Peru has a complex tax system that can be challenging for expats to navigate. In this article, we will explain how the taxation system works in Peru and what expats need to know about taxes in the country.
Taxation System in Peru
Peru operates a worldwide tax system, which means that residents are taxed on their worldwide income. Non-residents are only taxed on their Peruvian-sourced income. The tax year in Peru runs from January 1st to December 31st.
Double Taxation Agreements
Peru has signed double taxation agreements with several countries, including the United States, the United Kingdom, and Canada. These agreements aim to avoid double taxation on income earned in both Peru and the other country. They also provide relief from withholding taxes on dividends, interest, and royalties.
Main Taxes for Expats
Peru has a progressive income tax system with rates ranging from 0% to 30%. The income tax rates and thresholds are updated annually. Expats who are resident in Peru for less than 183 days in a tax year are subject to a flat rate of 30% on their Peruvian-sourced income.
Social Security Contributions
Employers and employees are required to make social security contributions in Peru. The employer‚Äôs contribution is 9% of the employee‚Äôs salary, while the employee‚Äôs contribution is 13% of their salary.
Value Added Tax (VAT)
Peru imposes a value-added tax (VAT) on the sale of goods and services in the country. The standard VAT rate is 18%, but some goods and services are subject to a reduced rate or are exempt from VAT.
Peru imposes a wealth tax on individuals with a net worth of over 7 million Peruvian soles (approximately $1.8 million USD). The tax rate is 0.8% on the excess over the threshold.
Special Tax Breaks for Expats
Peru offers several tax incentives to attract foreign investors and expats to the country. For example, qualified investors can receive a 5-year exemption from income tax on their dividends and capital gains. There are also tax exemptions for certain industries, such as mining and hydrocarbons.
Filing a Tax Return in Peru
Expats who are resident in Peru for tax purposes are required to file a tax return if their income exceeds a certain threshold. The deadline for filing a tax return in Peru is typically in March or April of the following year. Expats can file their tax returns online or by visiting a tax office in person.
Tax Exit Procedures
Expats who are leaving Peru to move abroad need to follow certain tax exit procedures. Firstly, they need to notify the relevant authorities of their departure and provide details of their new address abroad. They should also settle any outstanding tax liabilities before leaving Peru.
Peru has a complex tax system, but expats can navigate it by understanding the main taxes, special tax breaks, and filing requirements. Expats who are resident in Peru for tax purposes should be aware of income tax, social security contributions, VAT, and the wealth tax. Peru offers several tax incentives for foreign investors and expats, but it‚Äôs important to understand the eligibility criteria and conditions. Expats who are leaving Peru to move abroad should follow the tax exit procedures and settle any outstanding tax liabilities before leaving the country. By understanding the taxation system in Peru, expats can ensure they are complying with their tax obligations and maximizing their tax benefits in the country.