Peru Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.
Peru has not implemented subsidies, but it has implemented certain tax incentives for energy producers producing energy on renewable resources.
However, Peru has not implemented feed-in tariff schemes, premiumsto renewable energy producers or renewable energy quota obligation to energy producers.
Two engineers inspectingPeru is a country with abundant natural resources, but whether a particular resource is considered renewable is determined only by a general consensus rather than by legal definitions. This consensus appears to be changing, and some resources like water, which was once considered renewable, are no longer considered as such.
Apart from issues related to water, no clear tax policy exists that might promote investment into renewableenergy. However, a number of benefits can be identified in the Peruvian taxation system.
The Peruvian government grants 30-year concessions to explore and/or exploit aboveground and underground geothermic resources that are not hydrocarbon-based.
Geothermic concessionaires will be subject to the common tax regime of income tax in force at the time of signing the concession agreement during the term of the concession. For 2015 and 2016, the income tax regime will be28 percent, for 2017 and 2018, it will be27 percent and from 2019 and onward, it will be 26 percent.
Geothermic concessionaires having more than one geothermic resource concession agreement that may also perform activities related to geothermicresources and connected activities shall individually and annually assess theirincome tax liability by each contract and activity. If one of the contracts generates tax losses that carry forward, such losses could be offset against the profits derived from another contract or geothermic related activities. Investments applied to a geothermic resource concession agreement that may not have reached the exploitation stage can be accumulated withthe same kind of investment made with another contract that may have reached the exploitation stage. These accumulated investments can be amortized either on a production basis or proportionally over a five-year period on a straight line method.
Import of goods and inputs required to exploit geothermic resources under concession are exempt from all existing or to be existed taxes provided such goods or inputs were included in the specific list approved by the Energy and Mining Ministry.
Geothermic concessionaires are obliged to pay a 1 percent contribution applied to the energy average price up to the level of hydroelectric generation. Suchcontribution cannot exceed 1 percent of the annual sales of the concessionaire.
Local accounting could be carried in foreign currency. For such purpose, concessionaires must be authorized by the Ministry of Economy.
Electricity generation through hydro, wind, solar, geothermic, biomass, wave or tidal powers or other RERs is subject toan annual maximum of 20 percent accelerated depreciation regime for Income Tax purposes.Accelerated depreciation is applicable to electricity plants entering into operation as of 29 June 2008.
Accelerated depreciation is applicable to machinery, equipment and building infrastructures required for the installation andoperation of electricity plants generating power through renewable resources.
Electricity generated with RERs is considered when it is first delivered into the electricity distribution network.
This benefit will be in force until31 December 2020. However, it could be expected that further provisions would be enacted in order to extend the referred benefit.
Concessionaires of electricity-generating activities through RERs are entitled to the early recovery of the Input VAT paid for capital expenditures, services and building contracts directly related to the electricity generating activities, provided they do not enter into the productive stage.
The ISC excise tax is applicable to, among other goods, fuels. As of 1 January 2008 until 1 January 2016, the Peruvian government has established a schedule for applying a specific amount as an ISC on certain fuels such as diesel2, kerosene and others that contain harmful contaminants like sulfur.