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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.
American expats who are living abroad in Peru have additional tax responsibilities. Not only do you have to file your US tax return — 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.
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.
Here’s how to know your residency status when living in Peru.
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 2022 and lived there for 183 days or more, you’re considered a resident as of January 1, 2023, but you would file your 2022 income taxes as a non-resident.
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.
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.
Peru taxes individuals based on income through a bracketed tax rate system, similar to the US. But Peru uses tax units, instead of just income, to determine your tax rate. The first seven tax units are exempt from income tax (provided you meet the required conditions). For 2022, 1 tax unit is worth 4,600 PEN. In addition, you can deduct three additional tax units (roughly 13,800 PEN) on qualifying expenses like leasing a property, certain professional services, and even hotel and restaurant costs.
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.
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.
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.
No. Although the US has tax treaties with many countries, Peru is not one of them.
No, Peru and the US do not have a totalization agreement.
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.
Hopefully, this guide has answered your questions about the tax requirements for US expats living in Peru. If you’re still confused about part of the expat tax process, don’t worry. Taxes are complicated, and we’re here to help.