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11 December 2020

Peru repeals agribusiness preferential tax regime

On 4 December 2020, Peru enacted Law 31087, which repeals the special rules to promote agribusiness (i.e., agrarian regime) established in both Law 27360 and Urgency Decree 043-2019.

Background

In 2000, Peru enacted Law 27360, establishing the agrarian regime, which provided the following benefits to agribusiness entities:

  • 15% corporate income tax rate
  • 20% depreciation rate for investments in hydraulic infrastructure and irrigation works
  • Value-added tax (VAT) recovery during the pre-operational stage for the acquisition of capital goods, inputs, services and construction contracts incurred, provided that the pre-operative stage is less than five years

The regime was extended until 31 December 2031 by Urgency Decree No. 043-2019.

Law 31087

With the repeal of Law 27360 and Urgency Decree 043-2019, agribusiness entities will be subject to the general tax regime beginning 1 January 2021. Under that regime, agribusiness entities will be subject to:

  • A 29.5% corporate Income tax rate
  • A 10% depreciation rate on investments in hydraulic infrastructure and irrigation works

The agribusiness entities also are subject to the early VAT recovery regime, provided they meet the following requirements:

  1. The entities make an investment of at least US$5 million in any project.
  2. The pre-operative stage of the project (time incurred until the first invoice is issued for the project) is not less than two years.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Asesores S.C.R.L, Lima
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young Abogados, Latin America Business Center, Madrid
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

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Document ID: 2020-6571

 
 

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