As of June 1st 2020, foreign companies providing digital services are subject to 19% Value Added Tax (VAT) in Chile. The measure mainly affects foreign digital platforms that provide digital services located in Chile.
This tax obligation is only for foreign taxpayers, without domicile or residence in Chile, who provide remote services to be used in national territory by natural or legal persons who are not taxpayers of VAT.
1. The intermediation of services rendered in Chile, or sales made in Chile or abroad, provided that the latter gives rise to an import (of goods);
2. The supply of digital entertainment content, such as videos, music, games or other analogous content, by means of downloading, streaming or other technology, including texts, magazines, newspapers, and books.
3. The supply of software, storage, computing platforms or infrastructure.
4. Those who carry out advertising, regardless of the medium or medium through which it is delivered, materialized or executed.
Certain digital services as B2B transactions subject to withholding tax or commissions charged by a non-Chilean resident platform to foreign service or sales providers are out of the scope of the VAT.
The service will be considered to be used in Chile if at least two of the following situations are met:
1. the IP address of the device used or other geolocation mechanism indicates that the user is in Chile;
2. The payment method used is issued or registered in Chile;
3. The address indicated for billing or issuance of the payment receipt is in Chile;
4. The SIM card of the mobile phone through which the service is received has Chile as its country code.
Regarding the penalties, the non-payment or late payment of the VAT can trigger an interest of 1,5% for each month the VAT is not reported and paid a fine between 10% and 60%.
On the other hand, to register and comply with the declaration and payment of this tax, the Internal Revenue Service enabled a special website: http://www.sii.cl/vat/index.html. In the website, companies not domiciled or resident in Chile which are affected by VAT on digital services must register.
Regarding this registration, the Internal Revenue Service has indicated that it does not constitute a Permanent Establishment.
In said website, taxpayers can choose if they will report VAT on a monthly or a quarterly basis, as well as the currency (euro, dollar or pesos) in which the tax will be paid.
Name (Author) Loreto Salas
Company Name EGYB Abogados
Street Avenida Vitacura 2939 oficina 2202, Las Condes
Post Code, City 7550011, Santiago