Peru Taxes for US Expats: A Comprehensive Guide
- Living as an Expat in Peru
- Peru at a Glance
- US Expat Taxes in Peru
- Who Has to File Taxes in Peru?
- Who Qualifies as a Tax Resident in Peru?
- Income Tax in Peru
- Other Tax Situations in Peru
- Do the US and Peru have a Tax Treaty?
- Does Peru Have a Totalization Agreement with the US?
- What Tax Forms Do Americans Living in Peru Have to File?
- Credits & Deductions Available to Expats Living in Peru
- Navigating Tax Compliance for US Expats in Peru
Living as an Expat in Peru
Peru has over 33.6 million people living in the country and approximately 100,000+ expats. Best known as the home to the centuries-old stone city Machu Picchu and its subtropical temperatures, Peru is full of history and famous cuisines. With a low cost of living and a beautiful backdrop, it’s an excellent place for US expats to settle down. And if you’re one of them, figuring out your Peru taxes for US expats is essential to keep you tax-compliant in both countries.
Calculating your tax liability can feel overwhelming, but it doesn’t have to be. We’ll walk you through everything you need to know about expat taxes in Peru in this guide.
Peru at a Glance
- Primary Tax Form for Residents: Formulario 710 – Declaración Jurada Anual del Impuesto a la Renta
- Tax Year: Calendar year (January 1st to December 31st)
- Tax Deadline: April 15
- Currency: Peruvian Sol
- Population: Approximately 32 million
- Number of US Expats: Estimated 20,000
- Capital City: Lima
- Primary Language: Spanish
- Tax Treaty: No
- Totalization Agreement: No
US Expat Taxes in Peru
American expats who are living abroad in Peru have additional tax responsibilities. Not only do you have to file your US tax return, but you also have to file your Peru tax return. While taxes may seem complicated enough when filing in one country, let alone two, there are some tax breaks like the Foreign Earned Income Exclusion and Foreign Tax Credit you can claim when filing your US taxes to reduce your tax burden. We’ll walk you through these credits later on in the guide.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
Who Has to File Taxes in Peru?
Everyone living in Peru must file a personal tax return, whether they’re a country resident or a non-resident. Different types of income are taxed depending on your residency status, so it’s essential to understand where you fall.
Residents of Peru are taxed on domestic and foreign-earned income, while non-residents are only taxed on Peruvian-earned income.
Who Qualifies as a Tax Resident in Peru?
Here’s how to know your residency status when living in Peru.
Peru Resident Qualifications
You’re considered a resident of Peru if you live in the country for more than 183 days during a particular calendar year. These changes take effect on January 1 of each year.
So, if you moved to Peru in 2023 and lived there for 183 days or more, you’re considered a resident as of January 1, 2024, but you would file your 2023 income taxes as a non-resident.
Non-resident Qualifications in Peru
If you just moved to Peru or lived there for less than 183 days out of the calendar year, you’re likely considered a non-resident. Your foreign-earned income is not subject to Peruvian tax. This means you’ll only be taxed on any income you earn in Peru.
Income Tax in Peru
The amount you pay in income tax in Peru also varies depending on your residency. If you’re a resident or domiciled, you’ll pay the standard income tax rate. Non-residents, or non-domiciled workers, pay a flat rate.
Resident Tax Rates in Peru
For the 2023 tax year in Peru, the income tax rates for residents are structured in brackets based on tax units (Unidad Impositiva Tributaria – UIT). Each tax bracket corresponds to a specific range of tax units, with varying tax rates:
- First Bracket: 8% tax rate on income up to 5 tax units.
- Second Bracket: 14% tax rate for income from 5 to 20 tax units.
- Third Bracket: 17% tax rate for income from 20 to 35 tax units.
- Fourth Bracket: 20% tax rate for income from 35 to 45 tax units.
- Fifth Bracket: 30% tax rate for income over 45 tax units.
For the year 2024, a tax unit (UIT) is equivalent to PEN 5,150. The first seven tax units are exempt from tax. Additionally, individuals can deduct up to three additional tax units for certain expenses, such as the lease of property, independent professional services, hotel, and restaurant expenses, subject to meeting specific requirements.
Non-resident Tax Rates in Peru
If you’re not a resident of Peru, you’ll pay a flat 30% tax rate on all Peruvian-sourced income. You are not eligible for additional deductions and tax breaks like Peruvian residents.
Other Tax Situations in Peru
If you’re self-employed in Peru, you may need to pay monthly value-added tax (VAT), depending on your business services. The rate is 18%.
Companies in Peru pay a flat rate of 29.5% on taxable worldwide company net profits.
Value-added Tax (VAT)
This is similar to sales tax in the US and is charged when you pay for certain goods or services in Peru. The VAT rate in Peru is 18% (a 16% rate for VAT and a 2% municipal promotion tax rate).
There is no wealth tax in Peru.
There is no gift or inheritance tax in Peru.
The amount you’ll pay in property tax depends on the value of the real estate asset. Property tax rates range between 0.2% and 1% in Peru.
Employees do not have to pay into Social Security, but employers contribute 9% of the employee’s compensation to this fund. However, employees must contribute to one of Peru’s two social pension funds. Employers withhold 13% from employees’ payroll to contribute to this pension.
Do the US and Peru have a Tax Treaty?
No. Although the US has tax treaties with many countries, Peru is not one of them.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.
Does Peru Have a Totalization Agreement with the US?
No, Peru and the US do not have a totalization agreement. A totalization agreement, also known as a social security agreement, is a bilateral agreement between two countries that aims to eliminate the double payment of social security taxes for workers who move between those two countries. The agreement allows workers to combine their periods of coverage in both countries to qualify for social security benefits.
In the case of Peru and the United States, since there is currently no totalization agreement in place, workers who split their careers between these two countries may be subject to double social security taxation, which can lead to a reduction in their overall retirement income.
What Tax Forms Do Americans Living in Peru Have to File?
If the only income you earn is through an employer who withholds taxes, you do not need to file a personal income tax return. However, if you have self-employment income, run your own business, or have other income streams, you likely do have to file a personal income tax return.
The Portuguese tax year is the same as the US: January 1 – December 31. If you have to file a tax return, it is generally due the first week in April.
Form 1040 is the standard tax form for US citizens and residents, and it must be filed by US expats regardless of where they live. Form 2555 is used to claim the foreign earned income exclusion, which allows expats to exclude a portion of their income from US taxes.
Credits & Deductions Available to Expats Living in Peru
US expats living in Peru may be eligible for certain tax credits and deductions that can help reduce their overall tax liability. One such benefit is the foreign tax credit, which allows expats to offset taxes paid to Peru against their US tax liability.
Expats may also be able to claim the foreign-earned income exclusion, which allows them to exclude a portion of their foreign-earned income from US taxes. Additionally, the foreign housing exclusion can be claimed to cover the cost of housing while living abroad.
Other deductions that may be available to expats include expenses related to self-employment, moving expenses, and charitable donations. It’s recommended to consult with an expat tax professional service like Greenback to ensure compliance with all applicable tax laws and take advantage of any available tax benefits.
Navigating Tax Compliance for US Expats in Peru
If you’re a US expat living in Peru and you’re unsure about the tax requirements, this guide has hopefully answered your questions. However, we understand that taxes can be complex, and you may still have doubts about certain aspects of the expat tax process.
If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.