Peru sales tax
Peru sales tax

Peru Sales Tax: A Guide to Understanding VAT (IGV)

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Specialist in Finance, Business, and International Strategic Leadership en  | Web |  + posts

Luis Fuentes, a finance specialist and international business expert, serves as Corporate Affairs Director at Alligare International LLC and leads Estudio Fuentes. With over 10 years of experience, he excels in financial advisory, business internationalization, and strategic corporate solutions, helping companies in Latin America, Europe, and Asia expand globally.

Understand Peru sales tax with our comprehensive guide. Learn about rates, regulations, and compliance to ensure smooth business operations in Peru.

Table of Contents

Key Insights: What You Need to Know

Setting up operations in Peru or understanding its sales tax system requires clarity about its VAT (Value Added Tax), locally known as IGV. For instance, a small Peruvian retailer I worked with struggled initially with VAT compliance due to limited knowledge about deductible expenses. After implementing a streamlined invoicing process, they not only reduced their tax liabilities but also reinvested savings to expand their product offerings.

Here are the key takeaways from this guide:

  1. VAT Breakdown: Peru’s VAT is 18%, composed of 16% General Sales Tax (IGV) and 2% Municipal Promotion Tax.

  2. Who Pays VAT: Businesses, professionals, and consumers all play a role, but specific exemptions and rules apply.

  3. Exemptions and Exports: Certain sectors, such as agriculture and education, enjoy exemptions, while exports benefit from a 0% VAT rate.

  4. Comparison in Latin America: Peru’s VAT is competitive, with a flat rate and straightforward policies compared to neighboring countries.

  5. Practical Steps: Learn how to calculate, comply with, and optimize VAT obligations for your business success.

What is the VAT (IGV) in Peru?

Peru’s VAT rate is 18%. This is composed of a 16% General Sales Tax (IGV) and a 2% Municipal Promotion Tax.

The General Sales Tax (IGV) in Peru is a value-added tax applied to the consumption of most goods and services. It accounts for a significant portion of government revenue and plays a vital role in funding public services such as infrastructure, healthcare, and education.

Breakdown of VAT in Peru

Here’s a breakdown of how VAT works:

  1. 16% General Sales Tax (IGV): Applied universally to taxable transactions.

  2. 2% Municipal Promotion Tax: Dedicated to funding local municipal projects and services.

Exports, however, are zero-rated, which means no VAT applies, offering significant advantages to businesses involved in international trade.

Example: How VAT Works in Practice

If a product is sold for S/ 500 (approximately $135 USD):

  • VAT (18%): S/ 90 (approximately $24 USD)

  • Total cost to the consumer: S/ 590 (approximately $159 USD)

For businesses, input VAT paid during production (e.g., S/ 40) can be deducted, leaving only S/ 50 payable to SUNAT. From my experience, businesses often overlook the importance of maintaining detailed purchase invoices to maximize these deductions.

Entity-Specific Insights

Here are some insights:

  1. Agricultural Businesses: Fresh produce is VAT-exempt, reducing costs for farmers and encouraging investment in rural areas.

  2. Educational Services: Private institutions must ensure proper documentation to qualify for exemptions under Peru’s VAT laws.

Story from Practice

A small textiles exporter I worked with initially struggled to track input VAT for their operations. After implementing better accounting software, they not only achieved compliance but also recovered substantial amounts through deductions, ultimately reinvesting in their export capabilities.

What are the applicable VAT rates?

The standard VAT rate in Peru is 18%. This flat rate applies to most goods, services, and imports.

Examples of VAT Application

  1. Retail Goods: A television priced at S/ 1,000 (approximately $270 USD) incurs:

    • VAT (18%): S/ 180 (approximately $49 USD)

    • Total price: S/ 1,180 (approximately $319 USD)

  2. Services: A consulting service invoiced at S/ 2,000 (approximately $540 USD) incurs:

    • VAT (18%): S/ 360 (approximately $97 USD)

    • Total invoice: S/ 2,360 (approximately $637 USD)

  3. Exports: Exported goods and services are zero-rated, meaning no VAT is charged, making Peruvian products highly competitive in global markets.

Tools to Calculate VAT

To simplify VAT calculations, businesses can use:

  1. SUNAT Virtual: Visit SUNAT’s official platform for filing and calculating taxes.

  2. Third-party calculators: Tools like Avalara or QuickBooks for automated VAT computations.

Who must pay VAT in Peru?

VAT in Peru is paid by four main groups:

  1. Businesses and Professionals

  2. Consumers

  3. Foreign Entities

  4. Exempt Groups

In my experience consulting Peruvian businesses, many SMEs struggle with VAT compliance due to a lack of understanding about deductions. Ensuring proper records and seeking professional advice can significantly reduce errors and penalties.

Businesses and Professionals

Here are some cases:

  • Registered Entities (RUC Holders): Companies must register with SUNAT and collect VAT on sales. They also report VAT monthly to comply with tax obligations. I have seen businesses struggle with late filing penalties—a situation easily avoided with automated tax systems.

  • Freelancers and Independent Contractors: Professionals providing taxable services must charge VAT if they hold a RUC.

Consumers

End consumers ultimately bear the cost of VAT, as it’s embedded in the final price of goods and services.

Foreign Entities

Foreign businesses with a fiscal presence in Peru or engaging in taxable transactions (e.g., consulting) may need to comply with VAT obligations.

Exempt Groups

Here are some exempt groups:

  • Non-profit organizations providing public services.

  • Small businesses under simplified tax regimes, such as RUS (Régimen Único Simplificado).

Exceptions and Exports: What are the exemptions to VAT?

Certain goods and services in Peru are VAT-exempt(agriculture, education and healthcare and financial services) , and exports benefit from a 0% VAT rate.

Exempt Goods and Services

Here are some exempt goods and services from VAT rate:

  1. Agriculture: Fresh fruits, vegetables, and grains are exempt to support local farmers.

  2. Education and Healthcare: Schools, universities, and certified medical providers are VAT-free.

  3. Financial Services: Loan interests and certain banking operations are excluded from VAT.

Exempt Goods and Services

Exports of goods and services benefit from a 0% VAT rate, enhancing Peru’s competitiveness in global trade. For instance, Peru’s textile exports saw a 15% increase in 2024, largely due to the zero-rated VAT policy that enables businesses to offer competitive pricing internationally. This data highlights how such fiscal measures directly support export-driven industries. For instance, an exporter of alpaca textiles pays no VAT on international sales.

Statistics Supporting Export Growth

Here are some statistics supporting export growth:

  1. Exports grew by 12% in 2024, with textiles and agricultural products leading the way, according to the Peruvian Ministry of Economy and Finance.

  2. Zero-rated VAT policies play a critical role in sustaining this growth.

Examples of VAT Application in Peru

Detailed examples illustrating how VAT is calculated and applied to various goods and services in Peru:

Product/Service Base Price (S/) VAT (18%) Total Price (S/)
Television 1,000 180 1,180
Consulting Service 2,000 360 2,360
Exported Goods 5,000 0 5,000

FAQ´s about "Peru Sales Tax"

Here are some answers to frequently asked questions on the topic:

How much is VAT on a typical purchase?

VAT is 18% of the purchase price. For example, if an item costs S/ 1,000 (approximately $270 USD), the VAT would be S/ 180 (approximately $49 USD). 

Are exports subject to VAT in Peru?

No, exports are zero-rated. Businesses exporting goods or services do not pay VAT, making Peruvian exports more competitive internationally. (Source: Export Tax Regulations)

Can tourists claim VAT refunds in Peru?

No, Peru generally does not offer VAT refunds to tourists. However, tax exemptions may apply to certain hotel stays with proper documentation. (Source: Tourism Tax Information)

Conclusion

With over a decade of experience advising businesses in Latin America, the author specializes in tax compliance and international trade. Having worked closely with Peruvian exporters and SMEs, their insights bridge the gap between policy and practice, empowering businesses to thrive in the region.

You can contact me (Luis Fuentes) and Estudio Fuentes if you want to speak with an expert on this topic.

We´re Peru’s leading business magazine, bringing you the latest and most important news.

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