Chile: VAT changes for services

On 4 February 2020, Law 21,420 was published. This law reduces or eliminates tax exemptions to finance the universal guaranteed pension, which establishes that, as of 1 January 2023, all services will start to be taxed with VAT in Chile, except those that are expressly exempt from VAT.

This is a relevant tax reform since several services that were traditionally untaxed in Chile will begin to be taxed with VAT, such as professional services and advice, collection, various non-ambulatory health treatments and translation services, among others.

By virtue of said modification, services such as advice and consultancies from lawyers, accountants and engineers, etc., which until now were not subject to this tax, will be affected by a 19% VAT rate.

Education and transportation services remain expressly exempt, and a new exemption was added regarding "outpatient health services, benefits and procedures" whose scope must be defined by the Chilean IRS through its powers of interpretation.

Likewise, and as an exemption, the services provided by independent individuals who issue receipts for professional fees, and those provided by "professional companies" were added. Regarding the latter, the question remains as to whether the companies that currently provide these VAT-exempt professional services could be transformed into professional companies, or could be considered an elusive act in accordance with the anti-abuse regulations, so they must maintain their corporate structure.

Read the WTS Global VAT Newsletter here.