The health crisis caused by the coronavirus outbreak has had a significant impact on people’s health and the economy. Both the health system and production system in Peru are in need of significant financial resources to cope with the considerable tax expenses which will be implemented by the State over the next few months to help reactivate the economy.
One of the ideas which has gained support is to tax big earners in the country so that they contribute to the relieve the crisis resulting from the pandemic. This is not just an idea exclusive to Peru, it is also part of the political discussion in countries such as Spain, Italy, Argentina, and Brazil.
In the case of Peru, Congress is discussing a tax on individuals with a net worth of over 400 Tax Units (UIT in Spanish), equivalent to 1.7 million soles (USD 492,000 approximately).
According to the projected Law submitted to Congress, the financial affidavit made at the start of the year by those residing in the country will be used as a reference, and the tax amount will be gradual.
The commercial value of properties and vehicles will be considered as that of 1st January of this year. In the case of shares and bonds, their value will be the last stock market prices on the last business day prior to the tax assessment. In regard to bank deposits and credits, their value will be that of 1st January in relation to the tax obligations.
The projected law will also consider collectible goods, works of art, and jewellery with a value of over 2 UIT (8,400 soles), and other financial instruments which will be established by the legal regulations. Any personal property which forms part of any National Cultural Heritage will not be included.
Article 5 of the initiative of the congresswomen Rocío Silva Santisteban and Mirtha Vásquez indicates that the tax will be in accordance with the following details:
- 1% over 400 to 700 UIT (1,680,000 to 2,940,000 soles)
- 2% over 700 to 1 000 UIT (2,940,000 to 4,200,000 soles)
- 3% over 1 000 to 1 300 UIT (4,200,000 to 5,460,000 soles)
- 4% over 1300 to 1 600 UIT (5,460.000 to 6,720,000 soles)
- 5% over 1 600 UIT (6,720,000 soles).
In regard to payment, the projected law provides that it may be “in cash, up until the last business day of February, or in instalments, in which case the Ministry of the Economy and Finance will establish in its regulations the payment means with interest rates which may not be less than those offered on the financial markets.”
Furthermore, in article 8, it instructs “the Tax Administration Department (SUNAT in Spanish) to carry out a wealth survey to record all of the information contained in the financial affidavits of those subject to this tax. This survey may include the information required for the tax assessment”.
The project also underlies that the tax will be permanent and will aim to reduce inequality, transforming the country’s tax framework.
In order to avoid this tax affecting consumers or workers, the legal initiative will exclude businesses.
Other tax measures brought in to help deal with the coronavirus pandemic crisis are in regard to the amendment of the Income Tax Law following the publication of the Legislative Decree No. 1471, which “aims to exceptionally establish regulations to assess third category income tax account payments corresponding to the months of April to July of the tax year 2020, with the option that taxpayers may reduce or suspend said payments; with the overall purpose of contributing to the reactivation of the economy and relieving the impact on the national economy following the mandatory social isolation and immobilisation enforced by the declared State of National Emergency decreed based on the severe circumstances effecting the Nation as a consequence of COVID-19”.
In this regard, the scale of the reduced taxpayer income over these months, in comparison to the income earned in previous months, will determine which means, suspension, or reduction will be applicable based on the following parameters:
In the case of the net income earned in the month is comparable to the tax year 2019
If the income from the corresponding month in the tax year 2020:
- Has decreased by over 30%, the payment to the corresponding account in said month will be suspended.
- Has decreased by up to 30%, the assessed amount, as payment to the account in accordance with the general regulations, will be multiplied by the factor 0.5846, with the resulting amount being the corresponding account payment for said month
- Has not decreased, the account payment will be made as per the general regulations.
In the case of net income not being earned in April, May, June, or July of the tax year 2019
For comparison, the largest amount of the net income earned in any of the months of the tax year 2019, or if no income was earned, the largest amount of net income earning in the months of January or February of the tax year 2020 must be considered.
In the case of no net income earned during the tax year 2019, nor during January or February of the tax year 2020
Account payments will be determined by multiplying the account payment amount, as determined in accordance with the regulations of article 85 of the Income Tax Law, by the factor 0.5846.