VAT deduction is eliminated for supermarket expenses

September 14, 2021

On September 5, 2021, the “La Nación” published the VAT controversy, which could represent a setback to the formalization of the economy.

1. Controversy on the non-deduction of supermarkets’ expenses

The deputy of the Colorado Party, Hugo Ramírez, stated that the SET (Subsecretaría de Estado de Tributación – State Undersecretary of Taxation) will promote smuggling and informality given the controversy generated after the announcement that supermarket expenses will no longer be deductible within the Value Added Tax (VAT) regime.

2. VAT controls as of 2022

VAT controls will be reinforced as of January next year with the effective implementation of the electronic registration of vouchers for 100% of taxpayers. Although such control may possibly lead to a setback to the formalization of the economy.

3. Allowed and prohibited deductions

According to the laws in force since 1991 and its regulations, within the VAT regime, only products or services acquired related to the taxpayer’s work can be discounted at month-end, whether personal health, training, basic services, telecommunications, office rentals, office supplies and furniture, clothing, services related to vehicle maintenance, etc. However, purchases of items intended for food cannot be deducted.

4. Position of the set

According to the Undersecretariat of State for Taxation, there would be a possible confusion, since the purchase of products intended for VAT non-deductible food is already applied since its implementation in 1991 under Law N°125/91, implementing the same rule of Law N° 6.380/19 of Modernization and Simplification of the National Tax System in the year 2020.

Source: La Nación 06/09/21