How can an Umbrella Company Help with Contracting in Peru?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Peru. Even better, most are experts in Peru and expat tax law, meaning they’ll also help you optimise your earnings in Peru.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Peru.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Peru, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Peru and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Peru
One of the most consistently challenging aspects of contracting in Peru is complying with the country’s tax system. As well as paying tax in Peru, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Peru
If you’re working in Peru under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Peru for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Peru, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Peru through PAYE is left with the prospect of doing everything themselves.
Do you know much about Peruvian Tax Law? Does Peru have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Peru can range from 8 to 30 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Peru
| When Do You Need to Lodge Your Tax Return? | The tax year is the calendar year (31 December). Tax returns may be lodged after the tax year ends. |
| Tax Filing Deadline | Usually late March or early April. The specific date is determined each year by the Peruvian Tax Administration (SUNAT). |
| Can you file it online? | Yes, you can file your personal income taxes online. See below. |
How to File Taxes in Peru as a Contractor
Individuals earning only employment income are not required to file tax returns. If the individual earns other forms of income, a tax return must be filed. The process to do this involves:
Step 1: Enter the online portal here(link is external). You may log in using your DNI (Identification Number) or your RUC (tax identification number). You may register for your RUC here(link is external).
Step 2: Choose the form that you want to submit by entering the form number or choosing from the menu. Key forms include:
- Rental income form: N°1683
- Disposal of property and other income: N°1685.
Step 3: Complete the form that you are required to file.
- The method of calculating the income tax to be paid or refunded can be found here(link is external).
Step 4: Any balance due must be paid at the same time that returns are filed. After completing the tax return form, you will be required to select the bank to which you will pay any outstanding tax. The eligible banks include:
- BCP
- Banco de Comercio
- Scotiabank
- Interbank
- Banco Financiero
- HSBC
Step 5: After you pay the tax, you will be provided a certificate of declaration and/or confirmation of payment slip.
Tax Figures in Peru
| Currency | Peruvian sol (PEN) | ||||||||||||
| Tax-free Threshold in Peru | None | ||||||||||||
| Income Tax Rates |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | For 2018, one ATU equals PEN 4,150 |
Tax Residency in Peru
When do you become a tax resident in Peru
You become a tax resident in Peru when:
Residence in Peru is usually determined by an individual’s physical presence. In general, remaining more than 183 days in Peru results in residency and remaining 183 days abroad loses it.
Foreign citizens who were physically present in Peru for more than 183 days throughout any 12 month period, will acquire citizenship from 1 January of the subsequent calendar year.
Peruvian citizens who lost tax residency may regain the status on 1 January of the first calendar year after they return to Peru, unless they do it temporarily and stay in Peru no more than 183 days in any 12-month period.
Does the 183 day rule apply in Peru
Yes
Am I taxed on my global income in Peru
Yes, if you are a resident. Non-residents are subject to tax on their Peruvian-source income only.
Can you set up your own Limited Company in Peru?
| How long does it take to set up | 26.5 days |
| How much does it cost | Approx. PEN 1000 + registration fees which are composed by: 0.3% of capital + PEN 44 for performing the registration + PEN 9.72 per appointment of each director, manager or other representative, up to the limit of PEN 4,050. |
| Is it easy? | Starting a Business Rank: 114 https://www.doingbusiness.org/data/exploreeconomies/peru |
Tax Calculator in Peru
If you are a contractor and want a calculation on your tax and net retention in Peru, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Peru
Contractors in Peru are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Peruvian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Peruvian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Peruvian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Peru
We work with numerous umbrella companies in Peru, many of whom are experts in tax and immigration laws. If you have any questions about tax in Peru, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Peruvian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Peru but without the overhead of directly dealing with the Peru tax authorities. Get in touch with us today for some reliable advice on tax in Peru!
A Contractor’s Guide to Work Permits in Peru
Immigration is one of the primary concerns for any contractor hoping to start working in Peru. Permanent employees will find it easy to get their Peruvian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Peruvian work permit, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Peru is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Peru (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Peru. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Peru and match contractors with the right company for them. If you’ve already secured a contract in Peru, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
