On November 17, 2023, Law No. 21.622 was published in Chile, a significant reform in the tax and cultural sphere that introduces a Value Added Tax (VAT) exemption for certain cultural services. This law, promoted by the Ministry of Finance and the Ministry of Culture, Arts, and Heritage, aims to align the tax treatment of cultural entities with that of professional societies. Below, we explain what this new regulation consists of, who can benefit from it, and what conditions must be met.
What does Law 21,622 establish?
The new law adds Title V to the Law on Donations for Cultural Purposes (Law No. 18,985), creating a special category of VAT exemption for so-called “cultural services,” defined as activities related to research, training, mediation, management, production, creation, and dissemination of cultures, arts, and heritage.
Specifically, this exemption applies to cultural associations that meet specific requirements and carry out activities such as:
• Audiovisual, musical, and performing arts production.
• Visual arts or craft exhibitions.
• Stage productions or book publishing.
• Seminars, workshops, talks, or conferences related to artistic activities.
• Activities aimed at recognizing and safeguarding heritage.
Who is eligible for this exemption?
The law precisely defines what types of entities can be considered “cultural associations” for tax purposes:
- Companies made up exclusively of individuals who must actively participate in the provision of cultural services.
- At least 65% of their income must come from cultural activities.
- Personal work must predominate over the use of capital.
The following are also considered cultural associations, provided they are not for profit and provide cultural services:
- Corporations and foundations.
- Functional community organizations.
- Trade associations and civil servant associations.
- Cultural cooperatives, if they meet the above requirements.
Procedure and oversight
To qualify for the VAT exemption, cultural associations must register with the Servicios de Impuestos Interno (SII) and submit an annual affidavit certifying that they do indeed provide cultural services. This registration is a necessary condition for applying for the exemption and will be audited by the SII itself, which may request additional information and technical reports from the Ministry of Culture, Arts, and Heritage.
If the entity ceases to meet the requirements, it will lose the exemption as of the following month and must begin to apply the general VAT rules.
Validity and application
Although the law was published in November 2023, the provisions came into force retroactively from May 1, 2023. However, the formal requirement to register with the SII will be mandatory as of January 1, 2024.
Law 21,622 represents a significant step forward in the tax recognition of cultural activities in Chile. Equating these entities with professional societies in tax terms not only alleviates their tax burden but also formalizes a sector that is vital to the country’s social and creative development
As a firm specializing in tax compliance and tax advice, we recommend that all cultural organizations evaluate their legal and operational structure to determine whether they are eligible for this exemption.