Published on and written by Cyril Jarnias
Relocating to Peru, buying an apartment in Lima, or renting a property in Cusco involves more than just choosing a neighborhood or negotiating the rent. For an expat, understanding how income tax and real estate taxation work is crucial, both for the daily budget and for medium- or long-term investment plans. The Peruvian system is less complex than it seems, provided you clearly distinguish three key concepts: tax residence, the nature of income, and the difference between national tax and municipal taxes.
Understanding Tax Residence in Peru
In Peru, personal taxation is not based on nationality but on the concept of “tax domicile”. Thus, a foreigner can become a tax resident without being a resident in the strict migratory sense, and conversely, remain non‑domiciled even with a long-term visa, as long as they do not meet the physical presence criterion.
A person is considered tax-domiciled in Peru if they spend more than 183 days there within a 12-month period; these days do not need to be consecutive. The arrival day and departure day count as days of presence, but not as days of absence. Furthermore, temporary absences of less than 183 days do not interrupt the continuity of residence.
The change of status does not happen in real time, but on the January 1st of the following year. An expat who crosses the 183-day threshold in July will be considered non‑domiciled until December 31, then a tax resident from the following January 1st. Similarly, a person loses their resident status after more than 183 days of absence within a 12-month period; this loss is generally effective at the start of the following year, except in special cases where the person formally acquires residence in another country (long-term visa, employment contract of at least one year approved by a Peruvian consulate).
This distinction directly impacts the scope of taxation: a tax resident is taxable in Peru on their worldwide income, while a non‑resident pays tax only on their Peruvian-source income (salaries for work performed in Peru, rental income from a local property, capital gains on real estate, etc.).
The system follows the calendar year, from January 1 to December 31, with an annual tax return generally required between March and April of the following year, via Form 710 with the tax authority SUNAT (Superintendencia Nacional de Aduanas y de Administración Tributaria).
Expat Income Tax: Resident Brackets and Non‑Resident Rates
Peruvian personal income tax is based on a progressive scale, expressed not in fixed amounts but in “Unidad Impositiva Tributaria” (UIT). The UIT is a reference unit revised annually by the government: it was worth 4,950 PEN in 2023, 5,150 PEN in 2024, and is set to reach 5,500 PEN in 2026.
Resident Scale: Progression Based on UIT
For domiciled individuals, employment income (salaries, independent income) and foreign-source income are subject to a five-bracket scale. Its structure remains stable, with only the UIT value changing over the years.
| Annual Income Bracket (in UIT) | Applicable Rate |
|---|---|
| Up to 5 UIT | 8 % |
| Over 5 to 20 UIT | 14 % |
| Over 20 to 35 UIT | 17 % |
| Over 35 to 45 UIT | 20 % |
| Over 45 UIT | 30 % |
Before applying this scale, residents benefit from an automatic deduction equivalent to 7 UIT on their employment income (salaries or independent income). They may, under certain conditions, deduct up to 3 additional UITs corresponding to certain expenses paid in Peru: rent, fees to independent professionals, hotel and restaurant bills when regulations allow.
To illustrate the calculation mechanism with recent UIT values, we can show the applicable deductions and the tax scale, all expressed in the local currency of the country in question. This provides a concrete visualization of the interaction between the standard deduction and the tax bracket.
| Tax Year | Value of one UIT (PEN) | 7 UIT (base deduction) | 3 UIT (deductible expenses) |
|---|---|---|---|
| 2019 | 4,200 | 29,400 | 12,600 |
| 2023 | 4,950 | 34,650 | 14,850 |
| 2024 | 5,150 | 36,050 | 15,450 |
| 2026 | 5,500 | 38,500 | 16,500 |
For an expat who becomes a resident, this means that tax in practice only applies to the portion of income exceeding the equivalent of 7 UIT, or even 10 UIT if eligible expenses are sufficient and properly documented.
Non‑Residents: A Flat 30% Rate on Peruvian Source Income
Non‑domiciled individuals are subject to a much simpler but heavier treatment: a flat rate of 30% applied to gross Peruvian-source income. This rate applies to salaries paid for services performed in the country, to independent contractor fees, as well as to a large part of capital income when specific rules do not provide for another rate.
Effective withholding rate for some non-resident independent contractors after a standard 20% deduction.
For a newly arrived expat, the period of non‑domiciliation (before having accumulated 183 days within 12 months and until the following December 31) can therefore result in particularly heavy taxation if compensation is paid from Peru.
The Five Categories of Taxable Income: Salaries, Independent, Rent, Capital Gains…
Peruvian tax law classifies income into five categories. This classification determines the applicable rates, certain deductions, and the method of declaration.
The first category includes income from the rental or subletting of real estate and certain movable property. A key point for owners: when the declared rent is too low, the law imposes a minimum presumed income corresponding to 6% of the municipal value (autovalúo) of the property. In other words, an apartment officially valued at 400,000 PEN generates at least 24,000 PEN of taxable income per year, even if the rent charged is lower.
For domiciled individuals, capital gains on securities are taxed at an effective rate of approximately 5% (via a calculation applying 6.25% on 80% of the gross gain). Dividends distributed by Peruvian companies are subject to a 5% withholding at source, applicable to both residents and non-residents.
The third category covers professional income exercised in the form of a business (commerce, industry, services). This is practically the domain of corporate income tax, with a standard rate of 29.5% on net profit. This is the regime that also applies, for example, to a company like an S.A.C. (Sociedad Anónima Cerrada) created by an expat to conduct their business.
The fourth category concerns independent income received directly by the individual (consultants, doctors, lawyers, trainers, company directors remunerated by “dietas”, etc.). For residents, it is subject to the progressive scale after the 7 UIT deduction, plus a standard deduction of 20% of gross fees, capped at 24 UIT. Independent contractors must issue electronic receipts and, beyond a certain monthly threshold (e.g., 3,609 PEN), make an 8% advance tax payment.
This section details income from salaried employment and its taxation method.
Salaries, bonuses, commissions, gratuities, and profit sharing.
Taxed according to the progressive scale, after a standard deduction of 7 UIT and, if applicable, an additional 3 UIT for personal expenses.
Special Treatment for Expat Salaried Employees
For an expat employee, many benefits provided by the employer can be fully exempt, provided they are stipulated in an employment contract formally approved by the labor authorities. This applies notably to housing and food for the employee and family during the first three months in Peru, round-trip airfare, vacation trips to the home country, as well as moving and furniture transport expenses at the beginning and end of the contract.
Maintenance and fuel costs for a vehicle provided by the company for primarily professional use can also escape taxation in the hands of the employee. This regime of targeted exemptions is an important lever for contract negotiation for assigned executives.
Real Estate Income and Capital Gains: What an Expat Owner Needs to Know
Peruvian real estate taxation rests on three pillars: tax on rental income, tax on capital gains upon resale, and annual municipal taxes (property tax) or occasional taxes (transfer tax).
Renting a Property in Peru: 5% Rate for Residents, Withholding for Non‑Residents
For domiciled individuals, rental income (first category) benefits from a simplified regime: an effective rate of 5% on the taxable amount. In practice, the tax authority applies a nominal rate of 6.25% on a net base corresponding to 80% of the rent, which amounts to 5% of the gross. In some cases, a small amount of income may be exempt, but the structuring rule remains this flat rate.
For non‑residents, the situation is more nuanced in the sources, but the basic scheme is one of withholding at source. General texts provide for a rate of 30% on gross income, with no possible deduction. However, more recent practices and interpretations mention a final withholding of 5% in the case of rent received by non‑residents when the tenant or a professional manager makes the withholding directly. As these technical points are subject to evolving administrative interpretations, an expat owner would do well to rely on local advice to secure the applicable rate and declaration method.
For an expat renting a property to a relative below market price, the tax authority can calculate a theoretical rental income. This calculation is based on a constant rule: a minimum presumed income equivalent to 6% of the property’s municipal value.
Selling a Property: Tax on Real Estate Capital Gains
When reselling real estate, the regime differs depending on the seller’s status and the property’s use.
For a resident, the capital gain realized on a property that is not the primary residence is subject to a final 5% tax. The taxable base corresponds, in principle, to the difference between the sale price and the acquisition cost increased by justified improvement expenses. An important exemption applies to properties acquired before January 1, 2004, as well as to the sale of the primary residence (casa habitación) when the property has been used exclusively for housing for at least two years.
For a non‑resident, several sources mention two regimes: on one hand, a rate of 30% on the gross transfer price as Peruvian-source income (old and very penalizing approach); on the other hand, a rate of 5% on the net capital gain, subject to certain formalities with SUNAT. In practice, a non‑resident seller must often obtain a Peruvian tax ID number (RUC) and certify their acquisition price (devolución del capital invertido) to prevent the tax from applying to the entire sale price. Again, support from a local notary and tax advisor is almost indispensable.
When real estate sales become frequent (for example, three sales or more in the same year), the tax authority may reclassify the activity as real estate trading falling under the third category, taxed at the full 29.5% rate as corporate profit.
French Tax Administration
Property Tax (Impuesto Predial): A Progressive Municipal Tax
The Peruvian property tax, called Impuesto Predial, is levied by municipalities on the cadastral value of properties located in their territory. This self-assessment value (autovalúo) is often between 60 and 80% of the market value. The owner as of January 1st of the year is liable for the tax for the entire year, even if they later sell the property.
The scale is progressive, expressed in UIT, but usually presented in monetary value for clarity. Taking the UIT value at 5,150 PEN, the rate structure is as follows:
| Property Value Bracket | Property Tax Rate |
|---|---|
| Up to 15 UIT | 0.2 % |
| Over 15 to 60 UIT | 0.6 % |
| Over 60 UIT | 1.0 % |
Converting these brackets to local currency with a UIT at 5,150 PEN yields:
| Value Bracket (PEN) | Applied Rate |
|---|---|
| 0 to 77,250 (≈ 15 UIT) | 0.2 % |
| 77,250 to 309,000 (≈ 15 to 60 UIT) | 0.6 % |
| Over 309,000 (over 60 UIT) | 1.0 % |
The tax is generally paid in four quarterly installments, with deadlines at the end of February, May, August, and November. Many municipalities offer discounts in the order of 5 to 15% for early payment of the full year’s tax. Partial exemptions are provided for retirees using the property as their primary residence, for example on the first 50 UIT of value, as well as for certain persons with disabilities.
Municipal arbitrios can amount to several thousand soles per year for a medium-sized apartment in a central district of Lima.
Transfer Tax (Alcabala): 3% for the Buyer Beyond 10 UIT
When purchasing real estate, the buyer must pay a transfer tax called Impuesto de Alcabala. The rate is 3% applied to the property value, after deducting an exemption equivalent to 10 UIT.
Taking a UIT at 5,150 PEN, the exemption represents 51,500 PEN. In practice, the taxable base is the higher of the two amounts between the sale price and the cadastral value, minus these 10 UIT.
The Alcabala does not apply to first-time sales by a developer within the framework of new building construction, where VAT (18%) already applies to the construction part; in this case, the Alcabala only taxes the land value. Donations, however, may be subject to Alcabala, except when they are exempt advances of inheritance (anticipos de legítima).
For an expat buyer, this tax is in addition to notary fees (generally 0.5 to 1% of the price), registration fees with the public registry (SUNARP), and lawyer and real estate agent fees. In total, acquisition costs on the buyer’s side often range between 4.5 and 5.5% of the property value, while the seller mainly bears the agency commission (approximately 3 to 5%), bringing the overall “round‑trip cost” to 7.5–10.5%.
Other Levies: VAT, Social Contributions, and Absence of Wealth Taxes
Beyond income tax and real estate taxes, Peruvian taxation presents other important aspects for an expat, notably VAT, social contributions, and the absence of certain taxes common in other countries.
The VAT (IGV) is set at 18%, composed of 16% general sales tax and 2% municipal promotion tax. It applies to sales of goods, provision of services, construction contracts, the first sale of a building by a developer, and imports. An expat entrepreneur must register with SUNAT, collect this VAT on their invoices, and deduct VAT paid on their own professional purchases.
The employer pays 9% of gross compensation to EsSalud for health coverage. The employee contributes approximately 13% of their salary towards their pension, choosing between the public ONP or a private AFP, via withholding at source. There is no specific contribution for unemployment.
Finally, Peru does not have a wealth tax, nor inheritance or gift taxes. Gratuitous transfers of assets between individuals are not considered taxable income, even though real estate donations may remain subject to the Alcabala tax. This setup is particularly interesting for expats wishing to transfer assets without an additional tax layer, even though Peruvian civil inheritance law, based on the forced heirship reserve, limits testamentary flexibility.
Double Taxation and Tax Treaties: A Partial Safety Net
An expat receiving income in multiple countries quickly faces the risk of double taxation. Peru has signed a limited number of bilateral tax treaties, mainly with regional partners and a few OECD countries: Brazil, Canada, Chile, Japan, Korea, Mexico, Portugal, Switzerland, as well as with Andean Community countries (Bolivia, Colombia, Ecuador) via Decision 578.
These agreements allow, depending on the case, for reduced withholding at source on dividends, interest, or royalties, or for reserving taxation to a single state for certain types of income (e.g., public pensions or business profits without a permanent establishment). They also provide mechanisms for the amicable resolution of disputes (mutual agreement procedure) and non‑discrimination clauses.
Peru has also joined the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and signed the OECD’s Multilateral Instrument (MLI) to incorporate BEPS standards into its treaties. The MLI, which becomes effective for Peru starting in 2026, will modify certain provisions of existing treaties, particularly on preventing treaty abuse and improving the mutual agreement procedure.
For Peruvian tax residents with foreign-source income, tax paid abroad entitles them to a tax credit in Peru. This credit is limited to the lower of the foreign tax paid and the theoretical Peruvian tax calculated on that income (according to the taxpayer’s average rate). Furthermore, income from Andean Community countries receives preferential treatment: it is generally excluded from the taxable base in Peru to avoid any double taxation.
For U.S. nationals, the situation is particular: there is neither a comprehensive tax treaty nor a social security agreement (totalization) between the United States and Peru. Citizens and green card holders remain liable for U.S. tax on their worldwide income, even if they have lived in Lima or Arequipa for years. They can mitigate double taxation via the Foreign Earned Income Exclusion and the Foreign Tax Credit, but will, in the absence of a totalization agreement, have to pay U.S. self‑employment tax on their independent income, alongside any potential Peruvian contributions.
Declarative Obligations, Audits, and Legal Security
The practical functioning of the system relies on a combination of self‑assessment and withholding at source. Employers calculate and pay employees’ income tax monthly, along with social contributions. Independent contractors and companies must make monthly advance income tax payments, based on a percentage of turnover or a coefficient calculated from the last closed fiscal year.
Resident individuals must file their annual return (Form 710) within the deadlines set each year by SUNAT, often spread over several days depending on the tax identification number (RUC). Individuals whose only income is a salary fully subject to withholding at source may be exempt from filing in some cases.
Delays in filing or paying tax returns result in fines and late payment interest. Starting in 2024, the interest rate is aligned with the legal interest rate, replacing the traditional rate of about 0.03% per day. Furthermore, the tax authority has varying deadlines to conduct an audit: 4 years if a return was filed, 6 years in case of no return filed, and up to 10 years if withholdings at source were not remitted to the Treasury.
SUNAT has extensive audit powers, boosted by automatic exchange of financial information under the Common Reporting Standard (OECD CRS). Legislation includes a General Anti‑Avoidance Rule (GAAR) allowing the reclassification of arrangements primarily intended to reduce tax without sufficient economic justification, as well as transfer pricing and Controlled Foreign Company (CFC) rules to tax passive income housed in offshore entities controlled by Peruvian residents.
In real estate matters, municipalities can impose penalties and interest for non‑payment of property tax or arbitrios. After about twelve months of arrears, they can even initiate foreclosure procedures. To avoid this and update tax records, new owners must absolutely declare the property to the municipality (alta municipal).
What This Means in Practice for an Expat
Ultimately, Peruvian taxation, particularly regarding income tax and property tax, presents a paradoxical face for an expat: the mechanisms are relatively simple, rates on real estate (5% on rent and capital gains for a resident, 0.2 to 1% property tax) remain moderate, but periods of non‑residence are hit by high gross rates (30% on many types of income) and coordination with the home country’s tax system can be tricky, especially in the absence of a bilateral treaty.
For an expat employee, optimization mainly lies in the employment contract. It is advantageous to include exempt benefits, such as housing coverage, airfare for the start and end of assignment, moving expenses, or a company car if the position requires it. This reduces the taxable base and, once resident status is acquired, allows full benefit from the deductions in tax units (UIT).
For a real estate investor, Peru offers an environment legally open to foreigners, attractive rental yields, and, from a tax perspective, a fairly competitive triptych: 5% withholding on rental income for residents, 5% on capital gains outside the primary residence, and a low property tax relative to property value. However, vigilance is still required regarding the Alcabala tax, VAT on new purchases, and the obligation to register with SUNAT, or even obtain an RUC, even in the absence of migratory residence.
For an entrepreneur, the combination of corporate income tax (29.5%), VAT (18%), social contributions, and anti‑avoidance rules requires thoughtful structuring, especially for international activities or intra‑group services. Tax treaties, although useful for securing such structures, are still few compared to other jurisdictions.
Ultimately, the key for an expat is to plan ahead: determine when they will become a tax resident, map their income sources (salaries, dividends, rent, capital gains), measure the impact of the UIT-based scales, and incorporate property tax and transfer tax into their real estate investment calculations. Well understood, the Peruvian tax framework allows for a comfortable relocation and reasonable optimization, without resorting to complex structures. The condition remains to inform oneself in advance and secure procedures with SUNAT and the relevant municipal authorities.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
