Peru Passes Tax Exemption Law for Cooperatives
Peruvian cooperative advocacy organizations recently helped pass a law that exempts the country’s cooperatives from sales tax in their transactions with members.
With the help of local advocacy groups like the National Coffee Board, Serviperú and the National Confederation of Cooperatives, WOCCU’s Peruvian member, La Federación Nacional de Cooperativas de Ahorro y Crédito del Perú (FENACREP), had been working to get the Peruvian government to pass the bill since it was introduced into the legislature in December 2009.
“This is not just about a tax break for cooperatives,” said Manuel Rabines Ripalda, FENACREP’s president/CEO. “This law is simply correcting the interpretation of existing cooperative legislation so that tax laws will be properly applied to cooperative acts.”
“Cooperative acts,” in this case, refers to transactions between cooperatives and their members, which are now legally recognized as internal and part of a cooperative’s social objectives rather than as the taxable “sale of goods” or “provision of services.” Third-party transactions are still subject to taxation for cooperatives in Peru, where cooperative advocacy groups struggle to gain legal recognition as not-for-profits.
But FENACREP says the new sales tax exemption may save hundreds of the country’s 1,600 cooperatives from bankruptcy. Almost 20% of Peruvians are members of some form of cooperative, according to the organization, and the new law will help them contribute to Peru’s gross domestic product.
According to WOCCU, Peru has 160 credit unions that serve nearly 900,000 members.