20-07-2022
Companies incorporated in Peru are subject to income tax on their worldwide income. Non-domiciled corporations and their branches, agencies or permanent establishments are only taxed on income earned in Peru.
The corporate income tax rate is 29.5% and is applied to net income. Dividends received from other legal entities with Peruvian domicile are exempt from tax. Dividends received from non-domiciled entities are taxed at the rate of 29.5%.
For purpose of determining taxable income, companies 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.
The Peruvian Income Tax Law 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 over dividends received from other Peruvian corporations). The entity distributing dividends or profits is liable for withholding tax 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. As for legal entities and legal persons not considered principal taxpayers in Peru, the deadline to submit the affidavit is still pending establishment by the Peruvian tax administration.
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.
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