/ Law that Exempts Cultural Associations from VAT was Enacted

Jaime Urzúa
Associate attorney
Alessandri

Law 21,622, which introduces amendments to the Law on Donations for Cultural Purposes, was recently enacted (November 17, 2023).

This new law exempts the Value Added Tax (VAT) on the provision of cultural services by cultural associations that “are exclusively formed by individuals, whose income from activities other than the provision of cultural services does not exceed 35% of the total gross of the business within the immediately preceding calendar year, and in which personal – physical or intellectual – work predominates over the use of capital”.

Those organizations that have been created under other laws, but that comply with the requirements established by this law, will also be considered.

What does the law understand by cultural services?

They are those that “are directly related to research, training, mediation, management, production, creation, and promotion of cultures, arts, and heritage, as well as those that lead to knowledge, access, recognition, revitalization, and safeguarding of heritage”.

Cultural associations seeking to qualify for the exemption shall register in a registry to be created and managed by the Internal Revenue Service (SII). The SII will also be responsible for verifying whether an activity qualifies as a cultural service, for which purpose it may request relevant information.

The amendments introduced by this law will take effect retroactively as of May 1, 2023 and the obligation of cultural associations to register will be enforceable as of January 1, 2024.