Initial VAT rate cut to 15%; rise to 17% by 2028
The Peru parliament is reviewing a bill to initially cut the existing 16% standard VAT rate (there is an additional 2% municipal rate which is not changing), with an eventual rise. The changes if agreed to the general sales tax (IGV) to promote investment, for individuals and companies in all productive sectors, with the purpose of promoting investment and boosting the national economy would be:
- 2025: 16% VAT (2% additional municipal charge)
- 2026: 15%
- 2027: 16%
- 2028: 17%
These changes would only apply to resident businesses; non-residents (or example) providing digital service to consumers could not enjoy the 15% reduced rate.
Peru has enjoyed robust growth in the past year, expecting to hit 4% GDP rise this year – amongst the top in South America. But this does follow a deep recession which led to social unrest hitting the country’s key mining sector amid growing political instability.
Peru’s 18% VAT rate
Peru’s standard VAT rate is 18%, comprising a 16% VAT and a 2% municipal promotion tax (Impuesto de Promoción Municipal). This rate applies broadly to the sale of goods, provision of services, construction contracts, and imports. Exports are zero-rated, allowing exporters to recover input VAT on related purchases.
In recent years, Peru has implemented several VAT-related reforms:
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Tourism and Hospitality Sector: To support economic recovery, a reduced VAT rate of 8% was introduced for micro and small enterprises in the hospitality sector, including hotels, restaurants, and tourist accommodations. This rate is effective until 31 December 2026, after which it will increase to 12% in 2027.
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Digital Services: As of August 2024, non-resident providers of digital services to individuals in Peru are required to register for VAT and remit the 18% tax. This measure aims to ensure tax compliance in the growing digital economy.
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Withholding Mechanisms: Peru employs systems like the SPOT (Sistema de Pago de Obligaciones Tributarias) to facilitate VAT collection. Under SPOT, certain transactions are subject to withholding rates of 4%, 10%, or 12%, which are deposited into special accounts to be used for settling tax obligations.
