Until August 4, 2024, the Value Added Tax Law taxed the local use of services rendered by non-domiciled persons, the taxable person being the user of the services, i.e., the legal entity domiciled in the country.
Conversely, if the user were a person or entity without business activities, the operation would only be taxed according to its regularity.
Thus, Legislative Decree 1623, enacted on August 4, 2024, amended the VAT Law regarding the local use of digital services and the import of intangible goods through the Internet to tax with the IGV (Impuesto General a las Ventas – General Sales Tax/VAT) the “natural persons without business” who use in Peru digital services provided by non-domiciled subjects and also aims to tax the import of intangible goods through the Internet without these being habitual in performing such operations.
Operations Covered
Digital Services Definition
Through Article 3 of the Legislative Decree, the VAT Law defines digital services, consistent with that established by Article 4-A of the Income Tax Law regulations. They are referred to as “services made available to the user through the Internet or any adaptation or application of the protocols, platforms, or technology employed by the Internet or any other network providing equivalent services through online accesses and is essentially automatic and not viable in the absence of information technology.”
Likewise, the following shall be considered digital services if they meet the requirements of the preceding definition:
- Access and/or online transmission of images, series, movies, music, among other digital content, through streaming services. Examples include Netflix, Disney+, Spotify, and Apple Music platforms.
- Information storage includes, for example, iCloud, Drive, Dropbox, and Google Drive.
- Access to social networks and/or the provision of content or additional functions, such as LinkedIn Premium and Facebook Marketplace.
- The service of online magazines or newspapers, such as subscriptions to exclusive content such as NTY and others.
- Remote conferencing services such as Zoom and Microsoft Teams.
- The intermediation in the supply and demand of goods or services such as Airbnb and Booking platforms.
What Are Intangible Goods Imported Through the Internet?
Likewise, Article 3 of Legislative Decree 1623 defines intangible goods exported through the Internet as “those acquired to be definitively downloaded by the acquirer through the Internet, any adaptation, or application of the protocols, platforms, or technology used by the Internet or any other network through which intangible goods are acquired and downloaded definitively.”
In this case, we have as an example the acquisition through the Internet of software, music, audiobooks, and electronic books, among others.
Taxation Criterion
The taxation criterion for IGV applies to operations rendered by a non-domiciled subject when employed or consumed in the country without requiring them to be habitual in their performance.
In this regard, Article 3 of Decree 1623 incorporated the assumptions to consider when the USER has habitual residence in the country. Thus, both in the case of digital services and for importing intangible goods, any of the following assumptions may occur:
- The internet protocol (IP) or other means of geolocation of the device providing the digital service corresponds to Peru.
- The SIM (Subscriber Identity Module) card of the mobile terminal providing the digital services corresponds to Peru.
- The digital service payment is through a card (credit or debit) or any product of a Peruvian financial system’s entity.
- The address of the natural person registered with the digital service provider is located in Peru.
Tax Collection Mechanism
Legislative Decree 1623 incorporated Chapter XII to the VAT Law, establishing the tax collection mechanism. Given that the Administration could barely identify and require individuals without a business to pay the IGV, the withholding or collection agent’s figure was established as a collection mechanism. Conversely, the collection would actually be carried out in two ways:
Route No. 1: Withholding and Collection Agents
This route consists of non-domiciled taxpayers, who must register in the RUC per the rules regulating such registration and be the withholding or collection agent.
In this regard, the Third Final Complementary Provision of Legislative Decree 1623 provides that: i) the PROVIDER or NON-domiciled taxpayer is not required to establish domicile in Peru; ii) its designated representative shall not be domiciled in Peru; and iii) its registration shall not imply the constitution of a Permanent Establishment in the country.
Route No. 2
As an accessory mechanism or way, i.e., when the previous one cannot be used because the PROVIDER or NON-domiciled subject has not RUC (Registro Único del Contribuyente – Single Taxpayer Registration/TIN), fails to pay and declare the IGV tax obligation, the amount shall be withheld or collected by the subject PAYMENT FACILITATORS.
The following are considered PAYMENT FACILITATORS:
- Financial entities and issuing companies of electronic money when paying through credit or debit cards, digital wallets, or any other product established by such entities as indicated by supreme decree.
- Operators of public telecommunications services paid for digital services.
- Other subjects indicated by supreme decree paid for importing intangible goods through the Internet or digital services.
Additional Considerations
On August 24, 2024, Supreme Decree 157-2004-EF amended the VAT Law regulation to adapt it to the amendments of Legislative Decree 1623. The main points addressed are the following:
Definition of underlying operation in intermediation platforms, the reporting regulation for using the IGV Income tax credit of individuals with business, the compensation regulation of undue or excess perceptions and withholdings paid through non-domiciled platforms, and the procedure for the non-domiciled subject to request the refund.
Likewise, on August 31, 2024, Resolution of Superintendence 000173-2024-SUNAT was published, which regulates the RUC registration of non-domiciled taxpayers as withholding or collection agents of the IGV levied on digital services.
Although the amendment to the IGV regulations and the registration regulation in the RUC of NON-domiciled subjects were enacted almost immediately, there are still pending regulations to be published by the SUNAT (Superintendencia Nacional de Aduanas y Administración Tributaria – National Superintendence of Customs and Tax Administration) and the MEF (Ministerio de Economía y Finanzas – Ministry of Economy and Finance), so we hope the issuance of the relevant regulations soon to have a clear view on the taxation of these operations.