Under provisions that have been in force since 8 January 2012 (Article 33° of VAT law), only cross-border transactions which meet all of the following requirements may be considered to be an “exportation of services” and therefore not subject to Peruvian VAT.
- The service must be listed in Appendix v of VAT law. Such services include advisory services, data processing, IT services, leasing of movable goods, supply of personnel, certain financial services, telecommunications services.
- The service should be rendered for valuable consideration (capable of being evidenced by an appropriate payment receipt).
- The exporter shall be an entity domiciled in Peru.
- The user of the service shall be an entity non-domiciled in Peru.
- The services shall be used, exploited or utilized by the non-domiciled party abroad.
The domiciled provider of such services is entitled to deduct a corresponding tax credit in respect of VAT on it costs incurred in providing the services.
The law does not require that the service be rendered from Peru. However, it is important that the services is used, utilized or exploited overseas in order for it to qualify as an exportation. As there is no definition in the law for the concept of use overseas, the Tax Court, has established, at jurisprudence level, that the use, exploitation or utilization of the services by the non-domiciled entity refers to the economic use or “patrimonial advantage” that the receiver of such services must have overseas.
It should be noted that before the recent amendments, VAT law required that the service should be used, exploited or rendered “completely” overseas. As this requirement has not been retained in the new regulation, it could be interpreted that a service could qualify as an exportation if it is partly but not completely used overseas.
Finally, the amendments also removed a number of service categories from the scope of Appendix v. These included services acquired by foreign companies which are consumed within Peru and services provided by overseas establishments of Peruvian entities. Accordingly, services such as the repair and maintenance services of movable property located in Peru and portfolio investment administration services provided to overseas companies are now subject to Peruvian VAT.
When acquiring services from Peru, it is important for overseas business to bear in mind that any Peruvian VAT paid to the provider of the services may not be recoverable from the Peruvian Tax Administration thus increasing the cost of the service.