Are there limits to the application of the special 8% VAT rate?

6 June, 2024

In the COVID-19 pandemic, the Peruvian government ordered a series of measures in order to reactivate the economy. Among them, Law No. 31556 was enacted, which implemented the special and temporary VAT rate called “8% of VAT to Rescue Employment” for micro and small companies engaged in the activities of restaurants, hotels and tourist accommodations, catering services and food concessionaires, which is in force from August 13, 2022 until December 31, 2024.  

Regarding the 8% rate of IGV to Rescue Employment

This rate is applicable to individuals or legal entities that receive income, having as their main activity restaurants, hotels, tourist accommodations, catering services and food concessionaires in order to support the economic reactivation of this large economic business segment that has been damaged due to Covid-19.   

Limits for the application of the preferential rate

According to Article 2 of Law No. 31556, the taxpayer seeking to apply to the “8% rate of the IGV to Rescue Employment” must comply with the following:  

  • The taxpayer must have as its main activity restaurants, hotels, tourist accommodations, catering services and food concessionaires.  
  • The main activities represent at least 70% of its income from sales and services rendered.   
  • The taxpayer must qualify as a micro and small company affected by the IGV.  
  • The taxpayer must not form an economic group that does not meet the requirements. 
  • The taxpayer must not be economically related to other companies or economic groups, either domestic or foreign.  

Regarding the last two requirements, SUNAT has determined the scope of these requirements through Report No. 00037-2024-SUNAT.   

The Report No. 000037-2024-SUNAT/7T0000

On May 21, 2024 the Tax Administration published the referred report, where it analyzed the application of the “8% rate of the IGV to Rescue Employment” in the case that the company, complying with the requirements established in article 2 of Law No. 31556, has economic links with national or foreign companies or economic groups that also comply with such characteristics.  

The regulation is clear in stating that those taxpayers that have links with foreign national companies or economic groups will not be included within the scope of application, regardless of whether or not they comply with the requirements described.  

Although the report concludes in accordance with the regulation, the following is highlighted in the development of the report:  

  • An economic group with no economic link is within the scope of application of the “8% rate of the IGV to Rescue Employment”.  

This statement is based on the fact that article 4 of the Regulation of the MYPE Law determines that an economic group is considered to be a group of companies that are subject to the same control by a natural or legal person or by a group of natural or legal persons, while the economic link is determined when any of the 10 assumptions described in the aforementioned article is fulfilled.  

Therefore, there will be cases where there is an economic group that does not have an economic link but that as a whole must comply with the characteristics of Article 2 of Law No. 31556 in order not to be excluded from its scope of application.   

In conclusion, “the 8% VAT rate to Rescue Employment” is an attractive tax benefit for companies that, being in the restaurant, hotel and/or tourist lodging business, seek to reactivate their business. Indeed, the application of this benefit has limits and compliance with them is mandatory, so hiring a tax and accounting advisory service to have a better tax planning is essential. In this regard, in VAG Global we have the Tax Consulting area that will be able to support you in whatever you need.