Peru: Living There - Tax Issues

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Living There

Peruvian citizens residing in Peru are taxed on a worldwide basis. Foreign nationals are taxed only on their Peruvian-sourced income and they can elect resident status after living in Peru for six months. After residing in Peru for two years, foreign nationals are also taxed on a worldwide income basis.

The taxable income is calculated under five separate categories, according to the nature of the income. The income categories are as follows:

• First-category income is derived from lease or sublease of real property or movable goods
• Second-category income is derived from capital investments, dividends and royalties;
• Third-category income is business income from a sole proprietorship;
• Fourth-category income is for professional services rendered;
• Fifth-category income arises from dependent employment.

For the first and fourth categories of income, 20% of the relevant gross income can be deducted as notional expenses. Consequently, only 80% of the gross income is taxable under these categories. For second-category income, 10% of the gross income can be deducted (effectively, the taxable income is 90% of the gross income).

A taxpayer earning fourth and fifth categories of income can deduct an amount equal to 7 UIT or approximately US$7,616. No other deductions are allowed.

An official established tax unit (Unidad Impositiva Tributaria or UIT) is used to determine the tax liability. The UIT is a benchmark figure established to maintain the taxes, deductions, etc. at constant proportions to income. The UIT value for 2007 is 3,450 Peruvian Nuevo Soles (PEN), which is equivalent to about USD1,088.

Tax rates for domiciled individuals are determined using a three-bracket progressive scale, as shown below:

Rental Income

Rental income obtained from the lease or sublease of real property is considered first-category income. Rental income earned by nonresidents is taxed at progressive rates.

Peru - more data and information

• Lawyers (attorneys) with property law practices in Peru

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