Relevant VAT changes in Law No. 21.210
On February 24, 2020, the new law No. 21.210 was published. This law includes a series of modifications to different laws with tax content in force in Chile. Regarding the VAT law, by way of summary, some of the main changes are:
1.- While applying VAT, the presumption of habituality is eliminated when the sale of a real estate occurs before one year from its acquisition or construction. In turn, the presumption of habituality for taxpayers with an effective real estate business line is eliminated. With this modification, it will be the ‘SII’ (‘Servicio de Impuestos Internos’ – Chilean Internal Revenue Service’) who will determine on a case-by-case basis the quality of the usual alienating seller, for the purposes of applying or not VAT.
2.- Said tax is levied on the remuneration of certain digital services provided by individuals domiciled or residing abroad, adding a new taxable event related to the provision of remunerated services performed by non-residents in Chile, which are the following:
a. The intermediation of services provided in Chile, independent from its nature, or sales made in Chile or abroad, provided that the latter give rise to an import;
b. The supply or delivery of digital entertainment content, such as videos, music, games or other analogues, via download, streaming or other technology, including for these purposes, texts, magazines, newspapers and books;
c. The provision of software, storage, platforms or computer infrastructure; and
d. Advertising, regardless of the medium through which it is delivered, materialized or executed.
Another novelty included in the reform, relating digital services affected with VAT, is that the VAT Law establishes a new simplified procedure to declare VAT for service providers that are not resident in Chile, who provide said services to be used in Chile by individuals who are not VAT taxpayers.
3. – The regulations on early repayment of tax credit of article 27 bis were modified. Prior to the reform, the taxpayer had to maintain the remaining tax credit for the acquisition of fixed assets, for a period of 6 consecutive tax periods. Said period decreased now to 2 tax periods, and the taxpayers are able to request a refund of the VAT tax credit.
4.- In addition, the VAT exemption to services taxed with Withholding Tax is modified. Prior to Law 21,210, the exemption from VAT with respect to services subject to Withholding Tax had the exception that they were provided in Chile and enjoyed an exemption from said tax by applying the laws or the Agreements to Avoid double taxation in Chile. In this regard, the rule adds to the exceptions of this exemption, the services ‘used’ in Chile.
Name (Author) Jorge Espinosa
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