I. INTRODUCTION: WHY THIS TOPIC IS CRITICAL
One of the most common mistakes made by U.S. citizens who move to Peru is assuming that paying taxes in the United States releases them from tax obligations in the country where they live.
That assumption is incorrect from the moment they acquire the status of “tax residents” for Peruvian tax purposes.
Peru taxes based on tax residence, while the United States taxes based on citizenship. When both rules overlap, the taxpayer becomes subject to double tax obligations, which does not always mean double taxation, but does mean double compliance; in other words, tax returns must be filed with both tax authorities.
This article explains, step by step and with clear examples, how this Peru–IRS overlap works, what a new foreign resident must do, and how to avoid costly mistakes.
II. WHEN A FOREIGN NATIONAL BECOMES A TAXPAYER IN PERU
1. The concept of “tax domicile” in Peru
In Peru, tax residency is generally acquired when a person remains in the country for more than 183 calendar days within a 12-month period.
This has a direct and often underestimated consequence:
From that moment on, the foreign national is no longer taxed only on Peruvian-source income, but on worldwide income.
It does not matter:
Where the client is located,
In which country the company is based,
Or in which currency payment is made.
What matters is where the person providing the service resides.
2. What happens in the first year
During the first months:
The foreign national is usually considered non-resident, but once the 183-day period within Peruvian territory is reached, tax residency is acquired and the individual must declare in Peru all income from all sources, both domestic and foreign. This obligation applies as of January 1 of the year following the year in which the threshold was met.
Before that, only Peruvian-source income is taxable.
However, once the threshold is exceeded:
SUNAT may require full annual tax regularization.
Foreign income becomes relevant.
In practice, this change is not automatic and must be properly managed.
III. HOW PERU TREATS REMOTE WORK INCOME
1. Services rendered from Peru
When a resident in Peru provides professional services (consulting, design, programming, advisory services, etc.) from Peruvian territory, such income:
Constitutes employment or professional income.
Is generally classified as fourth-category income.
Is taxable even if:
The client is located in the U.S. or another country.
Payment is made in a foreign currency or originates abroad.
The contract is governed by foreign law.
The logic is simple:
The work is performed in Peru, that is, within Peruvian territory; therefore, the principle of territoriality applies, and the Peruvian tax authority taxes this income as Peruvian-source income.
2. Deductions allowed in Peru
Peruvian legislation recognizes that not all income is taxable income and allows automatic deductions:
A standard 20% deduction on total fourth-category income earned during the year.
An additional deduction of 7 UITs (S/ 5,350.00 x 7 = S/ 37,450.00 for tax year 2025) as a general deduction for individuals.
These deductions exist to reduce the effective tax burden and must be properly applied.
IV. EXPLAINED EXAMPLE: HOW TAX IS CALCULATED IN PERU
Basic scenario (simplified):
U.S. citizen who is a tax resident in Peru.
Annual income from remote services: USD 100,000.
Average exchange rate: S/ 3.80.
UIT 2025: S/ 5,350.
Annual income in soles: S/ 380,000.00 (three hundred eighty thousand and 00/100 soles).
After applying legal deductions and the progressive tax scale, the approximate annual tax in Peru amounts to:
S/ 42,890.00 (approx. USD 11,300).
This tax is neither optional nor replaceable by payment in the United States.
V. WHY THE U.S. ALSO REQUIRES TAX REPORTING
The United States is one of the few countries that taxes its citizens regardless of where they live, under the concept of “worldwide income.” U.S. citizens must always file and pay taxes in the U.S., regardless of their country of residence.
Therefore, even when legally residing in Peru, a U.S. citizen must:
File Form 1040 annually.
Declare worldwide income (from the U.S., the country of residence, or any other country).
Evaluate mechanisms to avoid paying tax twice on the same income.
This is where the most delicate technical issues arise.
VI. HOW THE U.S. AVOIDS DOUBLE TAXATION (WITH CONDITIONS)
1. Foreign Earned Income Exclusion (FEIE)
This allows exclusion of income up to an annual limit (approximately USD 130,000 for tax year 2025) if certain physical presence requirements are met.
https://www.irs.gov/individuals/international-taxpayers/figuring-the-foreign-earned-income-exclusion
Advantage:
It may reduce federal income tax to zero.
Key limitation:
It does not recognize taxes paid in Peru.
It is not always advisable in the long term.
2. Foreign Tax Credit (FTC)
This allows the following approach:
Declare total income in the U.S.
Credit the tax paid in Peru against U.S. tax.
Typical result:
Tax is paid first in Peru.
The U.S. IRS only collects the difference.
This mechanism is usually more efficient for long-term residents.
VII. PRACTICAL COMPLIANCE FRAMEWORK FOR NEW RESIDENTS
For a newly arrived foreign national, compliance should be understood as a process, not as a single isolated procedure.
Step 1: Determine the exact moment tax residency is acquired.
This marks the beginning of worldwide income taxation.
Step 2: Formalize tax status in Peru
Register with the Peruvian tax authority (SUNAT) to obtain a taxpayer identification number (RUC).
https://emprender.sunat.gob.pe/ruc/mi-ruc/inscripcion-rucProper issuance of professional fee receipts through SUNAT’s platform using the SOL tax key.
https://www.facebook.com/watch/?v=242978414137779Maintain an organized record of foreign income.
Step 3: Ongoing control during the year
Separate personal and professional accounts.
Keep monthly records of income and exchange rates.
Project tax liability before year-end.
Step 4: Annual tax return in Peru
Integrate Peruvian and foreign income received during the fiscal year (January–December).
Apply allowed deductions (general 20% and 7 UITs).
Deduct withholding taxes and monthly advance payments, if any.
Step 5: Filing with the IRS
File Form 1040.
https://www.irs.gov/individuals/international-taxpayers/taxation-of-us-residentsChoose FEIE or FTC consciously, based on what is most appropriate for the specific case.
Declare Peruvian bank accounts when applicable, under FBAR and FATCA rules.
VIII. COMMON MISTAKES TO AVOID
Believing that “if I pay taxes in the U.S., I do not have to pay in Peru.”
Failing to declare foreign income to SUNAT because it is earned in another country.
Choosing FEIE without evaluating the overall tax impact.
Failing to document taxes paid in Peru.
These errors are often not detected immediately, but may later be identified and assessed by the tax authority where the income should have been declared and taxed.
IX. FINAL CONCLUSION
Moving to Peru does not eliminate tax obligations in the United States, but it does not necessarily mean paying tax twice if matters are handled correctly according to each individual case.
The key lies in:
Understanding when tax obligations arise.
Complying in both countries in a coordinated manner, with proper professional advice to avoid mistakes.
Whether you are a U.S. citizen or any other foreign national, we help you navigate Peruvian and international tax obligations correctly.
Avoid mistakes. Don’t pay more tax than you legally have to.
Tax Obligations for U.S. Citizens Living in Peru: Key Questions Answered
A U.S. citizen becomes a tax resident in Peru after spending more than 183 calendar days in the country within a 12-month period. From that point on, worldwide income becomes taxable in Peru, starting January 1 of the following year.
No. Paying taxes in the United States does not exempt you from Peruvian tax obligations once you are considered a tax resident in Peru. Both countries may require tax filings, although this does not always result in double taxation.
Yes. If you perform the work while physically located in Peru, the income is taxable in Peru, even if your clients are located abroad, payments are made in foreign currency, or contracts are governed by foreign law.
Remote professional services performed from Peru are generally classified as fourth-category income (independent professional income) and are subject to Peruvian income tax.
Individuals may apply a standard 20% deduction on fourth-category income and an additional deduction of 7 UITs. These deductions reduce taxable income and must be properly applied.
Yes. U.S. citizens must file an annual Form 1040 and declare worldwide income, regardless of where they live.
The FEIE allows qualifying taxpayers to exclude up to a certain amount of foreign earned income if physical presence requirements are met. However, it does not credit taxes paid in Peru and may not be beneficial in all cases.
The FTC allows U.S. taxpayers to credit income taxes paid in Peru against their U.S. tax liability, usually resulting in payment first in Peru and only the difference owed to the IRS.
Yes. Once tax residency applies, you must register with SUNAT, obtain a RUC, issue professional fee receipts correctly, and maintain proper records of income.
Common mistakes include assuming U.S. tax payments replace Peruvian taxes, failing to declare foreign income in Peru, choosing FEIE without proper analysis, and not documenting taxes paid.
Confused about your tax obligations in Peru?
Whether you live in Peru, own property, or earn income locally, understanding your tax responsibilities is essential. Mistakes can lead to fines – but a smart setup can reduce your burden.
Book your private consultation with Sergio Vargas to receive practical, personalized tax advice based on your residency, income, and goals.
The session takes place via Zoom and can be conducted in English or Spanish.
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