Peru

Corporate - Income determination

Last reviewed - 17 July 2020

Inventory valuation

The first in first out (FIFO), average, specific-identification, retail, and normal or base-stock methods are allowed for inventory valuation. The last in first out (LIFO) method is not permitted.

Capital gains

Capital gains are taxed as ordinary income. However, capital gains derived from the sale of stock issued by a Peruvian company through the Lima Stock Exchange are taxed at a 5% rate, provided that the seller is a non-domiciled party.

An exemption has been granted as of January 2019 until December 2022 for the sale of shares performed through the Lima Stock Exchange as long as these requirements are met:

  • No more than 10% interest is transferred.
  • The stock has market presence.

Indirect transfer of Peruvian shares is also subject to income tax in Peru, provided certain requirements are met. 

Dividend income

Dividends distributed to domiciled individuals and non-domiciled taxpayers (entities or individuals) are subject to WHT. Nevertheless, dividends distributed to domiciled entities are not subject to any taxes.

If the dividends distributed correspond to earnings obtained up to fiscal year 2014, the WHT applicable will be 4.1%. If the dividends correspond to earnings obtained in fiscal years 2015 and 2016, the WHT applicable will be 6.8%. For dividends generated from fiscal year 2017 onwards, the WHT applicable will be 5%.

Interest income

The PITL establishes that the WHT rate on interest arising from loans for non-resident corporations is 4.99%, provided the following requirements are met:

  • In case of cash loans, the entrance into Peru of the foreign currency must be duly accredited.
  • The credit must not accrue an effective interest that surpasses the preferential rate prevailing in the place where it comes from, plus three points.
  • If the credit proceeds from the United States or from Europe, the company shall apply the preferential rate to the London Interbank Offered Rate (LIBOR) plus four points.
  • The loan must be destined to finance business or taxable activities.
  • The parties involved must not qualify as related parties for tax purposes.

If the loan does not comply with these requirements, a WHT rate of 30% would be applicable.

Royalty income

Royalties paid to non-domiciled parties are subject to a 30% withholding rate, to the extent that the goods or rights generating royalties are economically used in the country or the royalties are paid by a domiciled taxpayer.

Foreign income

A Peruvian corporation is taxed on Peruvian and foreign-source income. For active income of foreign source, the company must pay taxes in the fiscal year in which the earned income is accrued. For passive income, the company must pay taxes in the fiscal year in which the income is perceived.