Tax expenditures (TEs) have not been identified as a significant policy challenge in Peru, particularly within the corporate income tax, due to high levels of non-compliance and to the significant role of simplified tax regimes that are not categorised as TEs. However, this may change, given that the approval of new TEs in Peru has recently increased in a manner that deviates from the governance procedures mandated by Peruvian law. The recent approval of additional TEs risks worsening Peru’s fiscal outlook. Some TEs are not an effective solution to the problems they are intended to address and are therefore recommended to be reformed or abolished. The effectiveness of other TEs remains in question. Additional technical analysis is needed to assess their effectiveness and evaluate possible design improvements. This chapter presents a policy recommendations table that categorises various, provides presents. This chapter presents a policy recommendations table that categorises various long-standing and recently passed TEs, provides detailed analysis and presents specific reform proposals.
OECD Tax Policy Reviews: Peru 2026
Abstract
Peru foregoes about 2.2% of GDP in tax revenue per year according to the country’s TE report. While this appears low at face value, this estimate ought to be interpreted carefully. Peru’s TE report estimates that the revenue forgone from TEs amounted to 2.2% of GDP in 2025, a level that has remained roughly similar for two decades (SUNAT, 2025[1]). This percentage is lower than in LAC peer countries, whose revenue forgone as a result of TEs ranges from 2.5% to 8% of GDP per year. 1 Low TE take-up in the context of high non-compliance, together with the way the benchmark tax system is defined could explain this relatively low estimate for Peru, as will be explained below. On the other hand, when expressed as a percentage of tax revenues, Peru’s revenue forgone does not appear as low relative to its peers. In addition, Peru’s revenue forgone from TEs may rise in the coming years as recently passed TEs come into effect.
Significant tax non-compliance, together with complex administrative requirements, may account for the limited uptake of TEs in Peru. The revenue forgone from TEs in the PIT and the CIT is only 0.19% and 0.12% of GDP respectively (SUNAT, 2025[1]). However, within a context of high informality and tax non-compliance, taxpayers may be reducing their tax liability through evasion channels rather than through the uptake of TEs. In addition, burdensome administrative requirements that need to be met to benefit from certain CIT TEs may deter take-up.
Tax revenue forgone would increase if a wider range of tax provisions was classified as TEs. Peru’s TE report excludes many CIT and PIT provisions that allow taxpayers to significantly reduce their tax liability, while other countries identify these provisions as a TE in their TE report. For instance, Peru’s simplified business tax regimes (NRUS, RER and MYPE) that allow the majority of businesses to significantly reduce their business tax liability are excluded from Peru’s TE report. A provision that allows taxpayers to deduct expenses from their taxable income under the PIT by up to 3 UIT (approximately equivalent to the minimum wage), is likewise not considered as a TE. If these provisions were included in Peru’s TE report, the revenue forgone from PIT and CIT TEs would increase significantly. For example, an estimate of the revenue forgone from the simplified regime called Simples Nacional in Brazil is measured in the country’s TE report and represents that country’s costliest TE. In addition, Peru’s TE report may underestimate CIT TEs because in some cases, CIT-exempt entities are not required to report all of their income to the tax administration.
Peru’s could revise the benchmark tax system to exclude certain provisions that forgo tax revenue but are currently treated as part of the benchmark. Measuring the revenue foregone of a wider range of tax provisions would enhance transparency and could contribute to stronger tax policy. One possible option is to consider simplified regimes and the PIT 3 UIT deduction as TEs. Alternatively, Peru could follow the approach of certain OECD countries, such as Canada and the UK, which report the revenue forgone of certain provisions under the separate subheading of “structural relief” provisions rather than considering them as actual TEs (HMRC, 2024[2]; Department of Finance of Canada, 2026[3]). This approach would support more systematic tracking of fiscally costly elements of the tax system that would remain part of the benchmark. The recommendations table in the next section notes specific elements of the tax system that forgo revenue but are not currently included in the TE report (Table 3.1).
The revenue forgone estimates in the TE report may increase in the long run as the economy grows and tax compliance improves. As discussed in Chapter 1, only 25% of workers earn more than the standard PIT allowance and therefore have the opportunity to claim PIT TEs. This percentage may rise over time as economic growth continues or proposals to lower the standard allowance are enacted. Further, if tax enforcement increases, informality shrinks, and non-compliance becomes riskier over the long term, taxpayers may take greater advantage of TEs in order to reduce their tax liability. In addition, any future reforms significantly affecting the attractiveness of the simplified regimes might likewise motivate taxpayers to exit the simplified regimes and claim TEs (that are currently measured in the TE report) in the general regime as an alternative tax reduction strategy. This means that the share of total tax revenue forgone through TEs is likely to increase over time as economic activity expands, incomes grow and tax enforcement improves.
The recent proliferation of TEs in Peru risks becoming fiscally unsustainable. Peru’s deficit and debt levels are projected to increase in the coming decade, partially due to a historic increase in the number of TEs that are being approved. A total of 38 laws establishing or expanding TEs had been passed up to October 2025 in the current legislative session (Merino and Murga, 2025[4]). According to the Consejo Fiscal, the collective revenue forgone of these TEs passed in the legislative session could reach up to 1.8% of GDP (Merino and Murga, 2025[4]).
The approval of new TEs and the evaluation of existing ones increasingly deviates from legally mandated governance standards. As discussed in Chapter 1, Norm VII of the Peruvian tax code contains clear standards for the approval of new TEs, mandating a rigorous technical foundation including ex-ante and ex-post economic impact assessments. However, these standards are increasingly disregarded. Congress passes TEs despite the technical objections of the MEF more and more frequently (Merino and Murga, 2025[4]). In many cases, the design of TEs appears to depart from international good practice or contain technical inconsistencies that could hinder their effectiveness. This is all the more concerning given that ineffective TEs in Peru appear to be difficult to reform. TEs are frequently extended without reforms even when there is strong evidence that they are ineffective. Total adherence to the standards of Norm VII for new TEs as well as rationalisation of existing TEs, as highlighted in several MOF publications, is therefore recommended (Ministry of Economy and Finance of Peru, 2022[5]; Ministry of Economy and Finance of Peru, 2024[6]).
TEs were grouped into four categories depending on whether they warrant consideration for reform (Table 3.1):
“No Reform”: Certain TEs within the Peruvian tax system are found to be well-designed and aligned with underlying policy objectives; these TEs are classified as “no reform.”
“Maintain but Improve Design”: Other TEs are aligned with underlying policy objectives, but weaknesses in their design may undermine effectiveness. These TEs are classified as “maintain but improve design” and are accompanied by specific recommendations to address identified design shortcomings.
“Need for Impact Assessment”: For a further group of TEs, it is unclear whether they represent the most appropriate instrument to achieve the stated objective(s) and there is a risk of unintended consequences. However, additional evidence, particularly in the form of an impact assessment, is required to reach a definitive conclusion about this group of TEs. These TEs are classified as “need for impact assessment”.
“Abolish” or “Do not Introduce”: Finally, certain TEs are assessed as not being an appropriate instrument to achieve their stated objective(s) and these TEs are therefore classified as “abolish / approval not recommended if still a proposal”.
Table 3.1 also identifies the provisions that are currently not included in Peru’s TE report. The last column in the table indicates whether the identified TEs are currently included in Peru’s TE report (Table 3.1). The TEs include both recently enacted measures as well as longstanding provisions, including some that have not previously been identified as TEs and, therefore, for which the revenue foregone has never been measured.
Source: OECD.
TEs categorised as “No Reform”
Certain provisions, such as refundable credits for the net assets tax (ITAN) and the financial transaction tax (ITF), mitigate the distortive impact of these taxes. As their tax bases are not aligned with firm profitability, the ITAN and ITF are inherently distortive taxes, unless they are fully refundable. Refundable credits for ITAN and ITF under the CIT therefore constitute good practice. It implies also that both taxes effectively operate as a withholding mechanism for the CIT. Moreover, both the ITAN and ITF generate valuable information for the SUNAT, supporting the detection and deterrence of evasion in the CIT and PIT. Accordingly, no reform is recommended with respect to the refundable CIT credits for the ITAN and ITF.
Expenditure-based CIT incentives can support investment and economic growth while avoiding the fiscal risks associated with profit-based tax incentives. For example, CIT TEs included in Law 32434 that are targeted at the agricultural sector, including accelerated tax depreciation allowances for new investment in fixed assets in irrigation infrastructure, are expenditure-based tax incentives that aim at stimulating investment in the agricultural sector. These types of incentives may be warranted if government decides that the tax system should be used to stimulate this type of investment. Moreover, because the revenue forgone from these incentives is directly proportional to the level of investment, the fiscal risk is comparatively lower than that arising from profit-based tax incentives.
TEs categorised as “Maintain but Improve Design”
The deduction of expenses from taxable personal income up to 3 UIT has the potential to support the formalisation of self-employed and household workers; however, adjustments to its design could enhance its effectiveness while supporting tax revenues and the progressivity of the PIT. Taxpayers may deduct from their taxable personal income 30% of eligible rent payments, medical expenses, and payments to (self-employed) service providers who earn category 4 personal income, as well as 100% of EsSalud SSCs paid for household workers and 15% of tourism‑related expenditures, including hotels and restaurants. Some of these TEs, such as the deduction of SSCs, may contribute to the formalisation of the economy, albeit at a high revenue cost. At the same time, the composition of deductible expenses raises concerns from an equity perspective. In particular, deductions related to hotel, restaurant, and tourism spending (which account for approximately 49.7% of total claimed deductions) are less directly linked to formalisation objectives and may weaken the progressivity of the PIT (Ministry of Economy and Finance of Peru, 2024[7]). In addition, the deduction of 100% of SSCs paid for household domestic workers could be more effective if it were subject to a separate ceiling, rather than being included within the overall cap on personal deductions. This would ensure that households claiming other deductions are still able to fully deduct SSCs for domestic workers, thereby strengthening incentives for formalisation. More generally, the revenue foregone associated with this deduction could be systematically reported in the TE report, alongside an impact assessment to evaluate its contribution to increased formalisation and its distributional impact. Where evidence suggests that a given TE is not meeting its stated formalisation objective reforms are warranted. A reduction in the cap of 3 UIT should also be evaluated, in particular if the deduction of EsSalud SSCs for household workers would face a separate ceiling.
Enhanced deductions for the hiring of new formal workers in the agriculture and textile sectors are intended to promote labour formalisation; however, adjustments to the eligibility criteria could increase their effectiveness. At present, take‑up of the incentives foreseen in Law 31 969 is very limited: only 35 firms have claimed the deduction, with an estimated revenue foregone of approximately S/ 2.2 million (around USD 640 000). Further analysis to identify the factors underlying this low take‑up would be useful to assess the effectiveness of the measure and to inform potential reforms. Should participation increase, certain design features of the deduction may give rise to unintended behavioural responses. In particular, the requirement that eligible workers earn a monthly wage below S/ 1 700 in order for employers to benefit from the enhanced deduction may create incentives for partial wage informality or downward wage distortions. For example, employers could have incentives to report wages just below the threshold while compensating workers through unrecorded cash payments, thereby eroding the PIT and SSC bases. Replacing the wage eligibility threshold with a cap on the deductible amount could help mitigate these risks while preserving the intended formalisation.
TEs categorised as “Need for Impact Assessment”
The exemption from VAT applicable in the Amazon region could be assessed with respect to its distributional impacts and its effectiveness in promoting economic development relative to alternative policy instruments such as targeted public investment in areas such as infrastructure, health and education. The Amazon VAT exemption represents one of the costliest TEs reported in Peru’s TE report, with an estimated fiscal cost of around 0.3% of GDP (SUNAT, 2025[1]). The TE is intended to address low tax‑paying capacity and economic underdevelopment in the Amazon region. However, contrary to the requirements set out in Norm VII, no ex-post evaluation of the effectiveness of the TE has been conducted, despite it having been in place for many years. Available evidence nevertheless suggests that the impact of the VAT exemption on regional development may be limited. In particular, an evaluation of the withdrawal of the Amazon VAT exemption in the San Martín region (combined with increased public investment) found that economic development accelerated in San Martín relative to comparable regions where the VAT exemption remained in place (Escobal, 2017[8]). This quasi-experimental evidence suggests that public spending would be more effective than the VAT exemption at promoting economic development in the Amazon region. Note that Norm VII mandates that tax benefits not be extended when there is a more effective spending option for the same goals. Moreover, VAT exemptions are a poorly targeted instrument to provide support to poor families, and more direct income or social protection support may be more effective and fairer.
The excise tax exemption on fuels in the Amazon region has generated significant leakage and unintended effects, including the subsidisation of illegal activities. The geographic concentration of fuel stations along the borders of the Amazon region facilitates access to untaxed fuel for consumers from neighbouring regions, creating avoidance opportunities. In addition, the exemption lowers operating costs for organised crime, illegal mining and other illicit activities that rely heavily on fuel inputs. As a result, the exemption undermines the integrity of the excise tax system while weakening enforcement efforts against illegal economic activity. Nonetheless, abolishing the fuel excise exemption in the Amazon region could trigger an increase in the cost of basic goods that would exacerbate poverty. Peru could consider abolishing the fuel excise exemption in the region while providing a compensation to households.
An evaluation of the income tax credits for real estate investment in Lima’s historic centre would be advisable prior to considering any expansion of the measure. Stringent historical preservation requirements, together with the need to rehabilitate abandoned buildings, can increase investment costs in the historic centre. A recently introduced TE seeks to offset these higher costs by offering income tax credits for qualifying real estate investments.2 An impact assessment could help determine whether the incentive has resulted in additional investment that would not otherwise have occurred, as well as its distributional implications. There is a risk that the tax credit is claimed for renovation projects that do not involve abandoned or historically designated buildings, and which therefore are not subject to elevated investment costs and may not represent genuinely additional activity. From an equity perspective, the measure may primarily benefit higher‑income property owners, potentially weakening vertical equity in the PIT. Decisions regarding the continuation of the tax credit for the Lima historic centre, or its possible extension to other urban areas, would therefore benefit from an ex-post evaluation addressing additionality, distributional effects, and overall cost‑effectiveness.
Peru could consider changing the taxation of pensions as part of a formalisation strategy, although this would require additional rules during the transition phase to avoid double taxation. Under current PIT rules, pension contributions are not deductible from taxable personal income, while both the returns on pension savings and pension benefits (upon retirement) are exempt from PIT. This is a Taxed-Exempt-Exempt (TEE) treatment. As a result, the principal contribution is taxed at the time of saving (i.e. the pension contribution is not deductible from taxable income), while returns are effectively untaxed. In contrast, the standard approach across OECD countries is to allow deductibility of pension contributions from taxable personal income, exempt returns on pension savings, and tax pension income upon withdrawal. Under this Exempt-Exempt-Taxed (EET) treatment, both the principal and returns, which constitute the pension received, are taxed at payout. In the Peruvian context, taxing pension income while allowing deductions for contributions would, at present, leave most pension benefits untaxed due to the high level of the standard PIT allowance. However, this issue could be addressed by a reduction in the basic PIT allowance, as recommended elsewhere in this report. Transitioning to an EET benchmark could also help remove disincentives to formalisation associated with the current non‑deductibility of pension contributions. At the same time, transition considerations would need to be carefully assessed. In particular, current contributors have already paid PIT on pension contributions over many years, such that taxing future pension benefits could result in double taxation of the principal component. As this effect would be closely correlated with age rather than income, potential implications for horizontal equity would warrant careful consideration in the design of any reform.
Once in place, the private special economic zones (ZEEPs) would benefit from a regular assessment of whether the investment they attract is genuinely additional. Where ZEEPs primarily absorb investment that would otherwise take place under the standard tax regime, the outcome may put a downward pressure on the tax‑to‑GDP ratio. In this context, the design of eligibility criteria is a key determinant of effectiveness. Restricting eligibility to a clearly defined set of sectors and activities that are unlikely to develop under the standard tax system could help strengthen additionality (see the Chapter 6).
A targeted assessment could help determine whether the reduced CIT and PIT rates applicable to small agricultural producers are targeted at taxpayers with limited capacity to pay tax. Under Law 32 434, individuals and firms engaged in agricultural activities with net income below 30 UIT are exempt from income tax, while those earning up to 150 UIT are subject to a reduced rate of 1.5% on income above the exemption threshold. While raising additional revenue from small producers with limited tax‑paying capacity would not be advisable, an empirical analysis could assess whether taxable capacity begins below the current 150 UIT threshold at which the reduced rate ceases to apply. At the same time, if the recommendation to abolish the preferential 15% CIT rate for large agricultural companies were to be implemented, the continued existence of a sharp notch at 150 UIT could create incentives for income under‑reporting or firm‑splitting by larger producers seeking to qualify for the small‑producer regime. That said, given the already high levels of informality and non‑compliance in the agricultural sector, the practical significance of this risk may be limited. Finally, further broadening the scope of reduced income tax rates to activities beyond primary agricultural production would not be advisable, as this could dilute targeting, increase fiscal costs, and weaken the coherence of the overall income tax system.
The tourism special economic zones (ZEDTs) may have limited effectiveness in attracting additional high-quality investment and run the risk of reducing the tax buoyancy of the tourism sector. The new framework law (Law 32 392) allows for the creation of ZEDTs in which qualifying tourism enterprises benefit from reduced CIT rates for up to 15 years, including a zero‑rate CIT during the first five years. Such provisions are not aligned with internationally recognised good practice (see Annex A) (IMF-OECD-UN-World Bank, 2025[9]). Given Peru’s existing comparative advantage in tourism, these incentives risk subsidising investment that would likely have occurred in the absence of preferential treatment and could create tax-induced incentives for existing operators to locate most new activities into ZEDTs. Under this scenario, the ZEDTs could reduce the translation of economic growth into revenue growth within the tourism sector. Moreover, where ZEDTs are designated in areas with established tourism activity, firms operating outside the zones may face competitive disadvantages relative to firms in ZEDTs. In addition, the broad definition of eligible assets used to meet minimum investment thresholds encompasses items with limited potential to generate positive spillovers. According to the Official Letter 028-2026-EF/15.01 sent by the MEF to the Ministry of Tourism, Law 32 392 will require an amendment through legislation with respect to its tax-related provisions. This provides a key opportunity to improve its design and limit its distortive impact.
Non-tax policy measures may be more effective than TEs in promoting additional tourism investment. The tourism sector exhibits a relatively low tax-to-value-added ratio, which is estimated at 5-7% since 2011 (see Chapter 2), suggesting that the overall tax burden is unlikely to be a binding constraint on sectoral growth. While such estimates are subject to caveats, they indicate that profit-based tax incentives may have limited impact on stimulating investment. In contrast, several constraints on tourism investment are non‑tax in nature and cannot be effectively addressed through CIT relief, notably insufficient transport connectivity to areas with high natural or cultural tourism potential. This consideration is particularly relevant given that Norm VII of Peru’s tax code requires tax incentives to be considered only where no direct spending measure can achieve the same policy objective.
TEs categorised as “Abolish” or “Do not Introduce”
TEs targeted at agro-exporters
The design of Peru’s duty drawback refund system for exporters scheme results in refunds that substantially exceed duties paid, diverging from its original policy objective. Ideally, drawback provisions should be limited to reimbursing duties actually paid on imported inputs used in the production of exported goods. However, Peru calculates drawback refunds as a fixed percentage of export value, which departs from this standard approach. The fixed rate has frequently exceeded the effective duty incidence, resulting in significant over‑compensation. In 2013, the average beneficiary received refunds exceeding three times the duties paid, while 25% of beneficiaries received more than 13 times, and 10% more than 61 times the duties paid (Cusato, Chavez and León, 2017[10]). Although the scheme was originally intended to support manufacturers with high imported input intensity, around half of total drawback payments accrue to a small number of large agro‑exporters for whom imported inputs account for only a small share of export value. These shortcomings could be partially mitigated in the short term through a supreme decree reducing the refund rate, pending legislative reform that limits refunds to duties directly paid on imported inputs.
Applying the standard CIT rate to large agricultural companies would strengthen horizontal equity in the tax system. Peru’s agro-export sector has recorded rapid growth in value added and exports over the past decade, driven largely by large firms, yet it has contributed relatively little in tax revenue (see Chapter 2). As figure 3.1 shows, agricultural companies under the general regime have long enjoyed low CIT effective tax rates. Law 32 434 extends the reduced 15% CIT rate for large agricultural firms until 2035, rather than phasing in the standard CIT rate from 2028 as foreseen under Law 31 110. Eliminating this reduced rate would contribute to mobilizing much needed additional revenues and promote a more level playing field. Furthermore, given that agro‑export revenues are not closely correlated with mineral prices, a more robust contribution from this sector could provide a countercyclical revenue source, helping to stabilise the tax‑to‑GDP ratio during downturns in commodity prices.
If the reduced rate for the agricultural sector is maintained, it will be important to ensure that this preferential treatment is not extended to manufacturing activities linked to the sector. According to a recent assessment by the MEF, the draft Supreme Decree regulating “agro-industrial” activities under Law 32 434 (pre-published through Ministerial Resolution No. 0508-2025-MIDAGRI) substantially broadens the scope of this category. In practice, it extends tax incentives to conventional manufacturing activities that do not face the structural constraints typically associated with agricultural production, as they operate within established supply chains and exhibit relatively high levels of market concentration. The expansion of such incentives weakens both the equity and the revenue-raising capacity of the tax system and may divert support away from taxpayers and sectors with greater demonstrated need.
Note: CIT effective tax rates (ETRs) calculated by SUNAT according to sector classifications equivalent to those used in SUNAT Cuadro A6. Lossmaking firms are excluded. ETRs reflect the actual tax liability of businesses after tax credits have been deducted as a share of their profit before that profit is reduced by exempt income or enhanced deductions.
Source: SUNAT.
TEs targeted at the tourism sector
An impact evaluation has found that the reduced VAT rate for hotels and restaurants has not met its objectives of supporting sales or employment creation in the tourism sector. The measure was initially introduced as a temporary response to sustain activity and jobs during the COVID‑19 crisis but has since then been extended until 2027. Although formally targeted at small firms, the eligibility threshold of 1 700 UIT (approximately USD 2.3 million in annual turnover) covers around 99.5% of tourism businesses (World Bank, 2025[11]). The evaluation finds no statistically significant effects on sales, employment, or consumer prices among eligible firms. Instead, the primary observed response was a reduction in the ratio of reported purchases to sales, consistent with a decline in the use of fraudulent invoices to sustain pre‑existing levels of tax evasion. In light of these findings, the reduced VAT rate for tourism appears ineffective as an economic stimulus and is unlikely to represent an efficient use of public resources. Peru could therefore consider abolishing the reduced VAT rate for hotels and restaurants and refraining from extending similar rate reductions to other sectors. The analysis also indicates that there is a need for stricter enforcement of the sector to prevent the use of fraudulent practices, such as the use of fake invoices.
TEs targeted at the Amazon region
Reduced CIT rates are an ineffective instrument for offsetting non‑tax barriers to investment in the Amazon region. Certain activities, particularly in agriculture, fishing, tourism, forestry and linked manufacturing, are eligible for preferential CIT rates of 5% or 10% depending on the Amazon department, with the stated objective of compensating for disadvantages related to remoteness and limited infrastructure. Agriculture benefits from a complete CIT exemption if related to native varieties. However, international and domestic evidence suggests that profit‑based tax incentives are generally ill‑suited to attracting investment to underdeveloped regions, as they are unable to compensate for deficiencies in core elements of the investment climate, notably transport and logistics infrastructure (Andersen, Kett and von Uexkull, 2017[12]; ComexPeru, 2024[13]). In Peru, such reduced rates have coexisted for several decades with persistently low levels of economic development in the Amazon region, indicating limited effectiveness. More targeted expenditure‑type of support may therefore be more appropriate to address these constraints, for example through increased public investment in transport connectivity. Reduced capacity to pay in the Amazon region is already partly addressed through nationwide provisions, including preferential income tax treatment for small agricultural producers under Law 32 434 and the NRUS presumptive regime for microenterprises. To the extent that additional support is warranted, it could be more effectively delivered through direct support measures. As such, reduced taxpaying capacity in the region does not appear to justify the use of additional CIT TEs.
Other TEs
The PIT exemption for withdrawals from the “Compensación por Tiempo de Servicios” (CTS) no longer aligns with the current function of the scheme. Historically, CTS balances, funded through regular employer contributions, could be accessed only under limited circumstances, typically upon termination of employment, and therefore resembled severance or social insurance payments that are exempt from PIT in Peru. Recent regulatory changes, however, allow employees to withdraw the full balance of their CTS accounts at any time, effectively converting CTS into a readily accessible component of regular remuneration. As a result, the continued exemption narrows the PIT base by excluding a growing share of labour income from taxation. The CTS exemption entails a revenue cost estimated at 0.15% of GDP, making it the fourth‑largest measured TE (SUNAT, 2025[1]). At the same time, PIT in Peru is paid by only around 25% of formal workers and accounts for a substantially smaller share of total tax revenues than in the average OECD country. The phase-out of the PIT exemption for the CTS could be part of broader strategy to broaden both the PIT and SSC bases over time, which has to balance the broadening of these tax bases with ensuring the tax wedge does not increase by too much (see Chapter 4).
Positive sanctions raise significant concerns due to their adverse effects on revenue mobilisation and tax compliance. The Positive Sanctions Law (Law 32 335) limits the ability of SUNAT to impose monetary penalties on approximately 94% of registered microenterprises, even in cases of serious tax offences, unless the taxpayer has been previously detected at least once (PRODUCE, 2024[14]). The direct revenue foregone as a result of this measure could reach up to 0.5% of GDP annually (Merino and Murga, 2025[4]). By replacing fines with educational measures for first‑time offenders, the law effectively removes the financial penalty associated with tax evasion for a large majority of firms that have not yet been audited. Amending Law 32 335 to limit positive sanctions strictly to minor, low‑risk infringements where a breach of formal obligations is first identified provided it does not involve tax avoidance or evasion, such as the non‑payment of taxes, would help restore the deterrent function of penalties and reinforce the integrity of Peru’s tax enforcement framework. In general, positive sanctions can be used to complement financial penalties for tax crimes but should not replace them.
Law 31 962 and the amendments it introduced to the tax code raise serious concerns regarding tax compliance and the integrity of the penalty system. This law reduced the interest rate applicable to tax penalties and postponed its calculation from the date of notification of the fine and not from when the taxpayer commits the infraction. By deferring the application of late payment interest until formal notification, the law effectively reduces the net cost of violating tax obligations for those taxpayers who have not yet been detected and notified. Similar concerns arise regarding the equal treatment given to refunds resulting from administrative requests and those stemming from inaccurate tax returns, without any distinction based on the cause of the overpayment. Additionally, the law foresees the payment of interest on refunds, including those arising from taxpayer errors, at a rate higher than that which could be obtained in the financial system, thereby creating incentives that may undermine compliance. Both distortions raise the expected returns to non-compliance relative to voluntary compliance and weaken incentives for accurate self-assessment of tax liabilities. In this context, reinstating the accrual of late-payment interest from the time the infringement is committed would strengthen SUNAT’s enforcement capacity and support preventive compliance. Similarly, repealing Law 31 962 and introducing differentiated interest rates for refunds according to their origin would remove implicit subsidies for taxpayer errors and improve the coherence of the Peruvian tax system.
The proposed Nueva Ley de Industrias risks substantial CIT revenue losses without clear evidence of additional investment effects. The CIT currently accounts for nearly one-quarter of central government tax revenues in Peru (OECD, 2025[15]). Against a backdrop of a persistently low tax‑to‑GDP ratio that is not expected to rise with economic growth, alongside projected increases in public expenditure, broad sector‑specific reductions in the CIT rate would place additional pressure on fiscal sustainability and are therefore difficult to justify (Ministry of Economy and Finance of Peru, 2025[16]). Analysis of the MEF indicates that the revenue forgone from the Nueva Ley de Industrias projects could exceed 3% of GDP (Merino and Murga, 2025[4]). Moreover, international best practice, as reflected in joint IMF‑OECD‑World Bank‑IDB guidance, suggests that investment promotion is more effectively achieved through cost‑based tax incentives that link tax relief directly to the new investment undertaken, rather than through reduced statutory rates that do not condition benefits on additional investment activity (see Annex A) (IMF-OECD-UN-World Bank, 2025[9]).
The commercial zone (or régimen de franquicia) associated with the Zofratacna special economic zone needs to be phased out. Under this regime, businesses located in Zofratacna may sell imported goods to natural persons in the domestic market under per‑customer quotas that are exempt from VAT and ISC, while remaining subject only to a compensatory tariff of 6%. The scope of the regime currently includes alcohol (authorised until 2027) as well as a range of other consumer goods. While originally confined to retail sales within the geographic boundaries of the commercial free zone adjacent to Zofratacna, the regime has since been extended to e‑commerce sales delivered anywhere in the national territory, albeit subject to lower individual quotas. The policy was initially introduced in the 1990s with the objective of formalising cross‑border informal trade, but institutional capacity for tax administration and enforcement has since improved substantially. In its current form, the regime distorts competition by placing domestically produced goods, which are fully subject to standard VAT and ISC, at a disadvantage relative to imported goods sold under preferential tax treatment. The difficulty of effectively enforcing per‑customer quotas increases the risk of leakage and further intensifies these distortions. Particularly problematic is the challenge of distinguishing exempt sales to natural persons from transactions with domestic firms, which are legally subject to full VAT and ISC. In addition, the discretionary power to expand quotas and eligible product lists by decree adds uncertainty and weakens fiscal control. Peru is advised to ensure that the commercial zone within the Zofratacna regime at the end of the current extension period.
References
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← 1. The countries included in this comparison are Brazil, Chile, Colombia, Costa Rica, and Uruguay, and the data on TE revenue forgone are drawn from the GTED database.
← 2. The law provides tax credits for investment for 5 years and deductions for donations for three years starting, effective from January 2025.