How To Take Advantage of the Peru 1.5% Business Tax
Embarking on a business venture in Peru? Before diving into this dynamic market, it’s important to grasp the intricacies of Peru’s income tax system, and you can benefit from it. Peru offers an excellent 1.5% business tax rate for eligible businesses, and here is how you can take advantage of it as a Peruvian business owner.
Peruvian Corporate Tax Basics
For companies established in Peru, the Peruvian corporate tax amounts for 29.50% of the net annual income, calculated from January 1st to December 31st. However, the Peruvian tax legislation provides alternatives through other tax regimes, catering to the diverse landscape of businesses operating in the country.
SME Tax System
One notable alternative is the recently introduced SME Tax System, a great solution for small and medium-sized enterprises with a net annual income not exceeding 1700 UIT (approximately USD 2,050,000). Under this system, businesses enjoy a progressive tax rate of 10% on their net annual income for the first 15 UIT (USD 18,000) and a 29.50% tax rate for any excess.
Special 1.5% Income Tax System
Entrepreneurs will find the Special Income Tax System particularly appealing, with a monthly tax rate of 1.5% on gross revenue, provided the net annual income remains below PEN 525,000 (USD 156,250) as of 2024. This attractive rate serves as a powerful incentive for businesses operating within this income bracket, fostering a supportive fiscal environment.
Global Income Considerations
It’s noteworthy that companies established in Peru face taxation not only on domestic income but also on income generated abroad. However, taxes paid abroad can be credited, offering a degree of flexibility for businesses with international operations. Foreign companies with branches not established in Peru are solely taxed by Peruvian authorities on their Peruvian income.
Key Sources of Peruvian Income
Peruvian law identifies specific sources of income subject to taxation, encompassing various economic activities within the country. These sources include income from property, goods, capital, dividends, personal work, digital services, and technical assistance, each carrying its respective tax rate.
Obligations and Compliance
Peruvian taxpayers are obligated to meet various monthly and annual obligations, including filing tax returns, maintaining accurate accounts, and issuing invoices. Monthly payments, calculated based on the previous year’s performance, provide businesses with flexibility, especially under the SME Tax System.
If the monthly tax payments do not meet the full years annual tax payment, the remained of the tax will be carried over and paid into the next calendar year.
Conclusion
As you navigate Peru’s business landscape, understanding the nuances of the tax system becomes paramount. The country’s commitment to offering alternatives such as the SME Tax System and the Special Income Tax System, coupled with the notable 1.5% tax rate for businesses earning under 500,000 soles annually, positions Peru as an appealing destination for entrepreneurs seeking both fiscal advantages and a conducive environment for business growth.
If you are seeking a business structure in Peru, reach out to us and we would be happy to help you obtain residency or a business structure in Peru.
Learn More
If you want to learn more about becoming a digital nomad, creating a business you are passionate about, global taxes, and entrepreneurship, check out the links below:
The Work, Wealth and Travel Podcast
Also Read
Ultimate Guide to Obtaining Residency in Paraguay in 2023
