Peru Imposes VAT on Cross-Border Digital Services
Peru has introduced Legislative Decree No. 1623, which aims to tax digital services and intangible goods purchased online from non-resident providers.
Timeline
Non-resident providers must start withholding or collecting VAT (Impuesto General a las Ventas - IGV) from October 1, 2024.
Impact
Peru introduced VAT on digital services provided by non-resident businesses and on imports of intangible goods to customers (B2C) through the Internet. This means that non-resident service providers must register with Peruvian tax authorities and act as withholding agents for VAT. Non-resident businesses must file the tax declaration and remit the withheld or collected tax for each month within the first ten (10) business days of the subsequent month. The declaration and payment may be made in PEN (Peruvian Sol) or USD.
According to the decree, digital services are services that are made available to the user through the Internet or any adaptation or application of the protocols, platforms, or technology used by the Internet or any other network through which equivalent services are provided by means of online access and which are characterized by being essentially automatic and not viable in the absence of information technology.
The decree also outlines specific criteria to determine when digital services or intangible goods are considered to be consumed or used within Peru, such as through IP addresses, the Peruvian country code of the SIM card, payment methods linked to the country, or the customer's residence address.
This new tax framework aims to ensure that digital services, such as streaming platforms, online access and transmission of images, films, videos, music, and any other digital content, online storage, or remote conferencing services, along with downloadable goods like software, are properly taxed when used by Peruvian residents.
If businesses fail to comply, the responsibility shifts to the financial institutions or payment facilitators in Peru. However, non-compliance could result in penalties and additional scrutiny from tax authorities, making it crucial for affected businesses.
