Exemptions and types

In VAT there are exemptions , that is, operations in which the obligation to pay tax does not arise (articles 20 and following of the Law). This applies to public hospitalization and healthcare, services provided by dentists, public social assistance services, and child and youth education provided by authorized public or private entities.

There is a general of 21% (Article 90 of the Law), but there are two other reduced rates of 10% and 4% (Article 91) that apply to certain goods or services of general use or considered essential. Thus, the 10% tax applies to, among other things, food in general, housing, hospitality services, glasses and contact lenses, and passenger and luggage transportation. The 4% tax applies to bread, milk, eggs, fruits, vegetables, cereals, cheeses, books, newspapers, medicines, cars for people with disabilities, etc.

VAT is characterized by its neutrality, generality, and transparency, as well as its high revenue collection capacity. Certainly, from a redistributive perspective, the tax does not take into account the personal circumstances of taxpayers, and its proportional rate taxes all consumers equally. However, this phenomenon can be offset by an adequate level of public provision of goods and services, as well as by differentiating tax rates that reduce the tax burden on basic necessities, while subjecting luxury items to a higher rate than normal.