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Social Security and Taxation in Lima

Working in Lima makes you a part of the rapidly developing Latin American economy. You might be involved with a Peruvian or an international company, but either way you need some tips on the general financial state of Lima and on doing business in the city in general.
Lima may have a strong economy, but not all Peruvians have the chance to participate in it, thus limiting who has access to social security.

Unfortunately, Peru is not known for its excellent worker benefits. Understanding what you will gain in terms of social security is an important part of settling into your new life in Lima. This article will help elucidate the problem areas of taxation and benefits for expats.

Top Priority: Social Security

When choosing your social security coverage, you will have a choice of two different plans. The first is the SNP, or public social insurance. The second is the SPP, an individual account. If you do not make a choice, you will automatically become an SPP member. If you are an SNP member, you may become an SPP member instead, but you cannot change back to the SNP system (exceptions exist but are rare).

Both the SNP and SPP are available for private and public sector employees. If you are a fisherman, or a member of the military or police force, there will be alternative arrangements in place. If you are self-employed in Lima, then you can only opt for voluntary coverage under the SPP system.

The difference between the two lies in the amount of social security payments required on a monthly basis. If you are part of the SNP system, you need to pay 13% of your gross earnings. This is true of all earnings above the minimum monthly wage of 675 PEN. If you are part of the SPP system, you need to pay 10% of your gross earnings, as well as (on average) 1.87% of your gross earnings for administrative fees, and 0.96% of these earnings for disability and survivor insurance.

The different systems will also account for when you can qualify for the various pensions. The most popular, the old age pension, is available at the age of 65 in both the SNP and SPP systems. However, in the SNP system, you must have made at least 20 years of contributions. On the SPP system, you can have your pension at any age if your account has assets that replace at least 50% of your earnings in the previous 120 months.

Full details of all further conditions and differences between SNP and SPP can be found on the US Social Security Administration page for Peru.

No Way Out: Taxation

You are classified as a resident in Lima after you have spent 183 days legally working in the country. After this period, everyone is required to pay taxes. Your net taxable income is taxed at staggered rates of 15%, 21%, and 30%. For non-residents, the tax rate is also 30%. . These taxes enter directly into the pension and healthcare systems, whether they are private or public.

Please note that Peru has a double-taxation treaty with a handful of countries: Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Canada, South Korea, Switzerland, and Portugal. This helps facilitate overseas business and trade. If you are not a resident of one of these countries, then you need to visit your home country’s tax bureau to make sure you pay taxes correctly during your stay in Lima.

 

We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete. 

If there’s something you’re still not sure about, check out the InterNations Forum.

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