Taxation in Peru

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Taxation represents the biggest source of revenues for the Peruvian government (up to 76%). For 2016, the projected amount of taxation revenues was S/.94.6 billion ($29 billion). There are four taxes that make up approximately 90 percent of the taxation revenues:

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All these four types of taxes are imposed at the national level. There are also municipal taxes based on an individual's or household's residence as well as a municipal property tax and a municipal vehicle tax.

Income tax

Peruvian income taxes may be divided into 2 large groups:

Corporate income tax

The general income tax annual rate for resident entities is 29.5%. In addition to this, resident entities are obliged to make advance payments on a monthly basis by applying a coefficient over the accrued taxable income of the month. Advance payments are to be offset against the annual income tax obligation.

All resident companies are subject to this income tax on their worldwide taxable income. Resident companies are those incorporated in Peru. Branches and permanent establishments of foreign companies that are located in Peru and non-resident entities are taxed only on income from Peruvian sources. [2]

Various significant tax incentives are available for investments in the following areas:

They are available also for investments in manufacturing industries located in the jungles, in designated tax-free zones and in borderline areas of the country. Furthermore, companies involved in certain economic sectors may be subject to special or reduced income tax rates (i.e. companies involved in agriculture, animal husbandry and similar activities are entitled to a 15% rate). [3]

Personal income tax

Peru also has an income tax for individuals. Peruvian citizens domiciled in Peru are subject to taxation on their worldwide income. Individuals not domiciled in Peru are only taxed in this country on their Peruvian sourced income.

Foreigners residing or staying in Peru for more than 183 days within any given 12-month period, will be given the status of individuals domiciled in the country from January 1 of the following fiscal year in which the duration of stay expires. [4]

Dividends distributed by companies incorporated or established in Peru, received by individuals, are subject to the following rates:

This, currently valid Dividend Tax rate of 5%, is imposed on distributions of profits to nonresidents and individuals by resident companies and by branches, permanent establishments and agencies of foreign companies. [4]

Value added tax (VAT)

The general rate of VAT is 18% (16% of VAT itself plus 2% of municipal promotion tax). VAT in Peru is generally imposed on the following transactions: sale of movable property, rendering and use of services, construction contracts, first sale of real property (except land) made by builders and the import of goods.

As occurs with many indirect tax systems, to determine the tax payable by the company performing the above-mentioned transactions (output VAT), the VAT paid in the company's acquisitions is accepted as a tax credit (input VAT). Exporters can recover VAT paid in acquisitions for up to 18 per cent of an export's free on board (FOB) value.

Companies that have not commenced productive operations with a pre-production stage equal to or longer than two years may resort to a special system to obtain the advanced recovery of the VAT levied on certain acquisitions provided that they execute an investment agreement with the state. [3]

Excise Tax

Excise tax rates, and the manner on which the tax is applied, depend on the type of goods or services. The specific goods which are subject to excise tax include fuel, cigarettes, beer, liquor, and vehicles. [5]

Tax administration

The Superintendencia Nacional de Administración Tributaria (SUNAT) [6] (English version: National Superintendency of Tax Administration) is the government administrative body and the most important tax authority responsible for collecting of the national taxes. It means all taxes assigned as public resources of the national government (taxes on income, sales, assets and financial transactions, as well as customs duties), public pensions and health security system contributions.

In addition to this, each of the approximately 1 800 municipalities in Peru is considered as a separate tax authority with respect to municipal taxes (mainly taxes on the ownership and transfer of immovable property, real estate and payment of municipal public services). Tax authorities have discretionary faculties to exercise their auditing duties, which are not conducted on a routine cycle but rather on a variable basis. Larger businesses are usually audited every year, while medium-sized and small businesses may be audited on a biannual or lower frequency rate. However, all Peruvian-resident legal entities must file tax returns and pay taxes both on a monthly and annual basis. The annual tax returns must be filed by the end of March or beginning of April, depending on the taxpayer number. [3]

Double taxation treaties

Currently, in order to avoid double taxation, Peru has signed and ratified treaties with the following countries: Brazil, Chile, Canada, Portugal, South Korea, Switzerland; and Mexico. All these treaties are largely based on the OECD Model Tax Convention.

Negotiations to conclude tax treaties with Italy, Japan, the Netherlands, Qatar, Singapore, Thailand and the United Kingdom, and renegotiations with Spain, still continue.

Peru is also a member of the Andean Community, along with Colombia, Ecuador and Bolivia. In this regard, Decision No. 578 is applicable for avoiding double taxation between Andean Community member countries, as well as for preventing tax evasion. Decision No. 578 prioritizes the taxation at the source, using the exemption method. [4]

Related Research Articles

A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer by a governmental organization in order to collectively fund government spending, public expenditures, or as a way to regulate and reduce negative externalities. Tax compliance refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs. The first known taxation took place in Ancient Egypt around 3000–2800 BC. Taxes consist of direct or indirect taxes and may be paid in money or as its labor equivalent.

<span class="mw-page-title-main">Taxation in the United States</span>

The United States of America has separate federal, state, and local governments with taxes imposed at each of these levels. Taxes are levied on income, payroll, property, sales, capital gains, dividends, imports, estates and gifts, as well as various fees. In 2020, taxes collected by federal, state, and local governments amounted to 25.5% of GDP, below the OECD average of 33.5% of GDP. The United States had the seventh-lowest tax revenue-to-GDP ratio among OECD countries in 2020, with a higher ratio than Mexico, Colombia, Chile, Ireland, Costa Rica, and Turkey.

<span class="mw-page-title-main">Taxpayer</span> Person or organization subject to pay a tax

A taxpayer is a person or organization subject to pay a tax. Modern taxpayers may have an identification number, a reference number issued by a government to citizens or firms.

<span class="mw-page-title-main">Taxation in the United Kingdom</span>

Taxation in the United Kingdom may involve payments to at least three different levels of government: central government, devolved governments and local government. Central government revenues come primarily from income tax, National Insurance contributions, value added tax, corporation tax and fuel duty. Local government revenues come primarily from grants from central government funds, business rates in England, Council Tax and increasingly from fees and charges such as those for on-street parking. In the fiscal year 2014–15, total government revenue was forecast to be £648 billion, or 37.7 per cent of GDP, with net taxes and National Insurance contributions standing at £606 billion.

<span class="mw-page-title-main">Indirect tax</span> Type of tax

An indirect tax is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indirect tax as a part of market price of the good or service purchased. Alternatively, if the entity who pays taxes to the tax collecting authority does not suffer a corresponding reduction in income, i.e., impact and tax incidence are not on the same entity meaning that tax can be shifted or passed on, then the tax is indirect.

Taxation in Indonesia includes income tax, value added tax and carbon tax.

Income taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office. Australian GST revenue is collected by the Federal government, and then paid to the states under a distribution formula determined by the Commonwealth Grants Commission.

The Tanzania Revenue Authority (TRA) is the government agency of Tanzania, charged with the responsibility of managing the assessment, collection and accounting of all central government revenue in Tanzania.

Due to the absence of the tax code in Argentina, the tax regulation takes place in accordance with separate laws, which, in turn, are supplemented by provisions of normative acts adopted by the executive authorities. The powers of the executive authority include levying a tax on profits, property and added value throughout the national territory. In Argentina, the tax policy is implemented by the Federal Administration of Public Revenue, which is subordinate to the Ministry of Economy. The Federal Administration of Public Revenues (AFIP) is an independent service, which includes: the General Tax Administration, the General Customs Office and the General Directorate for Social Security. AFIP establishes the relevant legal norms for the calculation, payment and administration of taxes:

In Austria, taxes are levied by the state and the tax revenue in Austria was 42.7% of GDP in 2016 according to the World Bank The most important revenue source for the government is the income tax, corporate tax, social security contributions, value added tax and tax on goods and services. Another important taxes are municipal tax, real-estate tax, vehicle insurance tax, property tax, tobacco tax. There exists no property tax. The gift tax and inheritance tax were cancelled in 2008. Furthermore, self-employed persons can use a tax allowance of €3,900 per year. The tax period is set for a calendar year. However, there is a possibility of having an exception but a permission of the tax authority must be received. The Financial Secrecy Index ranks Austria as the 35th safest tax haven in the world.

The tax legislation of Azerbaijan is comprised by the Constitution of Azerbaijan Republic, the Tax Code and legal standards which are adopted herewith. The taxes levied in Azerbaijan can be generally broken down into 3 main types: state taxes, taxes of autonomy republic and local (municipal) taxes. State taxes include the following: personal income tax, corporate tax, value added tax, excise tax, property tax, land tax, road tax, mineral royalty tax and simplified tax. Taxes of autonomy republic are the same as state taxes but levied in Nakhichevan Autonomous Republic.

Taxation in Norway is levied by the central government, the county municipality and the municipality. In 2012 the total tax revenue was 42.2% of the gross domestic product (GDP). Many direct and indirect taxes exist. The most important taxes – in terms of revenue – are VAT, income tax in the petroleum sector, employers' social security contributions and tax on "ordinary income" for persons. Most direct taxes are collected by the Norwegian Tax Administration and most indirect taxes are collected by the Norwegian Customs and Excise Authorities.

Taxes in Germany are levied by the federal government, the states (Länder) as well as the municipalities (Städte/Gemeinden). Many direct and indirect taxes exist in Germany; income tax and VAT are the most significant.

The policy of taxation in the Philippines is governed chiefly by the Constitution of the Philippines and three Republic Acts.

<span class="mw-page-title-main">Taxation in South Africa</span>

Taxation may involve payments to a minimum of two different levels of government: central government through SARS or to local government. Prior to 2001 the South African tax system was "source-based", where in income is taxed in the country where it originates. Since January 2001, the tax system was changed to "residence-based" wherein taxpayers residing in South Africa are taxed on their income irrespective of its source. Non residents are only subject to domestic taxes.

Taxes in Bulgaria are collected on both state and local levels. The most important taxes are collected on state level, these taxes include income tax, social security, corporate taxes and value added tax. On the local level, property taxes as well as various fees are collected. All income earned in Bulgaria is taxed on a flat rate of 10%. Employment income earned in Bulgaria is also subject to various social security insurance contributions. In total the employee pays 12.9% and the employer contributes what corresponds to 17.9%. Corporate income tax is also a flat 10%. Value-Added Tax applies at a flat rate of 20% on virtually all goods and services. A lower rate of 9% applies on only hotel services.

Czech Republic's current tax system was put into administration on 1 January 1993. Since then, an updated VAT act was introduced on 1 May 2004 when Czech Republic joined the EU and the act had to correspond to EU law. In 2008, the administration also introduced Energy Taxation. Changes to tax laws are quite frequent and common in the Czech Republic due to a dynamic economy. The highest levels of revenue are generated from income tax, social security contributions, value-added tax and corporate tax. In 2015, total revenue stood at CZK 670.216 billion which was 36.3% of GDP. The tax quota of the Czech Republic is lower than the EU average. Compared to the averages of the OECD countries, revenues generated from taxes on social security contributions, corporate income and gains and value added taxes account for higher proportions of total taxation revenue. Personal income tax lies on the other end of the spectrum where the revenue is proportionally much lower than the OECD average. Taxes on property also account for lower levels of revenue.

Taxation in Malta is levied by the State and it is administered by the Commissioner for Revenue. The total tax revenues in 2014 amounted to €2.747 Billion, which represents 34.6% of the Maltese GDP. The main sources of tax revenue were value-added tax, income tax, and social security contributions.

The organization responsible for tax policy in Ukraine is the State Fiscal Service, operating under the Ministry of Finance of Ukraine. Taxation is legally regulated by the Taxation Code of Ukraine. The calendar year serves as a fiscal year in Ukraine. The most important sources of tax revenue in Ukraine are unified social security contributions, value added tax, individual income tax. In 2017 taxes collected formed 23% of GDP at ₴969.654 billion.

Taxation is an important part in the Turkish economy. Turkey has a 25.5% tax to GDP ratio. Most of the taxes are levied by central government. However some specific taxes are levied by municipalities, with the amount determined by centrally issued legislation. Municipalities have no authority to make their own tax laws.

References

  1. ↑ E. Bahner, Kathryn (2017). "Peruvian Tax Reform: Increasing Government Revenues and Social Equality" . Retrieved 23 April 2018.
  2. ↑ EY (2018). "2017 Worldwide Corporate Tax Guide: Peru" . Retrieved 23 April 2018.
  3. 1 2 3 César Castro Salinas & Rodrigo Flores Benavides (February 2018). "The Inward Investment and International Taxation Review: Peru (Edition 8)" . Retrieved 23 April 2018.
  4. 1 2 3 Oxford Business Group (2018). "Peru's recent tax changes and regulations" . Retrieved 23 April 2018.{{cite web}}: |last= has generic name (help)
  5. ↑ PwC (3 January 2018). "World Tax Summaries: Peru Overview" . Retrieved 23 April 2018.
  6. ↑ "SUNAT". www.sunat.gob.pe (in Spanish). Retrieved 2018-04-23.
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