Reduction of VAT to 8% approved for hair salons and beauty centers, which benefits large franchises

The Permanent Commission of Congress approved, in a second vote, the opinion of the law that seeks to apply a special rate of the General Sales Tax (IGV) of 8% to hair salons and beauty centers, which is set at 18%. In total, there were 15 votes in favor, 8 against and 3 abstentions, which validated this legislative proposal questioned by the Ministry of Economy and Finance (MEF).

According to the opinion submitted by the MEF to the Economic Commission chaired by parliamentarian César Revilla, this initiative would be capitalized to a greater extent by those businesses associated with large cosmetics franchises and beauty salons, which are aimed at socioeconomic strata with higher incomes. In this way, the controversial norm was ready to be forwarded to the Executive Branch, which must decide whether to observe it or promulgate it.

Opinion approved to reduce VAT for hairdressers

Despite opposition from the Ministry of Economy, the Permanent Commission approved the ruling that seeks to reduce the General Sales Tax (IGV) rate from 18% to 8% for hairdressing and other beauty treatment activities. This is a tax change proposal that includes two bills from Congressmen Eduardo Castillo of Fuerza Popular and José Pazo of Somos Perú.

This opinion supported by parliamentarian César Revilla had been approved three weeks ago in the first vote by the Plenary of Congress and only needed a simple majority to ratify this decision in the Permanent Commission. The next step was consummated yesterday when the members of this body, which meets during the parliamentary recess, ratified the opinion with 15 votes in favor, 8 against and only 3 abstentions.

According to the authors of the proposed law, the reduction of the VAT is intended to benefit natural persons or legal entities with businesses dedicated to hairdressing services and similar to strengthen the formalization and economic reactivation of the sector. However, the Ministry of Economy and Finance warned that “The project would only benefit a marginal fraction of hair salonssince 84% of the companies in the sector (15,300) belong to the New Simplified Single Regime and do not declare or pay VAT. In other words, the measure would only apply to 16% of the taxpayers in the sector.”

In this regard, the ministry headed by José Arista estimates a fiscal impact of S/17 million per year with the application of this law, without taking into account the practices of tax evasion and avoidance. Finally, they warn that reducing the IGV from 18% to 8% will only alleviate the burden on large companies or beauty salons that are aimed at high socioeconomic sectors.

It is worth mentioning that the ruling, which was issued on bills 4450 and 6611, was ready to be sent to the Executive Branch, which could review it or authorize its promulgation in the official newspaper El Peruano.

MEF against reducing VAT for beauty centers

A recent experience shows that this type of measures benefits large companies. The MEF recalled that in 2022, the implementation of Law No. 31556 was launched, which reduced the VAT for restaurants, hotels and tourist accommodation from 18% to 8%. However, it was observed that 86% of restaurants did not reduce their prices.

“The precedent that existed with the reduction of the IGV for restaurants and others was very demonstrative. The impact has been very marginal and in truth those who have appropriated the bulk of the tax were the large chains. Under a very laudable discourse of supporting small micro-enterprises, family economies, etc., in practice they benefit those who do not need it,” said economist Armando Mendoza, in a previous interview with La República.