CORPORATE TAXES SIGNIFICANT DVELOPMNTS
Income tax was suspended for 1999, and a so-called financial transaction tax(FTT) was implemented at the rate of 1% on most financial transactions (e. g., deposits in current and savings bank accounts, investments made) and remittances abroad, except for oil companies, which must pay the larger of income tax as explained below or the FTT.
TAXES ON CORPORATE INCOME
Taxes on corporate income are levied at the following rates.
%
On distributed or undistributed profits of local corporations and branches
…0.0
For oil companies with risk service contracts:
On distrbuted profits………………………………… 44.4
On undistributed profits (under certain investment conditions) …
…… 25.0
For oil companies with other types of contract (for distributed or
undistributed profits) ……………………………………………………
25.0
CORPORATE RESIDENCE
Corporate residence is determined by the place of incorporation. For branches it is the place indicated in the domiciliation deed.
OTHER TAXES
Municipal assets tax/The municipal assets tax is levied at the rate of 0.15% on total assets less current liabilites and contingencies.
Property tax/Municipal property taxes are levied on land and buildings, based on the officially estimated commercial value less deductions and updating by inflation, as allowed by law. The base tax is S/.63,090 on a maximum base amount of S/.5 million. Any excess over the base amount is subject to a surcharge of 1.6%.
Value-added and service tax/This tax is levied at a rate of either 10% or 0% on the transfer of ownership of goods, the provision of services and the importation of goods. Only those services specifically mentioned in the law are taxable at the 10% rate; all other services are subject to the 0% rate. The goods transferred and imported that are subject to the 0%
rate are specifically listed in the law. Taxes paid on goods are compensated by taxes already collected; differences are payable or carried forward as tax credits. These tax credits are available even on exports and on sales to government entities that are taxable at the 0% rate.
Companies designated by the government as special taxpayers have the obligation to withhold VAT applicable to their purchases.
Special consumption tax/This tax is imposed at 5% rate on certain automobiles and 10% on airplanes, helicopters and boats. The tax is levied on cigarettes, alcoholic beverages and soft drinks at rates raging form 10% to 75%. It must be paid monthly and is collected upon invoicing sales.
BRANCH INCOME
Distributed branch profits are taxed at the 1% FTT rate. No further tax is payable when profits are remitted to the home office.
INCOME DETERMINATION
Inventory valuation/The valuation of inventories is not specifically treated in the tax law or in regulations issued thus far as to method of valuation. Because the law makes reference to generally accepted accounting principles, inventories are carried at cost but have been adjusted for inflation since early 1992. FIFO, actual and average methods
are used; average
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