Requirements for Exemption from Value-Added Tax on the Provision of Cultural Services

The new Law 21622, published in the Official Gazette on November 17, establishes that the different forms of associativity of the cultural, artistic, and patrimonial sector may be exempted from paying VAT provided that they correspond to companies or enterprises that are formed exclusively by individuals who effectively work in the provision of cultural services; that the total income received by the company from activities other than the provision of cultural services does not exceed 35% of its total gross income; and that personal work predominates over the use of capital.

The benefit also applies to cooperatives formed exclusively by individuals, which must work effectively in the provision of cultural services, and non-profit entities such as corporations and foundations, functional community organizations, public interest organizations, trade associations, and associations of civil servants of the State Administration.

The regulations define cultural services as those directly related to research, training, mediation, management, production, creation, and dissemination of culture, arts, and heritage. That includes, among others, activities related to audiovisual, musical, and performing arts production; visual arts and crafts exhibitions and interventions; stage works or staging; book publishing; seminars, lectures, conferences, and training workshops on cultural topics. It also includes those activities that lead to the knowledge, access, recognition, revitalization, and safeguarding of heritage.

The Internal Revenue Service (SII) oversees the correct fulfillment of the requirements to apply the exemption. To qualify a service as cultural, the agency has a term of 30 working days and may, for such purposes, request background information, reports, or opinions from the Ministry of Culture, Arts and Heritage. To access the benefit, cultural associations must register with the SII starting January 1, 2024.

Cultural associations that fail to comply with the requirements will lose the exemption from the month after the non-compliance occurred and will be governed by the general VAT rules.

The general rules will govern the activities carried out by cultural associations other than providing cultural services according to the nature of such activities.

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