PERU TAX DESKBOOK ESTUDIO OLAECHEA PREPARED BY CECILIA DELGADO

Transcription

1 LEX MUNDI INTERNATONAL TAX DESKBOOK EDITORS: John R. Barsanti, Jr. and Robert Lewis Jackson Armtrong Teasdale LLP One Metropolitan Square St Louis, Missouri PERU TAX DESKBOOK PREPARED BY CECILIA DELGADO ESTUDIO OLAECHEA Bernardo Monteagudo 201 Lima 27 Peru Updated July 2002

2 PERU INTRODUCTION The Peruvian Political Constitution states that taxes are created, modified, or discharged only by a Congress Law or by a Legislative Decree, the latter in cases in which certain attributions have been granted by the Congress to the Executive Branch of the Government. This premise is also applicable to exemptions. The Peruvian Taxation regime is regulated by several norms. However, the Tax Code is the main legislative body that rules the tax principles, nature of taxes, the tax duty, the tax system, faculties of the Tax Administration, the Tax Court, tax proceedings, and penalizations to taxpayers. These premises guide the application of norms such as the Income Tax Law, General Sales Tax Law, Municipal Tax Law, Customs Act and other tax-related norms. Taxes are classified based on the following criteria: If payment does not originate a direct benefit for the taxpayer, it is called tax. Contrarily, provided that a benefit is obtained by the taxpayer from the construction of public works or governmental activities, it is called contribution. On the other hand, if an individualized service is rendered back to the taxpayer in exchange for payment, it is called governmental fee. In regard to taxes, it can be direct or indirect. For example, Income Tax is deemed as a direct tax, while the General Sales Tax (VAT) and the Excise Tax (ISC) are indirect taxes. Among the main taxes and their sources we can find the following: 1. The General Sales and Excise Tax Law (VAT and ISC Law in Peru) regulates the VAT applied on the sale of goods or services, construction contracts and on the first sale of real estate property performed by the constructor, as well as on the importation of goods. Such Law also regulates the Excise tax (ISC), which levies the production or importation of specific goods such as cigarettes, liquors, beers, soft drinks, fuels, etc. 2. The Income Tax Law basically rules those taxes applied on revenues from capital, work or a combination of both; as well as on other types of benefits also defined as income by such law. 3. The Customs Law rules taxes applicable to the importation of goods. 4. Unitary Simplified Regime, applicable only to individuals with low income, allows a single payment of the VAT and Income Tax. 5. Extraordinary Solidarity Tax levies the income obtained by dependent and independent workers.

3 6. Solidarity Tax in favor of Children levies the expedition or renewal of passports. 7. Tax on State Owned Stock, levies the property of State Stock and is applicable to companies whose capital, directly or indirectly belongs totally to the State. 8. Social Security (ESSALUD) and ONP contributions are collected in favor of the Health Social Security and the Public Pension System, respectively. The National Tax Administration (SUNAT) and ADUANAS (regarding customs duties) collect taxes for the Main Government, while each local government collects its own taxes in their jurisdictions. SUNAT is a public independent institution of the Ministry of Economy in charge of administering and applying tax collection processes and controlling internal taxes. For these purposes, SUNAT is organized into Several Intendances, including the National Main Taxpayers Intendance, Regional Intendances, Zonal Offices and Remote Offices. A recent merger process has started by which ADUANAS will be finally absorbed by SUNAT. Both SUNAT and ADUANAS resolutions can be appealed to the Tax Court, which resolutions put an end to the administrative proceedings. INCOME TAXES AS APPLIED TO BUSINESS ENTITIES AND INDIVIDUALS Business entities cover companies, partnerships and any other form used to conduct business. The tax treatment for domiciled partnerships, limited liability companies, taxable foundations and associations as well as joint ventures, that keep independent accounting from that of the venturers; is the same as that for domiciled companies. I. COMPANIES 1. Tax return filings All Annual Income Tax Returns from companies must be filed on the first working days of April of the following year of the fiscal year being assessed which closes on December 31st. These dates vary according to a filing schedule published by the Tax Administration determining the deadlines according to the last number of the Taxpayer Registry Number (RUC).

4 Tax Returns must be filed as indicated above at the corresponding offices designated by the Peruvian Tax Administration (SUNAT), depending on the taxpayer s level of income. For example, Main Taxpayers must file their tax returns at SUNAT s offices, while Medium and Small taxpayers must file their tax returns at the regional office of their jurisdiction or are allowed to present these at authorized local banks. Companies have to make estimated Income Tax payments in advance on a monthly basis following a schedule that is in relation with the last number of the Taxpayers Registry Number (RUC). Finally, companies must pay their taxes due upon the filing of the annual income tax return by the end of March. 2. Calculation of income/profit taxes A. How is the taxable base determined? 1. What revenues are included? As a general rule, all revenues that are obtained by the company from their business activities during the fiscal year are considered income for taxation purposes. 2. What deductions are allowed? As a general rule, companies may deduct from their gross income, all expenses incurred to produce income and maintain its source. 3. What are major expenses that are not deductible? Personal expenses, Income Tax, fines and any other tax sanction, certain donations, amounts invested on infrastructure or permanent improvements on such, provisions or reserves that are not admitted as deductible by Law, intangible amortization except for those with a short lifetime, commissions paid to foreign agents in excess of the amount normally paid in their country, expenses based on invoices not fulfilling formal requirements stated in the Invoices Regulations, the General Sales Tax the Municipal Promotion Tax and the Extraordinary Solidarity Tax that levy the gratuitous transfer of property, expenses incurred in some operations connected with tax havens.

5 4. What, if anything, is included concerning national investment abroad? Companies domiciled in Peru include and compensate their revenues from their foreign source income. Only if these result in a net income, they will be added to the Peruvian source income. Net losses from a foreign source cannot be included, and cannot be compensated for income tax purposes. This procedure does not include revenues from foreign sources that are obtained from tax havens. B. What are the applicable rates? Income tax is applied on a five-category basis of which income of companies is considered third category and is generally subject to a 27% rate. There are no state, federal, regional or local income taxes. Taxation is applied on a national basis. C. How are losses handled? Regarding domiciled companies, tax losses can be carried forward for four (4) years following the year the company obtains a net income, applying these losses to the income obtained during this term. Once this period is completed, the possibility of compensating the remaining losses with profits is lost. No loss carry-backs are allowed. D. Any special transfer pricing rules OECD methods to ensure the level of comparability of the transactions performed by related parties are provided, which include sales, services and any other sort of transaction that could take place between related entities. These apply to inbound and outbound transactions entered into between domiciled entities and to those carried out between domiciled and nondomiciled entities. However, transactions carried out with entities domiciled in tax havens will not be considered for comparison purposes. These are the transactional-based methods (comparable uncontrolled price, the resale price, the cost plus) and the profit-based methods. The Tax Administration can also apply any profit-based method available according to

6 the OECD Guidelines, such as the profit-split method and the transactional net-margin method. If the comparable uncontrolled price method cannot be applied, the Tax Authority shall apply the most appropriate method in order to reflect the economic reality of the transaction under analysis. However, comparable uncontrolled price is the preferred method for fiscal purposes. Furthermore, transactions carried out with entities domiciled in tax havens are also subject to transfer pricing methods. However, in this case the Tax Authority is enabled to apply the best method in order to reflect the economic reality of the transaction. E. Consolidated returns for affiliated companies Each company must file its own income tax return. 3. Territorial Rules A. Company s residence For taxation purposes, companies are domiciled in Peru when they have been incorporated in the country. B. Is worldwide income taxed? Domiciled companies are subject to income tax on their income from worldwide sources. However, non-domiciled companies are levied with income tax on their income from Peruvian source. C. How is branch income handled? Permanent establishments of non-domiciled entities are taxed on their Peruvian source income only. Branch income of domiciled entities must be compensated with the latter's income. If said income is obtained abroad, our comments in point 2. A. 4 above will apply. D. How is controlled foreign company handled? There is no special regime for controlled foreign companies. E. Tax Credits

7 Though subject to certain limits, domiciled companies may deduct as credit income taxes paid abroad on their foreign source income. 4. Withholding Taxes A. Rates on Dividends Currently, dividends are not subject to income tax. As from January 1, 2003, the withholding tax on dividends will be 4.1%. Only dividends payable to domiciled entities are tax-exempt until they are subsequently distributed to individuals or non-domiciled entities. B. Rates on royalties The withholding tax rate on royalties is 30%. C. Rates on interests Interests from financing granted by non-domiciled entities are subject to a withholding tax rate of 4,99% provided several requirements are met; otherwise, a withholding tax rate of 30% will apply. On the other hand, interests payable by domiciled banks and financial entities, for using their credit lines abroad, are subject to a withholding tax rate of 1%. Finally, interests generated from promotional loans provided directly by international organisms or foreign intermediaries are exempt from income tax until December 31, D. Rates of withholding tax on profits realized by a foreign company. As a general rule, Peruvian source income obtained by non-domiciled entities is subject to a withholding tax of 30%. Notwithstanding, in order to determine the Peruvian source net income regarding the transfer of property of goods, titles or rights, the cost incurred in their acquisition, and improvement if any, may be deducted provided certain requirements are met. Likewise, in regard to the exploitation of goods that can be depreciated, an annual amount equivalent to the corresponding percentage of depreciation on the acquisition plus improvement costs may also be deducted. E. Other

8 Income derived from the lease of ships and aircraft is subject to a withholding tax rate of 10%. Several activities performed by non-domiciled and their permanent establishments are deemed to generate different percentages of Peruvian source net income. So, an effective rate is obtained by applying the corresponding withholding tax rate. For example, technical services performed partially abroad and partially in Peruvian territory, rendered by non-domiciled entities are deemed to generate a 40% Peruvian source net income. Thus, by applying the corresponding 30% withholding tax rate, an effective rate of 12% is obtained. II. INDIVIDUALS Domiciled individuals are taxed on their worldwide income. Non-domiciled individuals are subject to taxation only on their Peruvian source income. This non-domiciled regime may vary after six months to the domiciled regime upon request from the non-domiciled individual or will change after residing for two years in the country. 1. What tax return must be filed? A. The filing dates As well as companies, individuals must file their Annual Income Tax Returns on the first working days of April of the following year of the fiscal year being assessed which closes on December 31st. These dates vary according to a filing schedule published by the Tax Administration determining the deadlines according to the last number of the Taxpayer s Registry Number (RUC). However, individuals who do not owe any taxes are exempted from filing such Tax Return. B. Where and with whom filed Tax Returns must be filed at the corresponding offices designated by the Peruvian Tax Administration (SUNAT), depending on the taxpayer s level of income. For example, Main Taxpayers must file their tax returns at SUNAT s offices, while Medium and Small taxpayers must file their tax returns at the regional office of their jurisdiction or are allowed to present these at authorized loc al banks.

9 B. When must taxes be paid? Taxes must be paid upon the filing of the tax return. Notwithstanding, individuals earning income that classifies into the first category (i.e. from lease operations) must make Income Tax monthly advance payments and file the corresponding tax return according to a given schedule. Individuals earning income that classifies into the fourth category (i.e. from independent work) must also make monthly advance payments provided their payers do not withhold them the tax. Those who pay second category income (i.e. income from capital) and fifth category income (i.e. from dependant work) must withhold the corresponding taxes. 2. Calculation of Income Taxes A. How is the taxable base determined? (1) What revenue is included? Peruvian source revenues may fall into the following categories: - First category: income produced by leasing operations - Second category: income from other capitals - Fourth category: income from independent work - Fifth category: income from dependent work and other income from independent work expressly stated by law. The taxable base is determined deducting, from the gross income of each of the above mentioned categories, the percentages fixed by the Income Tax Law (see below). If income from more than one category is obtained, all income from different categories must be added in order to determine the global annual net income. (2) What deductions allowed? Resident individuals are allowed the following deductions: - First category: 20% of total gross income - Second category: 10% of the total gross income - Fourth category: 20% of total gross income up to a 24 UIT (Tax Reference Unit) limit. For year 2002, 1 UIT equals to S/. 3,100 or US$860 approximately.

10 (3) What exemptions are allowed? A 7 UIT exemption can be applied to the sum of fourth and fifth category incomes. (4) What major expenses are not deductible? No other deductions are allowed. B. What are the applicable rates? Income of domiciled individuals is subject to the following progressive cumulative scale: Global Net Income Rate Up to 27 UIT 15% More than 27 to 54 UIT 21% Over 54 UIT 27% Income obtained by non-domiciled individuals is subject to a 30% withholding tax. C. How are losses handled? No losses can be deducted 3. Territorial Rules Domiciled individuals are levied with Income Tax on their worldwide source income, while non-domiciled individuals are levied on their income from Peruvian source. 4. Withholding Taxes Salary obtained by non-domiciled individuals is subject to withholding tax at the source. ALL OTHER TAKES, CONTRIBUTIONS OR TRANSFER REGIMES OTHER THAN INHERITANCE AND GIFT TAXES AND LEVIES I. A. General Sales Tax In order to assess its monthly amount due, the General Sales Tax VAT paid on purchases must be deducted from the VAT charged on sales.

11 A rate of 18% is applied to the sale value (16% is revenue of the central government and the remaining 2% is local government revenue). VAT tax returns must be filed monthly and the tax due must also be paid on a monthly basis. B. Excise Tax Excise tax is applied on fuels (gas, gas-oils, diesel), alcoholic beverages, cigarettes and tobacco, beer, vehicles, gassed drinks including mineral water, gambling, chance and lottery games, raffles and other related activities. Tax rates are variable and for some items this tax is applied by charging a fix amount per unit sold. C. Real Estate Property Tax The Real Estate Property Tax is applied on the total value of real estate property owned by the same person within the same local jurisd iction. The tax base is determined on the value of the real estate property declared by the owner. The corresponding rates are applied according to a cumulative progressive scale. D. Business Licenses Operating License Fee is a local tax that must be paid upon obtaining the Operation License before the Municipality where the premises of the business are located, in order to operate an industrial, commercial or service establishment. That fee is paid once only at requirement of the license and, afterwards, it is only necessary to file a yearly form before the Municipality. Only will be necessary to pay again that fee if the activity of the company changes. Operating License Fee rate is obtained from applying a pre-established percentage ranging from 0.13% to 0.25% of the UIT (tax reference unit), depending on the nature of the business activity. E. Health Care The employer, on behalf of the employee, pays the National Health Service, ESSALUD. The withholding rate is 9% of the monthly wage. For employees of the private sector the Private Health Service (EPS) is also paid by the employer on behalf of the worker.

12 F. Pension contributions A National Pension System contribution of 13% must be paid by affiliates to the National Pension System, while a contribution of around 12.5% must be paid by Private Pension System affiliates to their own Private Pension Entity. G. Employment severance There is no unemployment insurance contribution, however a retribution that represents one full salary for each year of service is granted to employees. This is the severance payment or CTS (severance payment). The employer must pay this contribution as a deposit at a specific employer s bank account and free fund disposition is restricted according to Law. II. Registration Duties for business entities and, if relating to their information, identify whether it is a local or national regime or both for the information. A. Are there registration duties due upon the incorporation of a company? Companies must be registered before the Tax Authority (SUNAT) to obtain their taxpayer registry number (RUC). According to the RUC rules, it is necessary to be registered before SUNAT 30 days before the company plans to perform any activity that has tax consequences. This is a national regime. B. Are there registration duties due upon an increase in capital? If an increase in capital implies the issuance of shares, that issuance of shares has to be informed to SUNAT by filing a specific form within the first 10 workdays of the following month. C. Are there registration duties due upon the transfer of the company's shares? Any transfer of the company s shares has to be informed to SUNAT by filing a specific form within the first 10 workdays of the following month. D. Are there registration duties due upon a transfer of corporate assets? No. E. Is there any other registration duty due? No.

13 F. If there are registration duties due on any of the above, set out the method of determining the duty, the returns which must be filed and when, where and to whom the duties must be paid. All applicable documentation must be filed at SUNAT in the deadlines stated above. Inheritance and Gift Taxes I. Is there an inheritance or gift tax? There are no special taxes regarding inheritance or gifts. However, donations might generate tax liabilities since they imply the gratuitous transfer of goods, assets or property. OTHER MATTERS I. Are there any tax incentives granted for various matters such as research and development, investment in certain areas, etc. Peruvian tax regulations have established special regimes for investment and industries in specific regions of the country. The zones called CETICOS where it is possible to import goods tax-free to transform them, but the sale of those goods to other zones is levied with normal taxes. Also, there is a special tax regime for companies located in the Amazon region of Peru that grants lower taxes for the development of some special activities in that zone. The acquisition and importation of capital goods as well as investment in dry lands are also subject to a special tax regime. Companies entering into agreements with the Government for the exploration and exploitation of natural resources as well as mining and hydrocarbon exploration are also subject to a special tax regime. 1. Who should be contacted to determine the information? For more information on this matter, please contact Mrs. Cecilia Delgado, Mr. Gustavo Lazo, or Mr. Gilberto Ramos. II. Are there exchange control regimes?

14 There are no limitations on profit remittances abroad by foreign investment, (though, as explained above, dividends will be withheld as from January 1, 2003) nor limitations to the free possession of foreign currency by residents. III. Are there any anti-deferral regimes? There are no anti-deferral regimes. IV. Tax Treaties 1. List the countries with which there are tax treaties. This could impact the withholding taxes on various distributions and to the extent possible, they should be itemized. Currently, there are two tax treaties in force. The first one was entered into with Sweden in 1966 and became in force since The other one, a multilateral convention in force since 1972 called the 40 th Decision was conveyed under the Andean Community of Nations (CAN) regime which included five country -members: Venezuela, Colombia, Ecuador, Bolivia and Peru.

15 SWEDEN ANDEAN COMMUNITY OF NATIONS: 40 th Decision This agreement is applicable only to individuals and entities domiciled in the member countries of the CAN. Business Profits: Shipping and air transport: Dividends: Interests: Royalties: The profits of an enterprise of a State are not levied in the other State unless it carries on business in that other State through a permanent establishment. The revenues are only levied by the State in which the place of effective management of the enterprise is located. The dividends paid by a company established in a State to a beneficiary established in the other State will only be levied in the former. Interests originated in bonds, debentures or any kind of loans which are paid by a resident of a State to the resident of the other State will only be taxed in the former. Royalties paid to a resident of a State to a resident of the other State can be levied in either State provided the resident does not have a taxable presence in the other Income from entrepreneurial activities is levied in the country in which they are performed. Dividends are levied in the country where the company that distributes them is domiciled. Interests generated from loans will be levied with Income Tax in the country in which the credit was used. Credit is presumably used in the country from where interests are paid. Royalties from the utilization of intangibles in the territory of a country are subject to taxation in said country.

16 State. However, the tax imposed in said other State shall not exceed 20% of the gross amount of the royalty.

17 Income from Nonmovables Income from the right to exploit Natural Resources Capital Gains Income of any nature from nonmovables physically located in a State obtained by a resident in the other State is exempted from taxation in the latter. Royalties or other sum paid to a resident in a State for the extraction of natural resources in the other State are exempted from taxation in the former. Income will be levied only in the territory of the government in which the capital is located at the moment of the transaction. Undivided Successions When a Peruvian resident is exempted or subject to a reduction of a Swedish tax, this condition will be applicable to the undivided succession when at least one of the beneficiaries is a Peruvian resident. Official Governmental Services Salaries or similar retributions paid by a State to a citizen of this State for official governmental services performed in the other State are exempted from taxation in the latter. This is levied in the country in which non-movables are physically located. This is levied in the country that owns the natural resources. These are only levied in the country in which capital is located when sold, except for: 1. Ships, airplanes, buses and other transportation vehicles are levied in the country in which they are registered when sold; 2. Stock and other securities will be levied in the country in which they were issued.

18 Pensions and annuities Personal Services Revenues obtained by professional service and technical assistance companies Income from artistic activities or public Pensions and annuities obtained by a resident of a State from a source in the other State will only be levied in the latter. A resident of a State will not be levied with the other State s tax on the revenue obtained from its personal services rendered in the latter, provided that: a) The person remains in the other State for a period or periods that do not exceed a total of 183 days during the fiscal year. b) The services are rendered by or on behalf of a resident of that State. These dispositions are not applicable to revenue obtained by individuals for services rendered in public shows such as theatres, cinema or radio artists, musicians and athletes. Taxed in the State in which their source is located. Salaries, benefits, compensations and similar income for services rendered by employees, professionals, technicians or for general personal services, are taxable only in the territory in which these were rendered, except for: 1. Individuals that render services to a State, when done for and in behalf of this State are only levied by this same state, even if these are provided in another State. 2. The crew of airplanes, ships, buses and other transportation vehicles that participate in international traffic, are only levied in the territory where the employer is domiciled. Levied in the State in which the services are rendered. Levied in the State in which these took place

19 entertainment

20 On the other hand, two tax treaties have been negotiated with the technical commissions of Chile and Canada. However, these treaties are not in force yet.