The Internal Revenue Service (SII) opened a period from January 1 through June 30 so that those who meet the requirements may apply to the extraordinary registry of professional partnerships.
Read the full article in La Tercera-Pulso.
Despite all the complaints and objections raised by the various professional associations and business guilds, on January 1 the law that taxes services with VAT came into effect, making all those who provide any type of service subject to this tax, except for those explicitly exempted by law: educational services, transportation services, and outpatient healthcare services. All the rest must now pay it.
However, the law left an open door so that, under a certain structure, this type of service could remain exempt. Thus, according to the Internal Revenue Service (SII), professional partnerships will be exempt from paying the tax.
What requirements must they meet? The SII details that they must be made up only of natural persons, meaning they must not be companies, although they may associate with other professional partnerships. The partners must engage exclusively in professional services and not carry out activities such as trade.
In addition, all partners must practice the same profession for the partnership or a similar, related, or complementary profession. Partners who only contribute capital are not accepted. If all the requirements are met, but the partnership is not registered with the SII as a Professional Partnership, it may use the simplified procedure that will be available from January 1 through June 30, 2023, through the service. Now, in the case of companies belonging to the Ministry of Economy’s Business Registry, the SII explains that the change can be made through the business and companies registration platform, and then registered as a Professional Partnership with the SII.
One week after this simplified registry began operating, the Internal Revenue Service reported that 1,646 taxpayers have declared themselves to be Professional Partnerships through the special application “Extraordinary Registry of Professional Partnerships.”
In the breakdown, on January 1 the registration began with 69 taxpayers as professional partnerships, then on January 2 it rose to 135, and January 3 was the day with the highest number of professional partnership registrations, with 697 taxpayers. It then began to decline until, on January 8, the number was 17.
Experts state that this preliminary figure already shows the interest in restructuring, and for that same reason they believe the number of registered entities will continue to rise exponentially, which could generate negative effects on revenue projections.
CCL TAX tax consulting lead partner Javier Jaque shares a similar view, believing that due to the high level of interest in restructuring, revenue collection may be lower. For this reason, he argues that the problem lies in “the exemption that was opened up. That is where the distortion lies.”
The estimate for this measure is based on the latest tax expenditure report prepared by the SII, which estimates the VAT revenue loss from services that are exempt or untaxed. In this way, the amount associated with this measure is estimated at CLP 555.9 billion (in 2022 pesos).