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Direct taxation of businesses

i Tax on profits

Regardless of the individuals' nationality, the companies' place of incorporation and the location of the productive source, resident entities are subject to income tax on their worldwide income, while non-resident entities and their branches, agencies and permanent establishments (PEs) are only taxed in respect of their domestic-sourced income.

Income subject to taxation is that obtained from:

  1. capital, work, and from the joint application of both factors (i.e., enterprises);
  2. capital gains;
  3. other profits derived from third parties' operations; and
  4. some specific imputed income.

To assess the taxable profits, taxpayers are entitled to deduct all expenses required for the generation of income or maintenance of its source, as well as those related to the generation of capital gains, provided that they are not specifically forbidden by law. In other words, tax legislation has adopted a broad criterion for the deduction of expenses. Therefore, it is acceptable to deduct, inter alia:

  1. interest derived from debts contracted to acquire goods or services related to the generation of taxable income or the maintenance of the productive source;
  2. insurance premiums covering risks over transactions, services and goods related to the production of taxable income;
  3. write-offs for bad debts and equitable provisions for the same purpose;
  4. awards, bonuses, compensations and, in general, payroll payments agreed for staff;
  5. royalties; and
  6. travel expenses incurred in connection with the business activities.

Likewise, depreciation of fixed assets and amortisation of finite intangible property, when related to the generation of taxable income, are also deductible. With respect to depreciation of assets, tax law has adopted the straight-line method, with maximum annual rates. For the depreciation to be accepted, it has to be recorded on the accounting books of the company, and the corresponding assets have to be related to the generation of income or maintenance of its source.

On the other hand, tax law contains a list of non-deductible expenses, such as:

  1. personal and living expenses of the taxpayer and his or her relatives;
  2. fines, surcharges and interest applied by governmental entities;
  3. donations not complying with legal requirements;
  4. expenses not supported with proper formal documentation; and
  5. expenses (including capital losses) incurred with entities domiciled or established in tax havens, with few exceptions.

The starting point for determining taxable income is the profit and loss statement derived from accounting recorded in companies' books, which are adjusted in accordance with the previously mentioned rules on deductible and non-deductible expenses. Taxable profits and deductible expenses are computed on an accrual basis (a cash flow or receipt of funds is not necessary). For the first time ever, a legal definition of 'accrual' – in force as of 2019 – has been included in the tax legislation. Accordingly, as a general rule income shall be considered accrued whenever the substantial facts for its generation have occurred, provided the right to obtain the income is not subject to conditions. Additional rules have been approved to determine the accrual of income arising from specific transactions, such as alienation of goods, rendering of services, temporary assignment of goods and non-performance obligations.

Capital and income

In general terms, both income and capital gains obtained by resident entities are taxed in the same manner.


Tax losses may be relieved by carrying them forward and applying them to income obtained in subsequent fiscal years. There are two possible carry-forward systems that companies may choose between: system A allows losses to be carried forward for up to four years as from the year following on from the generation of the losses; and system B allows losses to be carried forward indefinitely, but only up to 50 per cent of the taxable income each year.

Any changes in the ownership of the company (i.e., at shareholder level) do not affect the loss tax relief. Companies are not allowed to carry-back their losses.


The general income tax annual rate for resident entities is 29.5 per cent. In addition, 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.

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 per cent rate).

Companies entering into sectoral tax stability agreements for mining or oil and gas projects are subject to an additional two percentage points.


Peruvian-resident legal entities must file tax returns and pay taxes both on a monthly and annual basis.

The most important tax authority is the National Superintendency of Tax Administration (SUNAT), which is in charge of the administration and collection of 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, 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.

Should uncertainty exist as to the correct interpretation of a legal tax provision, SUNAT may issue a formal opinion providing proper guidance. Such opinions are mandatory for the employees of the tax administration.

If, however, the tax authorities try to collect taxes based on a criterion not shared by the taxpayer, the latter may file an administrative claim challenging the tax administration resolution. If said tax administration upholds its criterion, the claimant taxpayer may appeal the decision to the Tax Court, which constitutes the final administrative level for challenging tax resolutions. Further, the Tax Court's resolutions may be contested in the judiciary.

Tax grouping

Peruvian tax law does not contain any provision for consolidated taxation ('group of companies' doctrine). Indeed, as a general rule, all assets, losses, dividends, interest, etc., may not move within a tax group, but should remain within the particular company that originated them. In the case of reorganisation processes (such as mergers and spin-offs), however, it is possible to move tax credits and rights (but not deductible losses) from one company to another, subject to some specific requirements and restrictions.

ii Other relevant taxes

In addition to income tax, the following taxes should be taken into account when performing business activities in Peru.

Value added tax (VAT)

VAT at a rate of 18 per cent 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.

Payroll taxes

Companies must pay 9 per cent upon wages and salaries for Peru's health and social security system.

An approximate 13 per cent withholding on wages and salaries paid to employees is mandatory for AFP, the private pension fund.

A special retirement fund for mining and metallurgical workers shall be financed by 0.5 per cent of the mining companies' annual net income before income tax, and 0.5 per cent of the workers' gross monthly salary.

All wages, salaries, remunerations, bonuses, awards and, in general, compensations received by employees are subject to taxation with a progressive scale of 8, 14, 17, 20 and 30 per cent for resident employees, and with a flat 30 per cent rate for non-resident employees.

Temporary tax on net assets

This tax is levied at a rate of 0.4 per cent on the value of companies' assets exceeding an approximate amount of US$300,000. Temporary tax on net assets that has been effectively paid can be offset against income tax obligations for that fiscal year or reimbursed, at the taxpayer's option.

Tax on financial transactions

A 0.005 per cent tax on financial transactions is imposed on credits and debits in local banking accounts.

Customs duties

In addition to VAT, the import of goods is subject to the payment of customs duties, which may vary from zero up to 11 per cent, depending on the nature of the imported goods.