A new fiscal era for the digital economy in Peru
Abigail Alayo & Gustavo Martinez
by Abigail Alayo & Gustavo Martinez
In a strategic move to reshape the digital services landscape in Peru, the government has introduced new regulations that will subject individuals to the country’s Value Added Tax (VAT) regime. Effective December 1, 2024, this legislation aims to redefine how Peruvians access and pay for digital services, including popular platforms such as streaming services.
Broadening the scope: key regulatory changes
Under Legislative Decree No. 1623, non-resident companies offering digital services to individuals in Peru, such as streaming, cloud storage, premium social networks, video conferencing, and online marketplaces, are now subject to VAT. This affects platforms including Netflix, Google Drive, LinkedIn Premium, Zoom, and Uber, among others, and will require them to ensure compliance with the new tax rules.
Impact on consumers and global businesses
The decree has two key effects: Peruvian consumers will face an 18% rise in digital service costs due to VAT, while foreign providers must register with the Unique Taxpayer Registry (RUC) in Peru and remit VAT monthly. In cases of non-compliance, Peruvian financial institutions may be empowered to withhold the tax, ensuring its collection at the source.
The case of Netflix: a harbinger of change
As one of the most popular streaming platforms in the market, Netflix will need to adjust its operations in Peru to comply with the new legislation. This will likely result in price increases for Peruvian subscribers. To determine whether a service is consumed within the country, authorities will evaluate factors such as the device’s IP address, the SIM card’s country code, the use of Peruvian payment methods, and the registered address of the user. Meeting any of these conditions will constitute a "habitual residence" for tax purposes.
Debate and challenges ahead
The introduction of this regulatory shift has sparked significant debate. Supporters contend that the new law levels the playing field for national and international companies while boosting tax revenues in a fast-growing digital sector.
Critics, however, warn that this approach may stifle digital innovation in Peru and disproportionately increase consumer costs without expanding the tax base. A legislative initiative to repeal Decree No. 1623 has emerged, citing concerns over consumer rights and the potential infringement on digital freedoms.
Looking ahead: the future of Peru’s digital economy
This regulatory milestone marks a critical juncture in the interaction between Peru’s tax framework and the global digital economy. Key questions now arise over how to balance the need for effective tax collection with the ongoing promotion of technological innovation.
As the implementation date inches ever closer, both businesses and consumers are closely monitoring the evolution of this fiscal policy. What remains certain is that Peru’s digital ecosystem is on the verge of a profound transformation, with ripple effects likely to be felt across all sectors of society.
Abigail Alayo is a Certified Public Accountant by the Association of Public Accountants of Lima and an Administrator (UPC) with postgraduate studies in Corporate Finance, Tax Law, and Transfer Pricing. Abigail boasts more than ten years of experience in accounting, tax, and legal areas. At present, she is pursuing a Master's in Tax and Business Taxation.Contact Abigail.
Gustavo Martinez is a Lawyer (UNMSM) specialised in Tax Law. He is also a winner of the UNMSM Tax Competition. Gustavo has over five years of experience in Tax Consulting and Compliance. He is currently in the process of completing a Master's in Tax Law at the University of Lima.Contact Gustavo.
GGI member firm VAG GLOBALLima, PeruT: +511 627 9787Auditing & Accounting, Tax, Advisory
VAG Global is a multidisciplinary firm of accountants, auditors, lawyers, and economists with over 25 years of experience in audit, consulting, and tax services. Our commitment to clients and the expertise of our diverse team enable us to consistently deliver high-quality, tailored solutions.
