Companies incorporated in Peru are considered resident in Peru for tax purposes and thus subject to a corporate income tax (CIT) rate of 29.5% on worldwide net income.
For purpose of determining taxable income, such entities are allowed to deduct expenses to the extent that they are necessary to generate or maintain the source of taxable income. Requirements, limitations, and/or caps may apply to the deduction of certain expenses (thin capitalisation rules), bad debt provisions, salaries, travel expenses, gifts, donations, penalties, etc.
As of 1 January 2019, a definition of 'accrual' was incorporated in the Peruvian Income Tax Law (PITL) (before this incorporation, accounting standards were used). Therefore, income and expenses will be deemed accrued when:
- the substantial conditions regarding the operation have taken place
- the taxpayer has the right to collect the income
- the right to collect the income is not subject to any suspensive condition, and
- adjustments due to accounting estimates are not allowed.
The PITL allows crediting for various payments against income tax, including income taxes paid in advance, amounts paid for certain other taxes, and income taxes paid in foreign tax jurisdictions, provided that the foreign country’s tax rate is not higher than the Peruvian CIT rate and the taxable income qualifies as foreign-source income for Peruvian income tax purposes.
Dividends and any other type of profit distributions are taxed at a rate of 5% upon distribution, when the distribution is made to a non-resident entity (either individuals or legal entities) and to resident individuals, or when the distribution is agreed to by the shareholders, whichever happens first (resident legal entities are not subject to withholding tax [WHT] over dividends received from other Peruvian corporations). The entity distributing dividends or profits is liable for WHT at the aforementioned rates.
Nevertheless, enterprises are subject to an additional tax rate of 5% on every amount or payment in kind that, as result of a tax audit, is construed as taxable income to the extent that it is an indirect distribution of such income that escapes further control from the tax administration, including income that has not been declared.
On the other hand, companies incorporated abroad are considered as non-domiciled in Peru for tax purposes and thus subject, in most cases, to an income tax rate of 30% over the gross Peruvian-source income. As a general rule, foreign companies are not allowed to deduct expenses and are taxed on gross income.
On 2 August 2018, an obligation for corporations to submit an informative sworn statement declaring their final beneficiary (the natural person who effectively and finally owns or controls legal entities or other legal bodies, or finally owns or controls a client or on whose behalf a transaction is made) information was established (regulations are still pending to be enacted within the next two months, which should provide further information on the matter).
Local income taxes
There are no local or provincial taxes on income in Peru.