October 28, 2022
Peru enacts regulations on temporary VAT reduction for specific hotels and restaurants
On 13 October 2022, Peru's President enacted Regulations of Law 31556 (the regulations) for the temporary VAT reduction for specific hotels and restaurants, through Supreme Decree 237-2022.
On 12 August 2022, Peru's President enacted Law 31556 establishing a reduced VAT rate of 10% (8% VAT rate plus 2% promotion municipal tax) for restaurants and hotels, in comparison with the general VAT rate of 18%. The reduced VAT rate of 10% is effective from 1 September 2022 to 31 December 2024.
To apply for the reduced VAT rate, the taxpayer must meet the following conditions:
Supreme Decree 237-2022
The regulations establish detailed rules and guidelines to be met by hotels and restaurants to qualify for the reduced VAT rate of 10%. The main measures are:
Annual sales must not exceed 1,700 Taxable Unit (approx. US$1,979,746) under the micro and small companies' regime
The annual sales limit is equivalent to the total amount resulting from the sum of the net income registered in the last 12-month VAT returns. The regulations also provide specific rules for calculating the annual net income for taxpayers under reorganization structures or those starting their business activities.
At least 70% of the total income derives from hotel and restaurant activities
In order to calculate the 70% minimum limit, the income from the sale and rendering of services of the hotel and restaurant activities must be divided by the total income obtained by the taxpayer multiplied by 100. The taxpayer will benefit from the VAT reduced rate in the month following the one where the 70% minimum limit is met.
The taxpayer must not be part of an economic group
An economic group is defined as a group of companies, regardless of their business activities, under the control of the same entity or individual. Among others, two or more companies are considered to be economically related when:
Supreme Decree 237-2022 is effective on 14 October 2022.
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 LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific