INDIVIDUAL TAXATION

Nonresidents are taxed only on their Peruvian-sourced income. Married couples are taxed separately.

INCOME TAX (Impuesto a la Renta)

Taxable income is classified into five categories, according to the nature of income. Rules in computing taxable income depend on the income classification.

• First category: income from letting property
• Second category: investment income (capital investments, dividends and royalties)
• Third category: business income from a sole proprietorship and other income not specifically included in another category
• Fourth category: income from independent professional services
• Fifth category: employment income

Income is taxed at progressive rates. 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 2015 is PEN3,850 (US$1,132). The UIT value for 2016 is PEN3,950 (US$1,162) for 2016.

A taxpayer earning income from independent professional services (fourth category income) and employment income (fifth category income) can deduct 7 UIT; a fixed amount, which is adjusted annually. No other deductions are allowed.

RENTAL INCOME
Rental income earned by nonresidents is subject to a 30% flat rate. Nonresidents are not entitled to any deductions.

The annual rent from leased property in general may not be less than 6% of the value of the property established for the purposes of local taxes.

VALUE ADDED TAX (Impuesto General a las Ventas)

Generally, leasing properties in Peru is liable to VAT at 18%. 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.

CAPITAL GAINS
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 or market value of the property. These costs can only be deducted upon approval of the tax authorities.

MUNICIPAL SALES TAX (Impuesto de Promoción Municipal)

PROPERTY TAX

Real Estate Tax (Impuesto Predial)

Real estate tax is levied on the cadastral value of the real estate, as assessed by the government, at progressive rates. 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 2016 is PEN3,950 (US$1,162). The UIT value for 2017 is PEN4,050 (US$1,191).

Real estate tax is deductible for business income tax purposes.

Net Worth Tax

Net worth tax is levied at 0.4% on the net assets of entrepreneurs exceeding PEN1 million (US$317,460). This tax may be credited against business income tax liability.