• Español
  • English
Tax Reform in Peru Main Changes

Tax Reform in Peru: Main Changes

Share

Share on linkedin
Share on facebook
Share on whatsapp
Share on twitter

The government of President Pedro Castillo requested the Congress of the Republic, the delegation of extraordinary powers for 120 days to legislate on tax, financial, and economic reactivation matters to boost growth and contribute to the closing of social gaps through access to programs and services provided by the State. 

In this regard, the main changes this bill aims at will be pointed out.

What are the main tax changes proposed?

Income Tax Law

  1. Provisions on the deduction of expenses and costs to determine income tax; create a simplified income tax regime for smaller companies, among others. 
  2. The Government’s proposal consists of raising taxes on high incomes for those earning more than 300,000 soles per year, equivalent to 0.5% of taxpayers, increasing to a range between 31% and 35% as in different Latin American countries.
  3. In addition, it would also seek to raise capital gains tax rates so that gains in capital markets such as the stock market would not be taxed at 5% but even higher that could be as high as 15%, as some developed countries have been doing.

Mining Tax Regime

  1. Likewise, it is intended to change the Mining Royalty Law, the law creating the Special Mining Tax, and the law establishing the special mining tax to reflect more adequately the benefits of the mining activity and the revision of the amount effectively paid for mining royalty, special mining tax, and special mining tax for income tax purposes.
  2. The Minister of Economy and Finance, Pedro Francke, states that these changes will be made very carefully and with the advice of the International Monetary Fund (IMF) to preserve competitiveness in the main sector of the Peruvian economy.

IGV (Impuesto General a las Ventas – General Sales Tax) and ISC (Impuesto Selectivo al Consumos – Selective Consumption Tax) Law

  1. A collection mechanism would be established for “transactions performed with non-domiciled parties within the framework of the digital economy,” i.e., a tax on digital platforms, such as Netflix or other streaming television platforms, would be created.
  2. Among the proposals is also the extension of the VAT exemption applicable to the issuance of electronic money.

Among other changes

  1. The modification of the Tax Code to optimize Sunat’s auditing powers.
  2. In addition, it is proposed to change the Law to fight against evasion, formalize the economy, and amend the Municipal Taxation Law to broaden the scope of application of taxes.

What is expected by implementing these new changes?

According to the bill sent to Parliament, the purpose of the tax bill is to increase tax collection to generate more income for key sectors such as health and education to reduce existing inequalities, especially in the interior of the country. 

The Minister of Economy and Finance, Pedro Francke, pointed out that the main objective is to increase tax collection, since it is around 20% of Peru’s gross domestic product, far from the 27% of Latin America and almost half of the 40% reported by the Organization for Economic Cooperation and Development (OECD).

Meanwhile, tax evasion reaches 8% of GDP, three times what the State spends annually on health or twice the public budget for education and up to ten times the State spending on social protection programs.

In this sense, the granting of the powers to legislate is expected.

If this bill is approved, the Government would have the possibility to legislate for a term of 120 days.

Source: Abc.com 29/10/21

Noticias Relacionadas

How can we help you?

    To communicate with us you need to fill out the following form