Income tax on property rentals of up to S / 2,566 would be eliminated

One of the tax reform measures that the Executive would implement – if it obtained legislative powers – will be to adjust the first category income tax (IR), which levies rents at a rate of 5% for each transaction.

In this sense, the Ministry of Economy and Finance (MEF) proposes that the first category income (leasing of movable and immovable property) be applied the cumulative progressive scale that is applied to the sum of the fourth category income (independent work), fifth category income (dependent work) and income from foreign sources.

This in order that the tax burden is according to the contributory capacity of each person.

Jorge Picón, tax attorney, said that since first category income has the same tax treatment as work income, taxpayers will be able to deduct 7 UIT annually (S / 30,800) once all the income (the first category, fourth category, fifth category or foreign source income). Thus, the highest payment percentages will be for those with high incomes.

“This will allow the rental tax to be progressive and fairer, since only people who exceed a certain threshold would pay,” emphasized the MEF.

Impact

If this measure is materialized, it would also benefit people with fewer resources and whose only income is the rental of a property.

What the Executive proposes is that natural persons whose only monthly income is the rent of a property that does not exceed S / 2,566 would not pay income tax, thus eliminating the current payment of 5% of the rent that represents a payment of up to S / 128 per month.

“Currently, With the current regime, a retiree who only has income for that amount has to pay around S / 130 per month; The idea is that, precisely the reform is more equitable and fairer, we are eliminating it and we will apply increasing sections ”, the Vice Minister of Economy, Alex Contreras, announced to La República.

Minister Pedro Francke pointed out that this proposal for differentiated rates is because he considers that it is not appropriate to pay the same percentage regardless of the profit from the rent.

“Is it correct that those who rent a small room for S / 500 pay the same 5% as those who earn S / 50,000 renting several high-end apartments? We propose that the payment of rents is not, as now, a single rate, but rather that it be proportional, with a non-taxable part as happens with income from work, that is, a minimum below which it is not paid, “he said.

Tax revenue will be higher

The Minister of Economy, Pedro Francke, He pointed out that tax revenues would be S / 18,000 million more than what had been projected. Of that amount, most of it would be used to meet the demands of citizens, while the rest would be used to reduce the fiscal deficit.

“It serves to reduce the fiscal deficit that was originally projected, when the budget was approved, for this year at 6.2% of GDP and that we said in August would be 4.7% at the maximum, and that it will most likely go to be less than 4.2% of GDP ”, said Minister Francke.

The word

Alex Contreras, Vice Minister of Economy

“With the current regime, a retiree who only has an income of S / 2,566 has to pay around S / 130 monthly (…) we are eliminating it and we will apply increasing installments.”

Pedro Francke, Minister of Economy

“We propose that the payment of rents is not a single rate, as now, but is proportional, with a non-taxable part as happens with work income, that is, a minimum below which it is not paid.”