Peru starts taxing streaming services and other digital platforms

Peru has become the latest country in Latin America to implement a system of taxing placed on streaming services and digital platforms that are used on a daily basis, such as Netflix, Disney+ and other services like Uber, Airbnb and more. 

The Legislative Decree 1623, which amends the General Sales Tax (IGV) Law with respect to the use of digital services, establishes a form of collection from non-domiciled providers within the country. 

In countries such as the United States, Mexico, Spain and, more recently, Chile and Argentina, technology companies that operate in their territories without a physical presence are already regulated for tax purposes. The aim of these taxes is to ensure digital companies that generate significant revenues in these countries pay tax, regardless of whether they have local offices or employees. The measure in Peru seeks not only to increase tax revenue, but also to level the playing field for local companies competing with these global platforms.

In this article we will not only review the full scope of this decision in Peru, but also the current situation in other key Latin American markets such as Brazil, Argentina, Chile, Mexico, Colombia and other countries in Central America and the Caribbean. 

Streaming services consumption habits in Latin America

To give a little more context and relevance in relation to digital services in the region, Sherlock Communications developed a study to gain insights into streaming consumption in 2024, where it found 62% of users believe it is too expensive to subscribe to more than one streaming service. In addition, price increases were cited by 25% of respondents as the main reason for canceling a subscription in the last year. The imminent tax implementation, shortly to be applied in Peru – and one which is already being collected in other countries – may also raise prices, with this having consequences in the market.

Peru joins the list in search of higher revenues

From October onwards, around 600 companies will be registered to collect IGV (General Sales Tax.) Then, from November, the company will declare its earnings and make the required payment, according to comments from head of Strategies and Risks of the Sunat, José Peña, featured in the official newspaper El Peruano. 

This measure not only affects streaming companies such as Netflix, it actually covers all digital services that are purchased from abroad via the internet, such as information storage platforms, social networks, or those with additional functions, remote conferencing services and intermediation in the supply and demand of goods and services. This includes Uber, Airbnb, Spotify, Icloud, Dropbox, LinkedIn, Xbox, Playstation Network, Adobe, Zoom, Tinder, YouTube Music, LinkedIn, among others.

Moreover, companies will have to register with Sunat and obtain an RUC code, (Registro Único del Contribuyente, or ECR in English.) From there, banks would serve as facilitators since, as explained by Peru’s Minister of Economy, José Arista, each transaction made in the financial system will deduct 18% in relation to IGV.

If, for any reason, the platform decides not to pay, or not to register with Sunat, the banks will again come into play, but this time as a withholding entity. The MEF projects a collection of S/800 million this year alone, with a S/1,000 million return every year from 2025 onwards.

The main question for consumers, however, is whether they will have to pay more with the implementation of this tax: The answer is yes, as the IGV withholding would be added to the price paid by the user for the platform, i.e. streaming companies could include the IGV charge to the final receipt of their service.

Argentina also plays its own game

In Argentina, the pricing and taxation of digital services such as Netflix, Spotify and other digital platforms has previously been a matter of debate. In an inflationary economy, – an issue in recent years, – due to the expansion of consumption of online services and the need for the state to regulate and capture tax revenues from these activities, certain adjustments have been made.

The taxes applied to digital services currently include:

• VAT (Value Added Tax): Since 2018, digital services have been taxed at a 21% VAT rate. This tax applies to foreign platforms that provide digital services, such as Netflix, Spotify, Amazon Prime Video, among others.
• PAIS Tax: Implemented in December 2019, the Tax for an Inclusive and Solidarity-based Argentina (PAIS) levies an additional 8% on purchases of digital services in foreign currency.
• Perception of 45% on account of Profits and Personal Assets: As of 2020, an additional perception of 35% (increased to 45% in 2022) was applied on the value of digital services, intended to be taken on account of Profits and Personal Assets taxes.
• Stamp tax: In some provinces, such as Buenos Aires, a stamp duty is also levied on payments made via credit card for digital services.

In light of this, many platforms adjusted their prices in Argentinian pesos to reflect the tax impact, with this implying periodic increases in subscription fees. Platforms also launched differentiated or promotional prices and different plans for certain markets in order to maintain their audiences in a challenging economic context.

Changes continue in Brazil

In Brazil, taxes on streaming services and digital platforms (Netflix, Spotify, Prime Video, Disney+), transportation apps (Uber, 99), and food delivery services (iFood) are undergoing significant changes due to the ongoing tax reform. Currently, these companies pay taxes ranging from 8.65% to 14.65% on their income, depending on the tax regime. These rates include contributions to PIS (Programa de Integração Social), Cofins (Contribuição para o Financiamento da Seguridade Social), and ISS (Imposto sobre Serviços de Qualquer Natureza).

Companies operating under the real profit regime may face a higher overall tax burden. PIS and Cofins are federal taxes that finance social security programs, while ISS is a municipal tax levied on the provision of services.

Constitutional Amendment 132, which is already in force, introduces a major shift by laying the groundwork for replacing these taxes with the Imposto sobre Bens e Serviços (IBS) and the Contribuição sobre Bens e Serviços (CBS). These new taxes are part of a broader tax reform aimed at unifying and simplifying the current tax structure. However, the specific rates for IBS and CBS, which could reach up to 26.5%, and the final implementation details are still under debate and have not yet been fully finalized. The potential increase in costs for these platforms could translate into higher prices for consumers, depending on the final structure of the reform.

In addition, Bill 2331/2022, which aims to regulate video-on-demand (VoD) services in Brazil, is currently under consideration in the Chamber of Deputies. This bill proposes the application of the Contribuição para o Desenvolvimento da Indústria Cinematográfica Nacional (Condecine), a levy designed to support the Brazilian film industry. The contribution rates would be progressive based on a company’s revenue: 3% for companies earning more than R$ 96 million, 1.5% for those between R$ 4.8 million and R$ 96 million, and a zero rate for those earning less than R$ 4.8 million. However, this bill has not yet been approved and remains under legislative review.

These measures aim to strengthen Brazilian audiovisual production and ensure fair competition between streaming services and subscription TV. Additionally, platforms may be required to include a minimum amount of Brazilian content in their catalogs, which could further influence the operating costs of these companies.

Despite efforts by the technology sector to advocate for a differentiated tax regime for digital services, these platforms have not yet secured reduced rates in the tax reform proposals. The tax reform, which is still under discussion, reflects the government’s move to increase revenue and promote national culture, but it also raises concerns about the potential impact on the final cost to users of these services.

Mexico –  one of the pioneers in the region

In May 2020 it was announced that Value Added Tax (VAT), which stands at 16% in Mexico, would start to be charged on digital streaming services – Netflix, Spotify, among others. The decision was made in 2019, as part of the Miscellaneous Fiscal Resolution for Fiscal Year 2020, but it was not until the following year that the then Secretary of Finance, Arturo Herrera, had to clarify the change: 

‘These taxes already exist, what happened is that they were not charged and the reason why they were not charged is because the tax structure of Mexico and all other countries was associated with tangible goods’.

As for these intangible services, such as video or music streaming, transport by application, as well as others, the tax charge was passed on to the user, as mentioned by several analysts. For example, in the case of Netflix, the Basic Plan went up from $129 to $139 pesos a month, the ‘Standard’ plan rose to $196 pesos and the ‘Premium’ to $266 pesos. Another case worth mentioning was Spotify, which also increased its prices.

In the same vein, the Ministry of Finance said the change would raise $4,394 million pesos in 2020, which has steadily increased in recent years. The initiative, similar to those taken by other countries, according to analysts, responds to the ‘fiscal vacuum’ in which these companies were operating.

However, as many of them are located outside Mexico, few (which also include food delivery and transport services such as Rappi, Uber, among others) were able to issue CFDI: digital invoices with fiscal value. 

To cite another case, since 2020, Airbnb has collected approximately 6 billion pesos in taxes in Mexico. This includes Value Added Tax (VAT) and Income Tax (ISR), as well as an additional tax for temporary rentals within certain entities. 

In Mexico City, as of June 2024, Airbnb started charging a 3% tax on the provision of accommodation services. This tax is part of a reform seeking to regulate accommodation through digital platforms. The platform has established agreements with local governments to facilitate tax compliance, which has allowed for greater regulation of online accommodation services.

The evolution of taxation in Colombia

In recent years, Colombia has intensified its efforts in the taxation of profits generated through digital platforms. Although the charging of VAT on these services has long been established, Law 2277 of 2022 marked a milestone by introducing the concept of Significant Economic Presence (PES). 

This law expanded the taxation scope, obligating digital platforms exceeding certain thresholds of revenue (over $1,327 million or 31,300 Tax Value Units), or users (over 300 thousand) in Colombia to register and pay taxes, even without a physical presence in the country.

The government issued Decree 2039 of 2023, which implies that foreign digital platforms pay taxes beyond the 19% VAT currently levied on these services. This tax scheme started to apply from January 2024, and with this new decree digital platforms will have to choose between filing their income tax return with the DIAN, or paying a simplified tax corresponding to 3% of their bimonthly turnover.

The implementation of the PES has generated debate surrounding the fair tax burden for these companies and its consequential impact on consumers. While this change seeks to ensure digital platforms contribute to the national treasury, it has also raised questions  regarding its exact definition, as well as the real possibility of consumers bearing part of this burden through higher prices. In Colombia, this process continues to develop, with tax authorities working to refine control and enforcement mechanisms.

The dynamic scenario in Chile

In February 2020, when Sebastián Piñera was president in Chile, a tax reform was enacted implying a 19% VAT charge. The reform would come into play from June 2020 the same year and be placed on digital services for platform providers with no domicile or residence in Chile. This meant that the largest platforms such as Netflix, Airbnb, Spotify, Amazon and others had to pay taxes. 

The Internal Revenue Service (SII) enabled access to a platform for companies to obtain a ‘Tax ID Number’ as well as a key to comply with the new scheme. Through the platform, it is also possible to select the currency (from which the peso, euro or dollar can be chosen) and frequency in which the payment will be made (monthly or quarterly, the latter being a preference for companies). 

The results have been very encouraging, with 426 platforms registering to pay VAT on digital services in Chile, and with collections of more than USD 1 billion by February 2024. This being said, there are still 92 platforms that are not declaring and paying taxes, companies  such as WordPress, Tripadvisor and others. 

A panoramic view of the situation in Central America

In Panama, regulations are being discussed for foreign digital platforms such as Netflix, Spotify, Amazon and Uber to start paying taxes on the services offered within the country. Currently, these platforms are not subject to ITBMS (Impuesto a la Transferencia de Bienes Muebles y Servicios), the equivalent of VAT in other countries, even though Panamanian consumers use these services and pay via credit card. 

It is expected that the collection of these taxes could generate significant revenue for the country, with estimates indicating it could reach $100 million annually. Although the bill regulating these taxes has been discussed since 2019, it has not yet been approved, and authorities continue to work on its development to ensure its proper implementation.

In Costa Rica, as of October 2020, a 13% Value Added Tax (VAT) has been charged on cross-border digital services. These services are, by definition, providers which are not established or domiciled within the country via the internet or any other digital platform and consumed by customers in the national territory. VAT is automatically reduced when payment is made with credit or debit cards issued by domestic financial institutions. 

In almost four years, the Ministry of Finance reports a collection of more than ₡81 billion in VAT. The tax authority even described Costa Rica as a ‘success story’ on how to prosecute tax evasion by companies doing business in the country without actually being registered as taxpayers.

In Guatemala, the Superintendency of Tax Administration (SAT) has announced it will start collecting taxes from digital companies such as Facebook, Netflix and Spotify through the Digital Economy Compliance (DEC) platform, developed by the Inter-American Center of Tax Administrations (CIAT). This tool will allow the SAT to manage and collect VAT on services provided in the country by said companies, which until now have not been subject to these tax obligations.

Meanwhile, the Dominican Republic is moving forward with the implementation of a regulation that will require foreign digital platforms, such as Amazon, Google, Netflix, Spotify, Uber and Airbnb, among others, to pay taxes for the services they offer in the country. 

This regulation, which mainly regulates ITBIS (Tax on the Transfer of Industrialised Goods and Services), is in its final stages of development, according to the Directorate General of Internal Taxes (DGII). The measure seeks to establish fair competition between stated platforms and local companies, which are already subject to taxation.