SUNAT: Obstacle to Free Trade in Peru

Posted on 07. Aug, 2013 by in peru

Last year, I attempted an importing business in Peru. An American friend in Bogota has a connection who refurbishes iPhones on the cheap. He was making good money selling them in Bogota. Looking at the used iPhone market online, Peru looked more attractive than Colombia. I decided to test the waters.

The supplier could sell a refurbished iPhone 3 for $154, which included taxes and shipping to Peru. At the time, $154 was about S/. 425. Used iPhones of the same model were selling for 700 soles on MercadoLibre. Even at S/. 500 each, we would realize a 20% profit.

Smartphones in Latin America are a hot item, especially iPhones. Their prices are prohibitively high and come with expensive plans, so middle class people rarely have them. BlackBerry still dominates the market. As you read this, there is a Peruvian (and a Colombian) somewhere signing up for a BlackBerry with a heavy plan attaches. In fact, that Peruvian (or Colombia) is really proud of himself (or herself) for doing so.

I believed that affordably-priced, unlocked, factory-refurbished iPhones would be a hit among middle-income Peruvians. I purchased nine units for $1386. We used DHL as a courier, thinking they would help with any importing issues.

I imported the iPhones in my wife’s name, as a gringo name would be a red flag to SUNAT, the customs office in Peru. To import iPhones, she had to establish a business ID (RUC) with VUCE. Once she had a RUC, she had to gain permission from Peru’s MTC, the Ministro de Transportes y Comunicaciones, to import cell phones. Once she was set up, we had the iPhones shipped.

Then SUNAT stopped our shipment. DHL Peru informed us that SUNAT had denied our valuation of the used iPhone 3’s at $135 per phone (excluding shipping), or $1215 according to the invoice. SUNAT slapped on an FOB value of $2,999.97, or $333.33 per phone, about 250% the real value of the phones.

These phones were the iPhone 3 8gb, and they were used. I couldn’t believe the arbitrary valuation. That was what they would’ve cost new a couple years prior. But what made things worse was that with the new valuation, SUNAT was demanding $418.05 in taxes ($46.45 per phone), or 30.2% of what we paid including shipping. This would’ve wiped out our planned profit.

We appealed the valuation but were denied. We paid the $418.05. I’d like to say we at least recouped our investment. But I prefer not to think about this venture.

Conclusions

1) Free trade deals don’t apply to small businesses

At least on the Latin American side, the free trade deals don’t apply to small players. For Chevrolet or McDonald’s, or other companies with millions of dollars and armies of lawyers, a free trade deal can be taken advantage of. But a small business with few resources is at the mercy of SUNAT.

2) SUNAT is a revenue center

Despite the Peru-United States Trade Promotion Agreement, SUNAT has been a profit center for a long time. The trade deal didn’t change that. I believe the SUNAT employees still believe their job is to charge for commerce, as opposed to allowing it to go unabated. I’ve heard similar stories from expats who have shipped containers of their home furnishings to Peru.

3) Latin American red tape is not to be underestimated

Bureacracy is a well-known problem in Latin American governments. To import these cell phones, my wife had to deal with two different government offices, which were both little more than rubber-stamping agencies. To sell Peruvian herbals in Colombia, I would’ve had to register the brand with INVIMA for $1000 per product. For a product that earns $2-3 profit per unit, you’d have to be extremely confident to just break even. So I didn’t even try. Each step, stamp, cost, and tax in the process discourages trade.

4) Free trade deals are never free

The United States subsidizes farm land, which puts Peruvian and other foreign food producers at an impossible disadvantage. The U.S. also demands certain treatment to organized labor from other countries. In order to get their interests into a deal, the American government allows concessions from the other side. While the U.S. protects American agriculture, Peru and other countries are allowed to tax other industries. You can see the Peru Tariff Schedule (where the cell phone tariff is between 4 – 7%).

Free trade deals are never truly free. The Peru-United States agreement didn’t even include the term, “free.”

5) SUNAT is an obstacle to free trade in Peru.

I’ve exported from Peru to the United States for almost five years at the time of this writing. I’ve had problems, but I’ve never been shut down so quickly and decisively by the FDA or CBP like I was by SUNAT.

After the fact, I thought about everybody I personally knew who was importing to Peru. In every case, the importer either has a (corrupt) connection at SUNAT, or they bring American products into Peru by hand (in a suitcase during a flight), which isn’t really importing.

Another theory

At one point in my desperation I turned to the Expat Peru forum. One user from this forum thread:

Are you importing this things as a private person, or as a business. If you are importing them as a business then any IGV they force you to pay, actually is a IGV credit, which you can use as a credit in your IGV payment once you sell your items. So in reality you won’t pay those taxes, as they are refunded in your company.

If you import them however as a private person, then you pay the IGV, and I suppose you sell the items without factura or boleta. So it makes sense that Peru taxes you as you import ..

Suppose you bought the item for $100. And Customs tells you it is worth $200. and tax you IGV ( $36 )
Those $36 are a tax credit, which you deduct from your payment once you sell your product.
Let’s say you sell it for $125 + IGV ($22.50 ) = $147.50.
Now you don’t have to pay the IGV ( $22.50 ) as you have a credit of $36. So your new credit is $13.50 which you can deduct of your future payment, or ask back of Sunat to pay your utility tax with a PDB Exportadores.

The end result of all this calculations is that you simply pay the IGV over your selling price, which is logic and how it is supposed to be.

But apparently you import them as a private person, and have to pay the $36 of IGV. And then you sell them basically on the black market without an invoice. So what did Peru to stop this ? They tax you higher when you import, and when you legally sell it with invoices, you get the extra tax back. It is all to stop what you appear to be doing… Importing informally and selling it informally.

I almost thought this might me a legitimate argument. However, we got no documentation from SUNAT, no receipt, no invoice, nothing. As always, we just got a bank account number and a balance to pay. And the price we paid per phone obliterated any chance for a profit to sustain the business.

Also, DHL sent a guide outlining import duties. Try to make sense of this document outlining how much SUNAT decides to charge importers. Then you’ll understand why there are so many BlackBerrys in Latin America, and so many Latin Americans have phones with buttons.

What do you think?

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9 Responses to “SUNAT: Obstacle to Free Trade in Peru”

  1. Jimmy

    07. Aug, 2013

    That stinks. Young girls love their I-phones. When enough young women understand that the bureaucracy keeps I-phones out of their pretty little hands, there will be a revolution and the fossilized klepto-crats will be overthrow.

  2. Jimmy

    08. Aug, 2013

    Ship them to Arica, Chile and see if you can bribe a customs guy.

    Hernando De Soto of the ILD once stated that the main problem with state corruption is that it forces otherwise honest people to break the law in order to survive.

  3. Bar

    08. Aug, 2013

    the problem with shipping them to arica is that once you cross the border you will then encounter sunat road blocks futher up the road that search every car and bus for items to tax, i recently did the border crossing and we got stopped 5 times on the way back to lima at these roadblocks

  4. Solomon

    08. Aug, 2013

    There has to be a way, man.

    Either make friends at SUNAT and grease the right person, or try it as a corporation, like the guy said. Maybe name your corporation something that sounds REAL similar to a familiar sounding major multinational.

    Maybe you could charge a little more, find a way to get them a little cheaper, and ship them with a person- either yourself or a mule of sorts. Higher volume would also offset ticket cost.

    If you bought me a round trip ticket to Peru (or Colombia etc) I’d pack the shit out of those phones and bring em down for ya. I’d bring my own money for fun stuff.

    You may want to look into how you can sell them higher, like hit up the high-end putas, or the coca boys. Better yet- sell them to visiting gringos that have more money than sense and explain how much play they’ll get if they offer a girl an iphone.

    If you persist, I imagine you’d find your way.

    and srsly, I’d be on the next plane out and I’d sling heavy baggage for ya.

  5. Colin

    10. Aug, 2013

    @ Jimmy, Bar, and Solomon – The problem with bribes, Arica, suitcases, and all that is I’m not interested in starting that kind of business. It it’s not 100% legit, there’s significant risk for it not to work long-term.

  6. Andrew

    12. Aug, 2013

    I don’t know how it works in Peru, but I have sent about 6 used Blackberrys/iPhones from the States to Colombia and here’s how to do it:

    Send 1 at a time – they do not check packages that are under 1 lb.

    Use the US Post Office with tracking. This will cost $24 and will arrive in 6-10 days. Don’t insure, but pay for the tracking, otherwise your package will be stolen.

    Try it with one. Very low downside.

  7. 2-RO

    18. Sep, 2013

    @Solomon your funny bro!!! you remind me times haha.Anyways I also plan om sendind iphones as well.now is this true that they don’t check anything under 1 pound?? And is this serpost ?? @Andrew that would be great I will have to try that out,do you have any knowledge of this or fact?? Is really interesting

  8. 2-RO

    18. Sep, 2013

    someone please email me with more info on this 2ro707@gmail.com thanx!!!

  9. Cesar

    02. Jul, 2014

    Hey Colin, I live in Peru and I just wanted to know if you are finally having success selling iPhones or any other gadgets. I heard something that if you import anything below $200 they cant charge you taxes or IGV. Soon im traveling to the US (I am a US resident) and I wanna start sending gadgets for sell here in Peru.

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