On 4 August 2024, the Executive enacted Legislative Decree 1623, establishing a new set of rules for levying an 18% VAT on the use of digital services via online platforms and the import of intangibles via the internet by individuals. The legislative decree also implemented a mechanism through which nonresident digital services providers, or nonresident sellers of intangibles, must withhold the VAT and pay it to the Peruvian Tax Authority.

Background

Current law does not have a mechanism for individuals to pay the 18% VAT on the use of digital services via online platforms or the import of intangibles via the internet, even though those transactions are levied with VAT. Therefore, no VAT is paid when the user or importer is an individual.

Legislative Decree 1623

Taxable transactions

Under the legislative decree, the following transactions are levied with an 18% VAT, when the final user or purchaser is an individual:

1. Digital services: Defined as any service that is made available to the user through the internet, platforms or technology used by the internet and characterized as being essentially automatic (minimal human participation) and not viable in the absence of the internet. If the digital services meet the definition, the following services are considered digital services:
• The access or online transmission of images, series, movies, documentaries, short films, videos, music, and any other digital content, available through streaming technology or other technology
• The storage of information
• Access to social networks or the provision of additional content or features on those social networks
• Online magazines or newspapers
• Remote conferencing services
• Intermediation in the offer and demand of goods or services
2. Import of intangibles via internet: Defined as the acquisition of intangible goods to be downloaded permanently by the purchaser through the internet or any adaptation or application of the protocols, platforms, or technology used by the internet or any other network through which intangible goods are acquired and downloaded permanently.

The legislative decree establishes that when the taxpayer is an individual that uses the digital services via online platforms or imports intangibles via the internet, the nonresident provider or the nonresident seller will be required to withhold the VAT and pay it directly to the Peruvian Tax Authority. To pay the VAT, the nonresident provider or seller must register in the VAT Registry and obtain a Tax ID. Registering for VAT will not trigger a permanent establishment in Peru. Additionally, the nonresident provider or seller will not be required to incorporate an entity in Peru.

The nonresident provider or seller must file a VAT return and pay the tax on a monthly basis. The nonresident provider or seller must pay the VAT within 10 business days of the month following the month in which the user pays for the service or for the intangible.

The legislative decree allows the tax to be paid either in Peruvian currency (PEN) or in US dollars, under the terms and conditions to be established in future regulations.

The Ministry of Economics will publish a list of the nonresident entities that are not in compliance with the registration requirement or VAT payment. Failing to register or make the VAT payment will mean that the Peruvian bank will be responsible for the VAT payment, under the terms and conditions to be established in future regulations.

Legislative Decree 1623 will be in force once the regulations are issued. The VAT, however, is effective 1 October 2024.