Peru Delays 18 Percent VAT on Digital Services What to Expect by 2025

In a significant tax policy shift, Peru has announced a delay in the implementation of the 18% VAT on digital services until 2025. This postponement has sparked discussions among businesses, consumers, and tax experts about the future of digital taxation in Peru. But what does this mean for companies operating in the digital space, and how will it impact consumers?

What Is VAT and How Does It Impact Digital Services?

What is VAT?

VAT (Value Added Tax) is a consumption tax applied to goods and services at each stage of production and distribution. Unlike a sales tax, which is only imposed at the final sale, VAT is collected incrementally along the supply chain.

Why Is Peru Implementing an 18% VAT on Digital Services?

Governments worldwide have been adjusting tax and VAT regulations to capture revenue from digital platforms. The rise of streaming services, e-commerce, and remote work solutions has prompted Peru to introduce VAT on digital transactions to level the playing field between local and international providers.

Key Reasons for the Delay

The Peruvian government has cited several reasons for postponing the VAT tax implementation:

1. Economic Uncertainty: Inflation and fluctuating markets have impacted consumer spending, prompting authorities to delay additional tax burdens.
2. Technical Challenges: Setting up the VAT collection framework for foreign digital service providers has proven complex.
3. Global Trends: Other Latin American countries have faced similar delays, influencing Peru’s decision.

Need expert VAT compliance assistance? Get in touch with Dreis Accounting Services today.

How Businesses & Consumers Are Affected by Peru’s VAT Delay

1. Local and International Digital Service Providers

The delay offers temporary relief to both local businesses and global platforms like Netflix, Amazon, and Spotify. Companies now have additional time to adjust pricing, tax compliance strategies, and reporting systems.

2. E-commerce and SaaS Companies

Businesses operating in e-commerce and software-as-a-service (SaaS) industries may use this window to optimize pricing models and tax structures before VAT enforcement.

3. Peruvian Consumers

Consumers can expect lower costs for digital services in the short term. Once VAT is implemented, prices for online subscriptions, apps, and digital transactions are likely to rise.

VAT on Digital Services: How Peru Compares Globally

VAT regulations on digital services vary globally. Here’s how Peru’s 18% VAT tax compares:

This comparison highlights that Peru’s VAT is within the regional average, although its delay may impact how quickly the country aligns with international tax policies.

How Businesses and Consumers Should Prepare for VAT Changes

1. Businesses Should Prepare in Advance

Even with the delay, companies should proactively update tax compliance systems to ensure they meet future VAT obligations.

2. Consumers Should Expect Price Adjustments

Once the VAT tax is implemented, digital service costs will likely increase. Consumers should be aware of potential price hikes on streaming platforms, online shopping, and cloud services.

3. Governments May Continue Refining Digital Taxation

As seen in other Latin American countries, VAT on digital services is an evolving policy. Future modifications could adjust tax rates or introduce exemptions for specific industries.

Need tax compliance assistance? Contact Dreis Accounting Services today!

Final Thoughts

The delay of Peru’s 18% VAT tax on digital services provides a temporary reprieve for businesses and consumers. However, this pause is an opportunity for companies to prepare for compliance and for consumers to plan for price increases.

Peru’s VAT changes will impact digital businesses and consumers—are you ready? Get expert tax compliance guidance from Dreis Accounting Services before the 2025 rollout!