On May 28th, SUNAT issued Report No. 056-2021-SUNAT/7T0000, resolving the following queries:
1. Consultation
Could private associative universities exempt from Income Tax under Article 19 of the Political Constitution of Peru be registered in the Registry of Entities Exempt from Income Tax, otherwise?
2. Analysis and legal basis
2.1. Political Constitution of Peru
According to the first paragraph of Article 19 of the Peruvian Constitution, universities, higher education institutes, and other educational centers constituted under the legislation on the subject, they are exempt from all direct and indirect taxes affecting the goods, activities, and services related to their educational and cultural purposes, whereas a special regime may be established for certain goods regarding import tariffs.
However, private educational institutions generating income qualified as profits by law may be subject to income tax.
2.2. General rule
Regarding the Income Tax treatment of private universities, the rule exempts them except for income generated by activities unrelated to their educational activities or for expenses unrelated thereto, being possible its involvement also regarding its own income from its educational and cultural purpose that qualifies as profits by law.
2.3. Difference between private corporate universities and private associative universities
The report states that, unlike private corporate universities (that do generate profits), in general, the income of private associative universities related to their educational and cultural purposes does not generate them, but surpluses (not subject to distribution or use out of the University Law nor can be distributed among its members or used by them, either directly or indirectly), except if these universities have constituted centers to produce goods and services, whose positive results qualify as profits.
2.4. According to the Income Tax Law
Article 19, section b), the first paragraph of the Income Tax Law establishes that the income of taxable foundations and non-profit associations whose articles of incorporation exclusively include one or more of the following purposes are exempt from tax until 12.31.2023: charity, social assistance, education, cultural, scientific, artistic, literary, sports, political, trade union, and/or housing; provided that their income is destined to their specific purposes in the country and not to be distributed, directly or indirectly, among the associates or parties related to them and the property is destined to any of the purposes contemplated in the said clause in its bylaws, in the event of dissolution.
3. Conclusions
Consequently, it is concluded as follows:
- The income of private associative universities is constitutionally exempt from income tax, except for income generated by activities unrelated to their educational and cultural activities or those destined to expenses not related to such activities, as well as those generated by its goods and services production centers.
- The private associative university, organized as a non-profit association, which also generates income subject to income tax, may register for the latter in the Register of Entities Exempt from Income Tax, as long as be under paragraph b) of Article 19 of the Income Tax Law.
Source: SUNAT 11/11/21