Value-added tax on digital services in Peru

Christian Del Carpio

Rodrigo, Elias & Medrano Abogados, Lima

cdelcarpio@estudiorodrigo.com

Legislative Decree No 1623, enacted on 4 August 2024, has introduced significant changes to Peru’s framework on value-added tax (VAT),[1] extending its application to digital services and intangible goods acquired by Peruvian consumers[2] from foreign providers.[3] This reform addresses the expanding digital economy, imposing new tax obligations on non-resident providers and payment intermediaries, particularly financial institutions.

The details of the new Decree

Under this Decree, digital services are defined as those provided via the internet or similar technology, delivered in an automated manner and fundamentally reliant on information technology. Examples of these services include cloud storage, streaming, social networking, remote conferencing and online newspapers and magazines. The Decree further expands the scope of VAT to include intangible goods downloaded for consumption in Peru, such as software, digital content and other downloadable products.

The VAT on these services and goods is triggered when they are considered consumed within Peru. To determine the place of consumption, the Decree relies on several criteria, such as the user’s internet protocol (IP) address, the subscriber identity module (SIM) card’s country of origin, the issuing country in terms of the user’s payment method (eg, debit or credit cards) or the address an individual uses to register with the digital service provider.

The Decree designates non-resident digital service providers as VAT collection agents, requiring them to collect and remit 18 per cent of the transaction value at the time of payment by the Peruvian user. To meet these obligations, foreign providers must register with Peru’s National Customs and Tax Administration Superintendence (La Superintendencia Nacional de Aduanas y de Administración Tributaria or 'Sunat') to get a taxpayer identification number (Registro Único de Contribuyentes or RUC) and must submit monthly VAT returns, with the option to pay the tax in either the Peruvian national currency (PEN) or US dollars.

Notably, Legislative Decree No 1623 emphasises that the abovementioned registration and compliance requirements by foreign service providers will not imply the creation of a permanent establishment (PE) in Peru nor will compliance with the requirements create the need for a local address. This structure enables non-resident service providers to fulfil their Peruvian tax obligations without establishing a physical presence in the country.

If a non-resident service provider does not comply with their VAT collection obligations, the responsibility shifts to payment facilitators. These entities, including banks, digital wallets providers and other payment systems or payment agents, must collect VAT on digital services and intangible goods destined for consumption in Peru by individuals not engaged in business activities.

Conclusion

The Decree mandates that non-resident providers offering digital services or intangible goods to Peruvian consumers must begin fulfilling their tax obligations by 1 December 2024.

However, implementing this Decree effectively will require additional regulatory measures in order to specify the necessary operational details and compliance mechanisms. The Peruvian tax administration is expected to issue further guidelines to clarify critical areas, such as payment timelines, reporting standards and specific compliance procedures for foreign service providers and payment facilitators.

The successful enforcement of this Decree represents a significant step towards adapting Peru’s VAT system to the digital age, requiring collaboration from foreign service providers, local intermediaries and the tax administration to ensure compliance.