Peru

Foreign tax credit

Pursuant to the PITL, taxpayers may deduct the foreign income taxes paid due to their foreign-source income levied by the PITL, provided that it doesn't exceed the amount that results from applying the average rate of the taxpayer to the incomes obtained abroad, or the tax paid abroad. The amount that, for any circumstance, is not used in the corresponding fiscal year cannot be set off (or compensated) in others fiscal years or be refunded.

As of 1 January 2020, the following will be taken into account:

• Tax credit will be granted for the entire tax paid abroad that falls upon income taxed by the PITL.
• Taxes paid abroad, whatever its denomination, shall bear the characteristics of income taxes.

Taxes paid abroad should be converted to national currency (the taxpayer should apply the average purchase price exchange rate corresponding to 31 December of the fiscal year in which the income was obtained). Since 1 January 2019, specific rules on tax credits were introduced for domiciled entities. As of 2019, domiciled entities will be able to deduct the following taxes as credits (specific requirements will apply):

• Income tax paid or withheld abroad for dividends distributed ('direct credit') by non-domiciled entities ('first level entities').
• Income tax paid abroad for the performance of a business carried out by the first level entities ('indirect first level credit') in proportion of the above-mentioned dividends.
• Income tax paid abroad for the performance of a business carried out by non-domiciled entities that distribute dividends to first level entities, in proportion to such dividends ('indirect second level credit').

Special deduction regime for projects related to scientific research, technological development, and technological innovation

A special deduction regime has been established for projects related to scientific research, technological development, and technological innovation. As of 1 January 2020, taxpayers investing in these projects will be able to deduct the expenses incurred as follows:

• For taxpayers whose net income does not exceeds 2,300 tax units:
  • 240% if the project is executed directly by the taxpayer or through centres of scientific research, technological development, or technological innovation domiciled in Peru.
  • 190% if the project is executed by non-domiciled centres of scientific research, technological development, or technological innovation.
• For taxpayers whose net income exceeds 2,300 tax units:
  • 190% if the project is executed directly by the taxpayer or through centres of scientific research, technological development, or technological innovation domiciled in Peru.
  • 160% if the project is executed by non-domiciled centres of scientific research, technological development, or technological innovation.

There are some requirements that must be fulfilled in order to access the benefit.

Early recovery of VAT

Companies in a preoperative stage with large projects in process may apply for early recovery of VAT prior to commencing operations. An investment agreement with the government (the Ministry of its sector) is required.

Among other requirements, companies that carry out investment projects and generate CIT can access the regime if they make an investment commitment of not less than USD 5 million as a total investment amount, including the sum of all stages. Until 31 December 2024, companies that make an investment commitment of not less than USD 2 million can access the regime.

Stability agreement

Investors may enter into stability agreements with the government, either under the general regime or specific regimes (i.e. mining and petroleum).

Under the general regime, investors may enter into Juridical Stability Agreements that guarantee the following advantages for a ten-year period:

• Stability of the income tax regime in force at the time the agreement is entered into with respect to dividends and profit distribution.
• Stability of the Peruvian government monetary policy, according to which there is a complete absence of exchange controls, foreign currency can be freely acquired or sold at whatever exchange rate the market offers, and funds can be remitted abroad without any previous authorisation.
• Right of non-discrimination between foreign and local investors.

Under the mining regime, local mining companies may enter into stability agreements of guarantees and investment promotion measures that guarantee the following for 10, 12, or 15 years:

• Stability of the overall tax regime.
• Stability of the overall administrative regime.
• Free disposition of funds (foreign currency) arising from export operations.
• No exchange rate discrimination.
• Free trade of products.
• Stability of special regimes for tax refunds, temporary importation, etc.

Oil and gas companies may enter into stability agreements that guarantee the following for the term of the contract:

• Stability of the overall tax regime.
• Free disposition of funds (foreign currency) arising from export operations.
• Free convertibility of its funds.
• Free trade of products.

Investment promotion in the Amazon

Certain tax benefits with regard to VAT and income tax have been established for taxpayers located in the area designated by the law as the ‘Amazon’ and that are engaged in the following activities:

• Agriculture and livestock enterprises.
• Aquaculture.
• Fishing.
• Tourism.
• Manufacturing activities linked to the processing, transformation, and commercialisation of primary products originating in the activities listed above and in forest transformation, provided these products are produced in the area.

Special zones - Centres of Export, Transformation, Industry, Commercialisation, and Services (CETICOS)

CETICOS are geographical areas duly delimited with customs primary zone status and special treatment, destined to generate development poles through industrial, maquila, assembling, or storage activities. CETICOS are located in Paita, Ilo, and Matarani cities.

Agribusiness and agro-exporting activities may be performed within a CETICOS. Agribusiness activity is primarily the transformation of agro-farming products produced in the country. Such transformation must be carried out at CETICOS.

Companies engaged in industrial, maquila, or assembling activities, established or set up in the CETICOS, until 31 December 2022, are exempt from income tax, VAT, excise tax, municipal promotion tax, as well as from any other taxes, fees, contributions levied by the Central Administration, and even taxes that require express exempt regulation.

Tax reliefs enacted for fiscal year 2020 - COVID 19 Measures

During fiscal year 2020, certain reliefs for taxpayers have been issued to endure the pandemic situation. Among others, taxpayers will be able to apply any of the following tax reliefs, provided that certain conditions are met:

• Suspend the application of monthly advanced payments, or modify the coefficient applied for each month. This will depend on the comparison of the net income obtained on a determined month during fiscal year 2019 and the net income obtained in the same month in fiscal year 2020. If by such comparison it is determined that the net income has not been reduced in a determined month, then this relief will not be applicable to such month.
• Deferral regime for tax debts administered by the tax administration, fines, appealed debts, among others. The benefits from this regime are, among others, the ability to defer the tax payment up to 6 months and/or the fractionating of such tax debts up to 36 months with a lower interest rate applicable.
• Also, the tax administration will not sanction any infractions committed or detected during the National State of Emergency, including infractions committed or detected between 16 March 2020 and 18 March 2020 (date of issuance of the resolution).

Tax credit for textile and clothing companies

Taxpayers who mainly carry out activities in the textile and clothing industry will have a tax credit equivalent to 20% of the amount of annual profits reinvested during fiscal years 2024 to 2028. 

Special depreciation regime for textile and clothing companies

A special deduction regime has been established for machinery and equipment of taxpayers who mainly carry out activities in the textile and clothing industry according to the following detail:

• The machinery and equipment acquired in 2024 and 2025 may be depreciated applying a maximum rate of 33.33%.
• The machinery and equipment acquired in 2026, 2027, and 2028 may be depreciated applying a maximum rate of 20%.