Service companies must issue VAT invoices as of 2023

Currently, most services are not taxed with VAT except those listed in the Income Tax Law (article 20, numbers 3 and 4).

The current tax regulations imposes VAT on a specific group of services, which are linked to the activities and entities expressly indicated in numbers 3 and 4 of article 20 of the Income Tax Law, leaving out of this taxation very generalized services such as consultancies of any kind.

This tax situation changes from January 1, 2023. According to the provisions of Law 21.420, all services will be taxed with VAT (19%), except for professional services rendered by individuals who issue fee slips, professional partnerships and educational services, transportation of persons, unfurnished real estate rental, and ambulatory health services.

What is a professional partnership?

For the SII, a professional partnership is constituted by a group of people where the partners are natural persons or other professional alliances, and in which all its members must have professions related or complementary to the corporate line of business. Its exclusive purpose is the provision of professional services or consultancy.

In this regard, the regulation issued by the SII (Circular 46 of 2008) on joint stock companies (SpA) expressly states that they cannot be a professional partnership. Therefore, companies that provide services under SpA will always be taxed with VAT.

The companies that currently provide VAT-exempt services must request the SII to enable them to become VAT-taxable and start issuing VAT invoices from January 2023. They must also inform their clients that from January 1, 2023, by the provision of Law 21.420, the value of their services will be surcharged with VAT (19%).

Some services that were not subject to VAT and that, as of January 1, 2023, will be subject to VAT:

  • Consulting services companies (engineering, accounting, legal, others).
  • Collection services
  • Administration and management services
  • Design services
  • Software development services
  • Audiovisual services
  • Virtual address services


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