VAT, GST and Sales Tax in Peru

Summary

Name of the tax Value-added tax (VAT)
Local name Impuesto General a las Ventas
Date introduced 1-Aug-91
Trading bloc membership Andean Community
Administered by General Tax and Customs Administration (http://www.sunat.gob.pe)
VAT rates
Standard 18%
Other Zero-rated and exempt
VAT number format 11-digit taxpayer identification number (RUC) used in all communications with Tax and Customs Administration
VAT return periods Monthly
Thresholds
Registration None
Recovery of VAT by non-established businesses  No

Scope of the tax

VAT applies to the following transactions:

  • The sale of movable property in Peru
  • The provision of services in Peru
  • The use of services in Peru rendered by nonresidents
  • Construction contracts
  • The first sale of real property by the builder
  • The importation of goods from outside Peru, regardless of the status of the importer

Who is liable

A VAT taxpayer is any business entity that performs any VAT taxable transaction in the course of doing business in Peru. In addition, individuals are liable to VAT if they perform such activities on a “habitual” basis. The Peruvian VAT law does not define “habitual” for transactions performed by individuals; the nature, amount and frequency of the operations must be considered.

No registration threshold applies. The definition of a VAT tax­payer applies to a permanent establishment of a foreign business in Peru.

Group registration. VAT grouping is not allowed under the Peruvian VAT law. Legal entities that are closely connected must register for VAT individually.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in Peru. A non-estab­lished business must register for VAT if it performs any of the VAT taxable transactions, such as the sale of movable goods or the supply of services in Peru.

Registration procedures. In order to be considered a VAT tax­payer, a tax identification number (Registro Unico de Contribuyente, or RUC) must be obtained. To do so, the tax rep­resentative must complete the Form 2119 and provide an identi­fication document, as well as the company’s electronic record, provided by the Peruvian Public Registry and any document to accredit its residence. The registration procedure for companies can only be carried out in the tax administration’s offices; it has no cost, and the RUC is provided immediately. Online registra­tion is available for individuals.

Late-registration penalties. If taxpayers do not follow the regis­tration procedures, there is a penalty of one Tax Reference Unit (UIT), which is approximately USD1,200.

Tax representatives. Any person may be appointed by the com­pany’s legal representative to represent the taxpayer before the tax administration. For that purpose, the company’s legal repre­sentative must be registered before the tax administration.

Reverse charge. Applicable for the import of goods and the use of services in Peru.

Digital economy. There are no specific rules related to the taxation of the digital economy.

Deregistration. Not applicable.

VAT rates

The term “taxable supplies” refers to supplies of goods and the provision or use of services that are subject to VAT. The term “exempt supplies” refers to supplies of goods and services that are not subject to VAT. Exempt supplies do not give rise to a right of input tax deduction (see Section F).

The standard VAT rate is 18% and applies to all taxable transac­tions unless a specific measure provides for an exemption.

Examples of exempt supplies of goods and services

  • Fruits and vegetables
  • Educational services
  • Public transportation
  • Exports of goods
  • Technical assistance, marketing, information technology, insur­ance

Option to tax for exempt supplies. It is possible to waive exemp­tion of VAT for the sale and importation of goods listed in Appendix I of the Peruvian VAT Law (which principally includes some animals, fruits and vegetables), but not for the provision of services. In this regard, the taxpayer must communicate its deci­sion to the tax administration and comply with all the require­ments and conditions laid down. This request comprises all the exempt goods, not specific categories or goods. After the tax administration is notified, it has 45 days to approve or deny the request. Should the request be approved, the VAT will be appli­cable as of the first day of the month after the request is approved. The election to waive exemption is definitive.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” The following are the rules for determining the basic time of supply for goods and services:

  • Sale of movable property within the country: when the goods are delivered or when the invoice (or payment voucher) is issued or should be issued, whichever is earlier
  • Provision of services in the country: when the invoice (or pay­ment voucher) is issued or should be issued or when the payment is made, whichever is earlier
  • Use of services in the country rendered by nonresidents: when the invoice (or payment voucher) is registered in the domiciled entity’s accounting records or when the payment is made, whichever is earlier
  • Construction contracts: when the invoice (or payment voucher) is issued or should be issued or when the payment is totally or partially made, whichever is earlier
  • First sale of real property sold by the builder: when the payment is either totally or partially made

The following are the rules for determining the time of issuing invoices:

  • Sale of movable property within the country: when the goods are delivered or when the payment is made, whichever is earlier
  • Provision of services in the country: when the service has con­cluded, when the payment is partially or totally made or when the deadline established for the payment of the services has expired, whichever is earliest
  • Construction contracts: when the payment is totally or partially made
  • First sale of real property sold by the builder: when the payment is totally or partially made

Imported goods. The time of supply for the import of goods is either when goods clear customs or when the goods leave a duty suspension regime. In the case of import of intangible goods, the time of supply is when the payment is either totally or partially made or when the invoice (or payment voucher) is registered in the domiciled entity’s accounting records, whichever is earlier.

Recovery of VAT by taxable persons

For all of the transactions listed in Section B, VAT payable is determined on a monthly basis by deducting from the gross tax (output VAT) the corresponding VAT credit (input VAT).

VAT paid on imports of goods or the use of services in the coun­try must be paid directly to the tax authorities. For such supplies, VAT payable equals the gross tax and no deduction for VAT credit is allowed. After the VAT is paid, it may be used as VAT credit. As a result, a financial cost may be incurred for the time period beginning with the date of payment and ending on the date on which the VAT credit is used to offset the gross tax on the trans­actions listed above.

The gross tax corresponding to each taxable operation is deter­mined by applying the VAT rate of 18% to the tax base (for example, the value of goods and services or the value of con­struction contracts). The VAT credit consists of the VAT sepa­rately itemized in the payment voucher (or corresponding document) relating to any of the activities listed in Section B.

The following are requirements for the use of the VAT credit:

  • The acquisition cost is allowed as an expense or cost for income tax purposes, and the acquisition is intended for operations in which the obligation to pay the VAT will arise.
  • The tax must be stated separately in the payment voucher, and the payment voucher must be completed according to applica­ble law and registered in the purchase book appropriately.

For nonresident purchasers of goods or services, the VAT paid may not be used as a credit. However, under Peruvian VAT law, reimbursement of the VAT paid when acquiring goods is allowed if the purchaser is a nonresident tourist who remains within Peru between 5 and 60 calendar days, and the acquired goods are taken abroad by the nonresident tourist. The nonresident tourist must request the reimbursement when leaving the country and satisfy all requirements in the VAT law and its regulations.

Exporters are reimbursed for any VAT paid on the acquisition of goods and services. Exporters can apply such reimbursement as a credit to offset VAT or income tax liabilities. Any balance may be refunded by the tax administration.

Early recovery VAT system. The early recovery VAT system allows an early recovery of the VAT credit with respect to acquisi­tions of goods and services, construction contracts, importations and other transactions without having to wait to recover such amount from a client when the corresponding invoice for sales of goods, services or construction contracts, including VAT, is issued to the client.

This regime provides relief of the financial costs (cost of money) with respect to projects if the projects have a significant preop­erative stage and if advance invoices transferring the VAT burden cannot be issued periodically to the client.

The law provides for a general and enhanced early recovery sys­tem for enterprises performing productive activities.

Under the general system, which applies to all productive com­panies in a preoperative stage, the VAT paid on the acquisition of capital goods is reimbursed through negotiable credit notes.

The enhanced system is restricted to companies that satisfy the following conditions:

  • They enter into investment contracts with the Peruvian govern­ment.
  • They make a minimum investment commitment of USD5 mil­lion to projects with a preoperative stage of at least two years.

Under the enhanced system, VAT paid on construction contracts and on the acquisition of new capital goods and intermediate goods and services can be recovered on a monthly basis through negotiable credit notes.

The use of one system does not preclude using the other for dif­ferent items.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for making taxable supplies or that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). If expenditure relates to both business and nonbusiness activities, only the por­tion related to the business may be recovered. In addition, input tax may not be recovered for some items of business expenditure.

Examples of items for which input tax is nondeductible

  • Personal expenses

Examples of items for which input tax is deductible (if related to a taxable business use)

  • Advertising and sponsorship
  • Business gifts, if the value does not exceed 0.5% of the taxpay­er’s annual gross revenues, with a maximum limit of 40 tax units (approximately USD48,000)
  • Business entertainment expenses, if the value does not exceed 0.5% of the taxpayer’s annual gross revenues, with a maximum limit of 40 tax units (approximately USD48,000)
  • Mobile phones
  • Parking
  • Fuel
  • Taxis
  • Travel expenses

Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. VAT paid on the acqui­sition of capital goods may be used as a tax credit (input tax). A tax credit arising from the acquisition of capital goods may be offset with debit VAT (output tax) in the month in which capital goods are acquired.

Refunds. If the amount of input VAT (credit VAT) recoverable in a month exceeds the amount of output VAT (debit VAT) payable, the excess credit may be carried forward to offset output tax in the following tax period.

Partial exemption. If a taxable person makes both taxable and nontaxable transactions, it may not deduct input VAT in full from output VAT. It may deduct only the amount of input VAT related to the goods and services used in taxable transactions. For this purpose, VAT payers shall maintain separate accounts for taxable and nontaxable transactions, as well as for the services and goods purchased for conducting such transactions. If it is not possible, the amount of input VAT subject to deduction in each reporting period must be prorated based on a procedure established by the Regulations of the VAT Law.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

Peru does not generally refund VAT incurred by foreign busi­nesses unless they have a permanent establishment or business established in Peru. Foreign businesses established in Peru recover VAT in the same manner as all other VAT-registered businesses.

Invoicing

VAT invoices and credit notes. A VAT taxpayer must generally provide a VAT invoice for all taxable supplies made, including exports. A VAT invoice is necessary to support a claim for input tax credit.

A VAT credit note may be used to reduce the VAT charged on a supply of goods and services in certain circumstances (for instance, for rebates, trade discounts, bonuses, returned goods or errant charges). A credit note must refer to the VAT invoice for the original transaction and contain the same basic information.

The use of electronic invoices, credit notes and debit notes is required for taxpayers appointed by the tax administration. Other taxpayers may voluntarily use electronic invoices, credit notes and debit notes, provided that they comply with certain condi­tions.

Exports. Exported goods and services are exempt from Peruvian VAT.

For a service to qualify as an export, it must be included in Article 33 or Appendix V of the Peruvian VAT Law. Appendix V (which includes consulting, insurance, financing and marketing services, as well as the supply of technical assistance) can be modified by a Supreme Decree countersigned by the Ministry of Economy. For exports of goods, customs documents must provide evidence that the goods have left the country. Exporters may recover VAT paid on the acquisition of goods and services. Exporters may apply to be reimbursed for VAT paid through credit notes. Credit notes may be used to offset either output VAT or income tax lia­bilities.

Foreign-currency invoices. If a VAT invoice is issued in a foreign currency, the value must be converted to Peruvian nuevo sol, which is the Peruvian currency, using the sales exchange rate in force on the date of the transaction.

VAT returns and payment

VAT returns. VAT returns must be submitted monthly. Taxpayers must fulfill their tax obligations between the 7th business day and the 16th business day of the month following the date on which the tax obligation arises. The exact date for payment depends on the Tax Terms Schedule, which is approved annually by the Peruvian tax authorities. The Tax Terms Schedule indicates the due date for taxpayers based on their tax identification number (RUC).

Return liabilities must be paid in Peruvian nuevo sol.

Special schemes. Not applicable.

Electronic filing and archiving. VAT returns should be submitted monthly using the Virtual Program No. 00621 (http://www2. sunat.gob.pe/pdt/pdtdown/independientes/independientes.htm). Taxpayers use the electronic account known as “CLAVE SOL” (http://www.sunat.gob.pe/) to submit returns. Once the RUC is obtained, the tax administration provides each taxpayer the ID and password of CLAVE SOL.

Annual returns. Not applicable.

VAT withholding systems. VAT withholding systems must be applied in certain transactions (supply of certain goods and ser­vices). Those systems imply an advanced collection of the tax and were designed by the tax administration to prevent tax eva­sion.

Penalties

The penalty for failure to include taxable transactions in the VAT return is 50% of the omitted tax if an amount of VAT is payable. Interest is charged at a monthly rate of 1.2% on late payments or underpayments of VAT. This fine can be reduced up to 95% under certain conditions.

Many other penalties apply to failure to fulfill obligations arising under the VAT law.