Corporate - Deductions

Last reviewed - 22 July 2021

Acceptable payment methods

Obligations that are fulfilled through cash payments exceeding PEN 3,500 must be made via bank account deposits, wire transfers, payment orders, credit cards, non-negotiable cheques, or other means of payment provided by entities of the Peruvian financial system. Failure to use one of these payment methods when such an obligation exists will result in the disallowance of deductions for any expenses or costs for income tax purposes and the disallowance of a credit for the corresponding VAT.

Expenses derived from transactions entered into with entities resident in tax havens

Certain expenses are not tax-deductible, including expenses incurred with respect to transactions with (i) entities resident in tax havens on the list attached to the PITL regulations, (ii) PEs located in tax havens, or (iii) entities that generate revenues or income through tax havens.

Nonetheless, expenses incurred from the following transactions are excluded from the above-mentioned limitations, provided the consideration paid falls within market value:

  • Interest on loans.
  • Insurance premiums.
  • Leases of aircraft or ships.
  • Maritime freight.
  • Fees for passing through the Panama Canal.


Assets may be depreciated for tax purposes via the straight-line method, capped at the following rates, but without exceeding the amount of the financial depreciation:

Assets Depreciation rate (%)
Cattle (both labour and reproduction) and fishing nets 25
Vehicles (except trains) and any kind of ovens 20
Machines and equipment used for mining, oil and construction activities, excluding furniture, household, and office goods 20
Equipment for data processing 25
Machines and equipment acquired as of 1 January 1991 10
Other fixed assets 10

Buildings must be subject to a flat 5% depreciation rate, regardless of the financial depreciation. However, due to recent government dispositions, as from fiscal year 2021, buildings and constructions will be subject to a flat 20% depreciation rate, provided that the following requirements are met: (i) the construction has to be initiated as from 1 January 2020, and (ii) until 31 December 2022, the construction had a work progress of at least 80%.

These rules will be also applicable for taxpayers that acquire properties that comply with the above-mentioned requirements during fiscal years 2020, 2021, and 2022. Nevertheless, it would not be applicable when such property has been built totally or partially before 1 January 2020.

In addition, during fiscal years 2021 and 2022, buildings, constructions, and vehicles (except trains) that have remaining value to depreciate at the end of fiscal year 2020 and qualify as fixed assets will be depreciated with the following rates: (i) 20% annually in the case of buildings and constructions and (ii) 33.30% annually in the case of land transport vehicles. This rule will be applicable only for taxpayers dedicated to activities related to hosting, travel agencies and tourism, and restaurants, among others.

Finally, as from fiscal year 2021, the following assets will have the following depreciation rates, provided that they were acquired during fiscal year 2020 and are used for purposes of generating taxable income:

Assets Depreciation rate as from 2021 (%) 
Equipment for data processing 50
Machines and equipment 20
Transport vehicles (except trains) with technology EURO IV, Tier II, and EPA 2007 used by authorised companies that provide services related to passenger transportation and/or merchandise 33.30
Hybrid or electric transport vehicles (except trains)  50

Amortisation of intangible assets

The amortisation of property rights, trademarks, patents, and manufacturing procedures, as well as other similar intangible assets, are not deductible for income tax purposes. However, the price paid for intangible assets of a limited duration, at the taxpayer's choice, may be considered as an expense and applied to the results in a single year or amortised proportionally over a ten-year term.

The Peruvian tax administration, prior to an opinion from the corresponding technical organism, is permitted to determine the real value of those intangible assets for tax purposes when the price does not reflect the real one.

Organisational and start-up expenses

Organisation expenses, pre-operating expenses (including initial operations and further expansion of operations), and interest accrued during the pre-operating period may be expensed in the first period of operation or amortised using the straight-line method over a maximum of ten years. However, once a company has elected to recover start-up costs via the straight-line method, it may revoke such election only upon receiving approval of the tax authorities.

Interest expenses

In general terms, interest on loans and related expenses are deductible, provided they are related to the acquisition of goods or services incurred, or to be incurred, in order to obtain or produce taxable income or to maintain the source of such income.

In the case of loans entered into between related and non-related parties, the amount of interest to be deducted is limited to interest from indebtedness not exceeding 30% of the Tax EBITDA of the previous fiscal year (see Thin capitalisation in the Group taxation section).

Bad debts

Write-offs of bad debts and equitable provisions are deductible, provided that the accounts to which they belong are determined. For the provisions of bad debts, it is necessary that:

  • there is a debt due and the taxpayer can provide evidence of the financial difficulties of the debtor that could foresee a risk in the collection of the debt, and
  • the provision is registered separately in the inventory and balance book at the fiscal year closing. In this sense, a generic bad debt provision will not be deductible in the assessment of the net taxable income, nor will bad debts whose terms have not yet elapsed.

Bear in mind that the following debts are not considered bad debts:

  • Debts incurred between related parties.
  • Debts guaranteed by banks or financial companies by means of rights over real property, money deposits, or purchase-sale agreements with reservation of right of legal ownership.
  • Debts that have been subject to renewal or express extension.

Charitable contributions

Donations made to entities of the public sector, except companies, and to non-profit associations with certain purposes are deductible, provided that the receiver of the donation is duly qualified by the tax administration.

The deduction will be limited to 10% of the net income of the donor and only during the fiscal year in which it is granted (carryforward of the donation is disallowed). This means that if the donor does not obtain taxable income in the fiscal year in which the donation is made, no deduction will be available.

In addition, companies can deduct the expenses for the food they donate. This donation requires the food to no longer have commercial value and be apt for human consumption. The deduction cannot exceed 1.5% of the total sales that the donor makes.

Profit sharing

Entities with more than 20 employees, provided they obtain taxable income during the fiscal year, must distribute a percentage (5%, 8%, or 10% depending on the industry) of their profits (the basis is the tax profit of the fiscal year) among their employees. The amount of distribution for each employee depends on the effective working days during the year and annual remuneration.

Employee’s retributions and health insurance premiums

Employee’s retributions paid during a fiscal year may be deducted in such year, provided the payments are made by the employer before the term to file its annual income tax return expires. Likewise, health insurance premiums for employees, their spouses, and children are deductible.

Vehicle expenses deductions

Vehicle expenses may be deducted, provided the vehicles are essential to a company’s business activities and are continually used for such purpose. There is a limitation on the tax deductibility of car expenses used for administrative of representation purposes, depending on the amount of income generated by the company. The number of company cars assigned to directors, managers, and representatives of a company may not exceed five under any circumstances.

Fines and penalties

Fines and penalties are not deductible for income tax purposes.


Other taxes assessable on properties and activities generating taxable income are deductible for income tax purposes.

Net operating losses (NOLs)

Tax losses may be offset according to either of the following systems:

  • Against net income generated within the following four fiscal years after the year in which the loss is incurred. Any losses that are not offset within such period may not be carried forward to any future year (system A).
  • Against 50% of the net income generated in the following fiscal years after the year in which the loss was generated. Under this system, there is no time limitation for carrying forward the losses (system B).

After choosing one of the aforementioned systems, the taxpayer will not be able to change the system until the accumulated tax losses from prior fiscal years are exhausted. Losses will not be carried back to years prior to the year in which the loss is generated.

Due to recent government dispositions, by exception, taxpayers that register tax losses in fiscal year 2020 and opted to apply system A will be able to offset such tax losses within the following five fiscal years after the year in which the loss is incurred (fiscal year 2021). However, any losses that are not offset within such period may not be carried forward to any future year.

Payments to foreign affiliates

Payments in favour of non-domiciled beneficiaries may be deducted as a cost or expense in the fiscal year in which they correspond to the extent that they have been effectively paid or credited within the term established to file the annual tax return (for the year in which they were incurred). Expenses that are not deducted in the fiscal year to which they correspond will be deductible in the fiscal year in which they are effectively paid, even if they have been registered in a previous fiscal year.