Peru

Employment expenses

Peruvian legislation allows companies to pay directly and deduct for tax purpose expenses incurred by executives, such as expenses for moving, travel, automobile under certain circumstances, among others. Allowed deductions for the employer (the company) are the costs required to produce income and maintain its source.

Personal deductions

Charitable contributions

Donations to entities and dependencies of the government and non-lucrative entities whose purpose engages at least one of the following may deduct the amount of the donation, up to a limit of 10% of the net taxable income: beneficence, social assistance, education, culture, science, art, literature, sports, health, and nation inheritance, provided that these entities are qualified by the Economy and Finance Ministry.

Donations not included in the preceding paragraph are not deductible.

The tax administration is required to control at least 10% of the entities registered in the registry of entities exempt from the income tax, according to the Income Tax Law Regulations, and also no less than 10% of the entities qualified as donations recipients in the previous year.

Standard deductions

Domiciled individuals who receive income from employment or professional income are entitled to a total deduction equivalent to seven tax units from their gross income. Individuals who receive both employment and professional income can only deduct the fixed amount once.

Domiciled individuals with income other than remuneration are entitled to certain deductions in accordance with the type of income obtained. In the case of rentals, they can deduct 20% of the income. In the case of royalty payments, they can deduct 20% of gross royalties received. Independent professionals can deduct 20% of gross revenues, up to a limit of 24 tax units, plus an annual amount of seven tax units.

Employees and independent professionals will be allowed to deduct three additional tax units for expenses such as mortgage interest, rent paid to a landlord, social security paid for housekeepers, and some expenses paid to independent professional services, provided that certain requirements are met. The deduction will be applied through the 2017 annual tax return resulting in tax refund for the individual.

From 1 January 2019 and onwards, individuals will not be able to expense mortgage interest anymore. Employees and independent professionals will be allowed to deduct 30% of all expenses paid to independent professional services (except those derived from performing directorial services, trustees, and agents, among others).

Furthermore, an additional 15% of expenses derived from hotels, bars, and restaurants will be deductible for income tax purposes. Due to recent government dispositions, during fiscal years 2021 and 2022, these taxpayers will be allowed to deduct 25% for such concepts.

In addition, during fiscal years 2021 and 2022, employees and independent professionals will be able to deduct 50% of the expenses related to tour guide services, tourism of adventure, ecotourism and similar services, and artisan services, provided by independent professionals. Additionally, for such years, taxpayers will also be able to deduct 25% of the expenses provided by companies related to travel and tourism agency services, operating agencies related to tourism, tourism guide services, thermal tourism centre services and similar services, artisan activities or similar activities, and adventure tourism services, ecotourism, or similar services. 

Losses

Capital losses derived from the transfer of shares will be offset against the annual income derived from the transfer of shares only in the fiscal year in which the income or the loss took place.