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Chile introduces 19% VAT on Digital Services

Chile introduces 19% VAT on Digital Services

From the 1st June 2020, Chile will impose 19% VAT on digital services sold by non-resident businesses to Chilean nationals. 

The rollout means that foreign digital service providers will have to register for VAT purposes in Chile and report the relevant VAT to the local authorities if they wish to remain compliant within Chile. The ruling is part of Chile’s tax reform which also set out to establish a simplified VAT regime for foreign suppliers to Chile.

What Digital services are subject to VAT in Chile?

The following digital services provided by foreign service providers will be subject to VAT:

  • Intermediation for services provided in Chile, whatever their nature, or intermediation of sales made in Chile or abroad, provided the sales made abroad trigger an import into Chile
  • The supply or delivery of digital entertainment content, such as videos, music, games or other analogous content, by means of downloading, streaming or other technology, including for these purposes, texts, magazines, newspapers and books
  • The provision of software, storage, computing platforms or infrastructure
  • Advertising, regardless of the mechanism through which it is delivered or created
  • Advertising, regardless of the mechanism through which it is delivered or created

The provision of software may also include cloud computing, SaaS, IaaS (infrastructure as a service) and PaaS (Platform as a Service).

The following digital services are not subject to the VAT: (i) business-to-business transactions subject to withholding tax; and (ii) certain commissions charged by a non-Chilean resident platform to foreign service/sales providers.

Reporting and registration

To register for the simplified VAT regime, foreign service providers must use the online “Digital Services Portal” (http://www.sii.cl/vat/index.html) (available in English) created by the IRS. Alternatively, vatglobal is able to offer end-to-end assistance with your registration and filings needs. 

Businesses who do not comply with the new obligations could face some major penalties. Failure to comply could result in interest of 1.5% for each month the VAT is not reported and paid and fines of up to 60% of the tax owed.

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