FACULTY OF BUSINESS

ACCOUNTING SCHOOL

ACADEMIC REPORT

COURSE:

PERSONAL AND BUSINESS

INCOME

AUTHOR:

Concha Alvarado, Ximena Lisbeth (0000-0002-

0572-7829)

TEACHER:

INGA FLOREZ, JUDIT GIOVANNY

Trujillo - Peru
2024-1
Tabla de contenido
I. INTRODUCTION.......................................................................................... 1
II. DEVELOPMENT........................................................................................... 1
2.1 FOURTH CATEGORY INCOME.....................................................................1
2.2 FIFTH CATEGORY INCOME..........................................................................2

III. CONCLUSIONS.............................................................................................................4
 I. INTRODUCTION

Labor income is a central concept in economics that refers to the income

that people obtain in exchange for their work. These incomes, which
include salaries, wages, commissions and other benefits, are essential for
the sustenance of households and the distribution of wealth in society. In
this brief analysis, we will explore the components of labor income, the
factors that influence its determination and its economic and social
implications.
Labor income constitutes an essential part of the tax system, including
the income that individuals obtain as a result of their work activity. This
brings with it a series of tax obligations, among them, the presentation of
the Annual Affidavit. In this regard, in the report under comment, we will
detail, as a summary, its particularities.
According to article 22 of the TUO of the Income Tax Law (Supreme
Decree No. 179-2004-RF), income from work or from natural persons is
classified as fourth category income, which is income from work.
independent; and fifth category income, which is income from work with a
dependency relationship.
According to article 45 of the Income Tax Law, to determine the fourth
category net income, the taxpayer may deduct twenty percent (20%)
from the gross income of the taxable year, for of all expenses, up to the
limit of 24 Tax Tax Units. This deduction is not applicable to income
received for expenses and functions of trustee, agent, business manager,
executor and similar activities.

II. DEVELOPMENT

2.1 FOURTH CATEGORY INCOME

Conceptualization of Fourth Category Income:

They are those incomes that natural persons receive for the
performance of their work activities independently.
They qualify as fourth category income:

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According to (Legislative Decree No. 979, 2007, art. 33), the following
qualify as fourth category income:
 Those obtained from the individual exercise of any profession, art,
science, trade or activities not expressly included in Third
Category Income.
 The performance of the functions of company director, trustee,
agent, business manager, executor and similar activities,
including the performance of the functions of the municipal
councilor or regional councilor, for which they receive per diems.

Characteristics of Fourth Category Income:

The income obtained by natural persons for the performance of their
activities has the following characteristics (Bernal, 2021)
- The person who provides the service must not be subordinated by
the person who receives the service.
- The landlord is obliged to provide the service for a certain time or
for a specific job.
- There is a relationship with civil law and not with labor law.
- The person who provides the service uses his or her own means of
work to carry out the activity.
Deductions and Expenses: Taxpayers can deduct certain expenses
necessary to generate income.
Payments on Account of Income Tax: Independent professionals
must make monthly payments on account of income tax, which are then
regularized in the annual declaration.
Tax Withholding: In certain cases, clients of independent workers must
withhold 8% of the amount paid for professional services, and pay this
withholding directly to SUNAT.

2.2 FIFTH CATEGORY INCOME

Conceptualization of Fifth Category Income:

According to (Medrano, 2018, p.18), income is considered “the periodic
utility or utility that can be obtained periodically from a more or less

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durable source. As you know. The sources that produce income are, in
principle, two (capital and labor) from whose combination a third arises:
the company” “To consider that there is a relationship of dependency,
there must be subordination between the worker who obtains the Fifth
category income and his employer, that is, there is an employment
relationship, in which the work is provided according to the employer's
instructions” (National Superintendency of Tax Administration, 2022).
They constitute Fifth Category Income
Income obtained from work provided on a dependent basis:
 Salaries, salaries, allowances, emoluments, bonuses, per diems,
gratuities, bonuses, bonuses, commissions, compensation in money
or in kind, representation expenses and, in general, all
remuneration for personal services.
Workers' participation in profits.
 That come from annual allowances or another benefit.
Remuneration of partners and/or company owners.
 That come from work cooperatives
Other fifth category income.
 Income obtained from work performed independently with service
provision contracts, with a dependency employment relationship.

Does not constitute Fifth Category Income: The amounts received by

the collaborator for service matters in a place other than his or her
habitual residence, such as travel expenses, travel expenses for food and
lodging expenses, mobility expenses, expenses for assistance health and
operating expenses (Bernal J., 2018).
Unaffected Income: It should be noted that compensation for time of
service (CTS), subsidies for temporary disability, maternity and
breastfeeding, as well as life annuities and pensions that originate from
personal work are also Fifth Category income, however, By mandate
contained in subsection d) of article 18 of the Income Tax Law, annuities
and pensions are infected, that is, they do not pay Income Tax, mentions
the (National Superintendence of Tax Administration, 2022).

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Exonerated Income: “The remunerations received by officials and
employees within the organizational structure of foreign governments are
exempt, as long as they are directly related to Fifth Category Income,”
according to (Alva, 2021).

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 III. CONCLUSIONS

Fourth and fifth category incomes are essential for the structure of the labor market
and the tax system. Fourth category income is vital for promoting independent work
and entrepreneurship, offering flexibility and opportunities to self-employed
professionals. The fifth category income, on the other hand, provides stability and
security to workers in a dependency relationship, ensuring a constant source of
income and social benefits. Both categories are fundamental for tax collection and
the implementation of public policies that promote the economic and social
development of the country.

We conclude that the fourth category income includes income obtained from the
independent exercise of professions, trades and specific functions, while the fifth
category includes income derived from a labor dependency relationship. Both
categories are regulated by the Income Tax Law, which specifies the corresponding
deductions and tax obligations.

Earned income has important tax implications, since it constitutes an essential part
of the tax system. Taxpayers in the fourth category must make monthly payments on
account of income tax and can deduct certain expenses necessary to generate
income. On the other hand, income in the fifth category includes various types of
compensation and labor benefits, some of which are exempt from income tax, such
as compensation for time of service and certain subsidies. The correct classification
and declaration of these incomes is crucial to comply with tax obligations.

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REFERENCES