Chile’s Controversial VAT Exemption for Professional Partnerships: Requirements and Taxation Considerations

• Since 1 January 2023, all services rendered or used in Chile are subject to VAT unless exempted under the VAT law.
• Law No. 21,420 broadened the scope of application of the VAT treatment of services.
• The exemptions for individuals who issue invoices for professional fees and other already exempted services were maintained.
• The VAT exemption was extended to income generated by professional partnerships.
• The IRS has taken a restrictive approach in defining professional partnerships for VAT exemption purposes.
• The partnership must meet certain requirements to qualify as a professional partnership.
• Professional partnerships may elect to be taxed as corporate taxpayers.
• Companies have restructured to comply with the IRS requirements for professional partnership qualification.
• Restructuring itself will not be considered evasion, but the IRS will review for abuse or simulation.

Source: bdo.global

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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