvian government are exempt from income tax. This exemption has been broadened to include:

• Repurchase transactions involving Peruvian government-issued securities.
• Disposal of units in Exchange Traded Funds (ETFs) replicating the performance of a portfolio of securities issued by the Peruvian Government.

Hospitality Sector (VAT)

A reduced VAT rate applies to the hospitality sector, including hotels and restaurants. The exact reduced percentage was not provided by the source.

Special Economic Zones (SEZs)

Businesses operating within designated SEZs enjoy several tax and customs benefits:

• Exemption from income tax, VAT, municipal promotion tax, and other taxes (excluding labor contributions).
• Exemption from import duties and taxes for foreign goods remaining within the SEZ.
• Eligibility for trade agreements signed by Peru (provided origin criteria are met).

Tax Installment Payments

A special installment payment regime is available for tax debts due by December 31, 2023. The deadline to apply for this regime has been extended to February 28, 2025. This program allows eligible businesses to pay their outstanding tax liabilities in installments, easing their financial burden. The exact terms were not available in the source.

Textile and Clothing Industry

A special depreciation regime exists for machinery and equipment acquired in 2024 and 2025. A maximum depreciation rate of 33.33% applies. In 2026, machinery and equipment can be depreciated at a 25% rate, and in 2027 and beyond, a 16.67% rate is applied.

Additional Considerations

• Drawback: Exporters can recover some or all customs duties paid on imported inputs used in export production. The drawback rate is 3% of the exported product's FOB value.
• Early VAT Recovery: Pre-operational companies with significant projects can apply for early VAT recovery on capital goods. This requires an investment agreement with the relevant ministry.
• These summaries do not constitute official tax advice. Consult with a tax professional for specific guidance.