Deputies approved two bills that would exempt construction and tourism sectors from the collection of the VAT for one year, even though an alternative source of revenue for the Government has not been specified.
The files 21,934 and 21,637 would slow down the tax collection that started last July 1, established by the Public Finance Strengthening Law. Both bills have been approved in the first debate with 44 votes in favor and none against.
Another proposal would keep tourist services exempt for another year and then as of July 1, 2021, they would pay a rate of 4%, then 8% as of July 2022. Finally it would be up to the general 13% as of July 2023. The argument against this is that entrepreneurs couldn’t transfer to clients the VAT that they don’t pay for their supplies. Another plan would have allowed tourism providers to increase profits by charging 4% VAT and granting tax credits. This was not approved.
The exemption from VAT in construction extends to related services like engineering, architecture, topography, and civil construction. This is important because this sector contributes over 8% of the GDP and over 16% of direct and indirect employment. This extension will help reactivate the economy.