New rule for employees in Peru: deduction of personal expenses in the income tax
Article 3 minute read

New rule for employees in Peru: deduction of personal expenses in the income tax

25 July 2017

Legislative Decree No. 1258 of December 8, 2016 introduced amendments to the Income Tax Law in Peru, specifically the Income Tax for Natural Persons with a domicile. The main objective of the change is that natural persons require proof of payment, allowing the deduction of expenses from work income.

The new regulations, governed by the Decree. No. 399-2016-EF of December 31, 2016, establishes that in addition to the deduction of seven tax units (UIT) - for a value of 4,050 soles each (approximately $ 1,245) - it is possible to consider the deduction of three additional ITU for expenses such as the following:

  • 30% of the rental of real estate for housing
  • 100% interest on mortgage loans for first home
  • 30% of professional fees of doctors and dentists for services rendered in the country, as long as they qualify as fourth category income.
  • 30% of services rendered in the country whose consideration qualifies as fourth category income, for example: lawyers, architects, nurses, nutritionist, etc. 
  • 100% of the contributions to ESSALUD (Social Health Insurance of Peru)


This modification not only represents a benefit for taxpayers which are natural persons domiciled in Peru; it also serves as a control mechanism to the service provider to ensure that it declares their taxes, as the rule states that the user can only deduct the cost if he or she submits proof of payment of the tax that the provider made.

The change will also generate savings for natural persons who only have income from work in a dependency relationship (known as fifth category income), who will have to carry out an extra procedure before the SUNAT (Peruvian Tax Administration). As of March 2018, they must manage their tax identification or RUC (Unique Taxpayers Registry), and then directly request from SUNAT the recovery of the tax withheld by their employer. It is recommended that people receive support from their accountant on this regard.

Companies, through their Human Resources department have the opportunity to support their employees by informing them about the new norm and providing them with training so that they manage the recovery or even manage the processing on behalf of their dependents.

In times when may be difficult to reward the employees´ effort with a bonus or a salary increase, assisting them in a task that will bring an economic benefit is an alternative worth considering. If we consider that the employer would probably be in a position to carry out the task with his or her own expert in tax compliance, or hire a specialized firm that grants a discount for volumes of procedures performed, the savings would be double for the employee. This benefit will undoubtedly represent an added value on behalf of the company.

If you have any questions or need more information, contact our experts in TMF Peru.

Written by

Esteban Hilgert

Managing Director

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