Under this structure, entities are exempt from paying this tax, which came into effect on January 1 of this year. The deadline to restructure has been extended until December 31. Experts state that the creation of new professional service companies is already reaching a ceiling.
Read the full article in La Tercera-Pulso.
Its implementation was not without criticism at the beginning of the year. Concerns came from professional associations, business groups, and there were even motions presented by members of Congress to postpone the entry into force of the law that imposes VAT on services. However, this request did not succeed and the legislation has now been in force for seven months.
This legislation originated from the discussion to implement the Universal Guaranteed Pension (PGU), as resources were needed to finance this measure. Therefore, tax exemptions were reduced or eliminated to generate higher revenues. One of these was VAT on services.
On January 1, this law came into effect, applying a 19% Value Added Tax to all individuals providing any type of service. The law maintained existing exemptions for individuals issuing professional fee receipts, who experienced no changes in their operations, as well as for other services already exempt under the Sales and Services Tax Law, such as passenger transport (urban, interurban, interprovincial, and rural, among others) and education (schools, kindergartens, universities, among others).
Additionally, the new law exempted outpatient healthcare services from VAT (medical consultations, dental services, psychologists, psychiatrists, physiotherapists, imaging services, among others).
However, the legislation also left an open door for more services to become exempt under certain conditions by converting into professional service companies. Initially, the period to do so was from January 1 to June 30, 2023. However, in June, it was extended until December 31.
Among the services that were previously not subject to VAT but are now taxed if they do not convert into professional service companies are consulting services provided by companies (engineering, accounting, legal, among others), collection services, management and administrative services, design services, software development services, audiovisual services, virtual office services, management services (within a corporate group or to third parties), technical adaptation services, software design and development, maintenance and remote support, dog daycare services, audiovisual production and filming services, travel assistance services, among others.
Those who have already done it
Seven months after this simplified registry began operating, the Internal Revenue Service (SII) reported to Pulso that 12,297 taxpayers have already declared themselves as Professional Service Companies through the special application “Extraordinary Registry of Professional Service Companies”.
Tax experts agree that the registration of professional service companies is already reaching a ceiling and that the number of new companies is likely to decrease in the coming months.
Javier Jaque, Lead Partner at CCL Auditores Consultores, added that he expects the “growth to become marginal and then decrease in the coming months, as there has already been sufficient time for entities to adopt this structure and it is now reaching its expansion limit. It is likely to reach a point of stabilization.”