To promote investments in mining and hydrocarbons in Peru, the MEF plans to extend the VAT refund to exploration activities

By MEF

This is a machine translation of the original press release issued in Spanish

With the aim of encouraging more mining and hydrocarbon companies to carry out exploration activities in the country, the Ministry of Economy and Finance (MEF) proposed to the Congress of the Republic to extend for five more years, until December 31, 2027, the refund of the General Sales Tax (IGV) and the Municipal Promotion Tax (IPM) for this activity.

This benefit is in force through Laws No. 27623 and No. 27624, which expire on December 12, 2022. Both laws, published in January 2002, have been consecutively extended in order to maintain tax competitiveness with respect to competing countries. , promoting investment in exploration in the country.

The Minister of Economy and Finance, Kurt Burneo, who supported this proposal before the Energy and Mines Commission of Congress, pointed out that this measure will affect the development of the mining and hydrocarbons sector, in addition to providing future benefits to the State from the contributions provided by companies that find resources and move on to the next process, which is the beginning of the exploitation phase (production).

He added that mining investment in exploration is of vital importance for the development of the mining industry, which has positive effects on private investment, mining production, exports and also on tax revenues, therefore it is important to maintain this incentive to continue promoting investment in exploration.

“A fundamental element for the continuity of the mining activity definitely has to do with exploration, otherwise we are hardly going to think about the sustainability of this activity in the future. For that, the country has to be attractive today and promote investment in exploratory activity, generating mechanisms for this activity, which is very risky”, he explained.

In addition, he referred that the increase in the term of validity from 3 years to 5 years is based on the fact that exploration projects have a longer average duration; but they are necessary to increase the levels of mineral reserves that are being depleted.

Mining and hydrocarbons represent 11.6% of GDP in 2021 (mining: 10.9% of GDP and hydrocarbons: 0.7%), and investments in both sectors together are equivalent to 13% of total investments in 2021. As of August this year, mining investments totaled US$ 3,245 million, 7.8% more than the same period last year.

These are key sectors for the generation of foreign exchange, which represented approximately 69% of total exports of goods in 2021. In addition, last year the mining and hydrocarbon sectors generated tax revenues of S/ 20.6 billion, the highest historical amount in recent years.