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.
As of 2019, legal persons and legal entities are required to identify, obtain, update, declare, retain, and provide information about their ultimate beneficiaries and, in this regard, they have to submit the Ultimate Beneficiary informative affidavit.
The Peruvian tax administration established that any legal person considered as a principal taxpayer in Peru had until 23 December 2019 to submit the mentioned affidavit. Furthermore, in March 2022, the Peruvian tax administration provided a new schedule stating that:
- Legal persons that in 2021 generated a net taxable income greater than 1,000 tax units must file the affidavit within the deadline to file the monthly tax return of May 2022.
- Legal persons that in 2021 generated a net taxable income between 500 tax units and 1,000 tax units must file the affidavit within the deadline to file the monthly tax return of August 2022.
- Legal persons that in 2022 generated a net taxable income greater than 300 tax units and were not required to file this affidavit before must file the affidavit within the deadline to file the monthly tax return of May 2023.
- Entities registered in the Taxpayers' Identification Registry (RUC) by 31 December 2023 must file this affidavit within the deadline to file the monthly tax return of December 2023.
The identification of these beneficiaries is based on the following criteria: (i) the natural person who directly or indirectly owns at least 10% of the legal entity’s shares, (ii) a natural person who, acting individually or with others as a decision unit, has power to designate or remove the majority of the administrative, management, or supervisory bodies, or has decision-making power in the financial, operational, and/or commercial agreements that are adopted, or (iii) when there is no possibility to identify a person by criteria (i) and (ii), the ultimate beneficiary of the legal entity that should be reported is the person within the company with the highest administrative position.
Local income taxes
There are no local or provincial taxes on income in Peru.