Employers in Peru are required to comply with a variety of tax responsibilities. These obligations are designed to fund social security systems, pensions, and healthcare.

Social Security Contributions (ESSALUD)

Employers are required to contribute 9% of the employee's gross salary to fund the national social health insurance system (ESSALUD). This system provides medical coverage to workers and their families. It's worth noting that employers may be able to offset 25% of their ESSALUD contributions if they provide employees with private health insurance.

Pension Contributions

Employers have the option to choose between two systems for pension contributions:

1. National Pension System (ONP): The rate for this system is 13% of the employee's gross salary. The payment must be made by the date the employee's salary is due.
2. Private Pension System (AFP): The rate for this system is approximately 12.4% of the gross salary (this can vary slightly across AFP providers). This includes contributions for personal pension accounts, disability/survivor insurance, and AFP management fees. The payment must be made by the date the employee's salary is due.

Compensation for Time of Service (CTS)

Employers are required to provide compensation equivalent to one month's salary for every full year worked, pro-rated for partial years. The effective percentage, including interest, is typically around 9.72%. This acts as a severance provision for employees. The payment deadlines are the 15th of May and the 15th of November.

Additional Considerations

Employers in certain high-risk sectors may be required to obtain additional insurance for workplace accidents. Additionally, employers are responsible for withholding income tax from employee salaries and remitting it to the tax authorities.

In Peru, there are several types of employee tax deductions, which can be categorized into mandatory, optional, and additional deductions.

Mandatory Deductions

• Income Tax (Impuesto a la Renta): This is a progressive tax with rates ranging from 8% to 30%, depending on your income bracket.
• ESSALUD (Social Health Insurance): This mandatory contribution is 9% of the employee's gross salary and covers healthcare services offered by the public healthcare system.

Optional Deductions

• Private Pension Funds (AFP): Employees can contribute to a private pension fund (AFP) as an alternative or to supplement the public pension system (ONP). Contributions are tax-deductible up to a specific limit.
• EPS (Private Health Insurance): Employees may choose to enroll in a private health insurance system (EPS) and have contributions deducted from their salaries.

Additional Deductions

• Specific Expenses: Individuals can deduct a portion of certain expenses, including:
  • Rent (up to 30% of the annual rent)
  • Independent professional services (up to 30% of the expense)
  • Hotel, bar, and restaurant expenses (up to 15%, or 25% in 2021 and 2022)
  • Tour guide, tourism, and artisan services (up to 50% in 2021 and 2022)

These deductions have specific limits and requirements.

Eligibility and Calculation

• Eligibility: All employees earning income in Peru are subject to mandatory deductions. Eligibility for optional and specific deductions may vary based on individual circumstances.
• Calculation: Tax deductions are usually calculated as a percentage of gross salary or qualifying expenses. Your employer will usually handle these calculations automatically as part of payroll processing.

Important Note: Tax laws and regulations in Peru can change. Always refer to the official website of the Peruvian Tax Authority (SUNAT) for the most up-to-date information.

Peru's standard VAT rate is 18%, which is comprised of a 16% VAT and a 2% municipal promotion tax (Impuesto de Promoción Municipal). This rate is applicable to most services rendered or first used in the country.

Exemptions

Certain services in Peru are exempt from VAT. These include:

• Educational services
• Financial services
• Public transportation
• International freight transport
• Live events

VAT Withholding (SPOT)

There are some services that are subject to VAT withholding, also known as SPOT. This implies that a portion of VAT is withheld by the service recipient and paid directly to the tax authorities. The withholding rates are usually 4%, 10%, or 12%. Outsourcing services are a typical example of this.

Filing Procedures

Businesses registered for VAT are required to file monthly tax returns and make payments to the Peruvian Tax Authority (SUNAT). The filing is done electronically through the SUNAT Operations Online System.

In Peru, businesses involved in agriculture, irrigation, agro-export, and agro-industrial activities can benefit from a lower corporate tax rate until December 31, 2030. To qualify, companies must have a net income not exceeding 1,700 tax units (UIT) in a taxable year. The UIT is a reference amount adjusted annually by the Peruvian government. The benefit is a reduced corporate tax rate of 15% compared to the standard rate of 29.5%. Companies meeting the criteria should automatically benefit from this reduced rate when filing their corporate income tax return.

Tax Credit for Reinvestment in Agriculture

Until December 31, 2030, there is a program that incentivizes reinvestment of profits within the agricultural sector. The qualification criteria are similar to the reduced tax rate program, companies must have a net income not exceeding 1,700 UIT in a taxable year. The benefit is a tax credit of 10% on reinvested profits, up to a maximum of 70% of annual profits after tax payment. Consult with a Peruvian tax advisor for specific details on claiming this tax credit during the tax filing process.

Tax Exemption for Specific Activities in CETICOS Zones

This program, which ended on December 31, 2022, offered significant tax breaks for businesses operating within designated Special Economic Zones called CETICOS. Companies engaged in industrial, maquila (assembly), or specific agribusiness activities established within a CETICO zone were eligible. The benefit was an exemption from income tax, VAT, excise tax, and other levies for a set period. While no longer applicable, this program highlights the Peruvian government's use of Special Economic Zones to attract investment, and future initiatives may emerge.