Peru: Taxes and Costs

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Rental income tax is high in Peru

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	24%	24%	24%
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Rental Income Tax (Impuesto a la Renta)

Rental income earned by nonresidents is subject to a 30% flat rate. The taxable income is 80% of the gross rent, which is irrefutably considered as net income. Nonresidents are not entitled to any other deductions.

Real Estate Equity Tax or Land Tax (Impuesto Predial)

Real estate tax is levied on the cadastral value of the real estate, as assessed by the government. The property owner is liable to pay this tax annually.

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.

The tax is calculated by applying the following progressive cumulative scale:

VAT (Impuesto General a las Ventas)

Generally, leasing properties in Peru is liable to VAT at 17%. However, if the leasing of property is not effectively connected with a trade or business, the lease transaction is then not liable to this tax.

Municipal Sales Tax (Impuesto de Promocin Municipal)

The rules regarding transactions subject to VAT also apply to municipal sales tax which is levied at a flat 2% rate.

Corporate Route

Corporate entities earning rental income are taxed at the standard corporate rate of 30%. The taxable income is computed by deducting income-generating expenses from the gross income. Other allowable deductions are: amortization of intangibles, bad debts, entertainment expenses, gifts, goodwill, interest expenses, royalties, insurance, salaries and wages of employees, board member fees, start-up expenses, social security contributions, travel expenses, promotional costs, and premiums for health insurance, and taxes levied on income-generating assets and activities.

Corporate entities earning rental income are liable to pay VAT and municipal sales tax.

Capital Gains Tax

Capital gains earned by nonresidents from selling Peruvian property, considered as investment income, are taxed at a flat rate of 30%. The taxable gain is computed by deducting the invested capital (acquisition and improvement costs) from the gross selling price. These costs can only be deducted upon approval of the tax authorities.

Corporate Route

Capital gains are considered ordinary income and are taxed at the standard 30% corporate rate.

Peru - more data and information

• Guide to buying houses and registering property sales in Peru

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