PERU Law and Practice Contributed by: Alvaro Echeandía, Alfred Kossuth Wieland, Pilar Santillán Meza and Rodrigo Varillas Cueto, Thorne, Echeandia & Lema Abogados
The amount of the monthly social contribution is equivalent to 9% of the worker’s salary, and must be withheld, declared and paid by the employer to EsSalud . Particular laws might extend the social contribution obligation to other persons. Pension system This social contribution aims to provide retire - ment pensions to workers. They can choose between a private pension system called AFP (Private Pension Fund Administration), which operates with a savings and investment model, or a public system called ONP (National Pen - sion System), which operates with a trust-based system where pensions are funded from contri - butions made during the same period. In both systems, the employer is responsible for with - holding and paying the contribution to the cor - responding entity. In the ONP system, the worker’s contribution is equivalent to 13% of their salary. In the AFP system, the worker’s mandatory contribution amounts to 10% of their salary plus 3.5%–4% of the salary for commissions and insurance pre - miums. 5.2 Taxes Applicable to Businesses Corporate Income Tax (CIT) Companies incorporated in Peru are subject to CIT on their worldwide income. To determine the tax basis, the taxpayer might deduct from the Peruvian source income the costs and expenses allowed by the Peruvian income tax law and add their foreign net source income. The tax year coincides with the calendar year. The tax rate under the General Income Tax Regime is 29.5%. This regime requires monthly advance payments equivalent to 1.5% of the taxpayer’s monthly net income or to the amount
that results from a co-efficient determined under specific rules, whichever is higher. VAT Value added tax (VAT) – so-called general sales tax (IGV) in Peru – is an indirect tax applied to the sale of goods and services within the territory. VAT taxpayers are Peruvian companies and the tax rate is 18% (16% for VAT and 2% for munici - pal promotion tax), which should be paid and declared monthly before SUNAT. The taxpayer determines its tax liability by subtracting input credit from output tax. Substantial and formal requirements apply for the deduction of input VAT from purchases of goods and services. Exports of goods and services are exempted from VAT, under certain conditions. In this case, a right to obtain a cash flow reimbursement of input VAT can be exercised, called “balance in favour of the exporter”. Anticipated recovery of input VAT regimes are also available under certain conditions. Excise Tax Excise tax is applied to reduce the consump - tion of taxed goods affecting the health and well-being of the consumer. This tax applies to alcoholic beverages, sugary drinks, fuel and cigarettes, among others. Rates vary depending on different variables. Financial Transaction Tax (ITF) All transactions using financial and banking enti - ties regulated by the SBS (Superintendence of Banking and Insurance) are taxed with the ITF. The applicable rate is 0.005% of the amount of the transaction, the bank being the withhold -
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