As part of the Peruvian government’s tax agenda to expand the tax base, on 4 August 2024, a “Netflix tax” became a reality through the enactment of Legislative Decree 1623, which brings certain segments of the digital economy within the scope of the General Sales Tax (GST). The decree will become effective once regulations are published within 30 days from 4 August.
Based on the decree, an 18% GST will be levied on the supply of digital services and the acquisition of intangibles by Peruvian individuals from nonresident providers. The rules will impact streaming activities, cloud storage, social media access, online publications, conference calls, digital intermediation and purchases of software. The decree introduces a requirement for digital providers to obtain a Peruvian tax ID, to collect the GST from the individual end consumer and pay the GST to the Peruvian tax authorities. Digital intermediaries additionally must withhold GST from the underlying provider and remit that amount to the tax authorities. The nonresident provider must file a GST return and pay tax due on a monthly basis. If a digital provider fails to adhere to the compliance requirements, payment facilitators, such as Peruvian banks, telecommunication operators, etc., will be required to collect and withhold the GST and make the monthly payment on behalf of the nonresident provider.
BDO insights
Due to the structure and some controversial aspects of the new tax (e.g., the decree is inconsistent with Peru’s current definition of “services,” the practicality of making facilitators responsible for payments in the case of intermediaries, etc.), it is difficult to predict the real impact of the Netflix tax on Peru’s digital economy. Nonetheless, the government expects the tax to be a quick and valuable revenue raiser, despite the fact that a group of specialists is already exposing deficiencies in the decree that could jeopardise the application of the GST to the intended transactions.
Osmar Carazas
BDO in Peru