2022 Tax Reform Bill updates digital reporting and criteria for determining tax obligations
The annual Chilean Tax Reform Bill has included a number of measures relating to foreign providers of digital services to local consumers:
All non-residents will be able to use the simplified registration and returns portal
Extending the legal presumption of services beyond digital
VAT on foreign digital services since July 2020
Chile introduced its 19% Value Added Tax on non-resident providers of digital services to consumers from 1 July 2020. This will require a VAT registration with the tax office, SII Commissioner, via a simplified process. There is no VAT registration threshold. Alternatively, payments made will be subject a withholding VAT. Marketplaces are also effectively drawn into the tax net as the facilitating or deemed supplier.
Check our global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.
B2B transactions by non-resident providers to Chilean business customers are subject to the reverse charge; the Chilean VAT-registered customer must report and account for the VAT and no payment is made.
The Chilean tax authorities now regularly monitor payments through to foreign providers via payment providers. They have adopted this method to identify non-compliance and raise back tax assessments.
What digital services are liable to Chilian VAT?
The following electronic or digital services are subject to VAT in Chile:
- Telecoms and texting;
- Online gaming;
- E-books and online journals;
- Digital advertising;
- Online storage;
- Downloads or streaming video, music etc;
- Cloud (SaaS) and downloads of software;
- Infrastructure as a services (IaaS);
- Platform as a Service (PaaS); and
- Intermediary services.
Determine the residency of the consumer
Providers and marketplaces need to determine the residency of their customer, or where the services were consumed, to decide if Chilian VAT is due. This may be done by relying on the following evidence:
- Billing address
- Telephone or SIM country code
- Address of payment credit card or bank transfer
- IP address of laptop, mobile phone or similar device
Registration and compliance – no VAT registration threshold
Foreign providers of digital services or facilitating marketplaces must apply for a VAT registration immediately. There is no VAT registration threshold. Non-residents do not need a local Fiscal Representative – they may VAT register directly. Providers may use the digital services portal – ‘Simplified Tax Regime’. Note: providers may not reclaim any Chilian VAT incurred if they opt for this regime. VAT registered providers do not have to supply VAT invoices.
VAT returns may be filed monthly or quarterly. In either case, the return and payment of any VAT must be made by the 20th of the month following the reporting period. VAT liabilities may be paid in either peso, USD or Euro’s. If there are no taxable supplies in the period, a nil return is not required.
Central and South America VAT on digital services
|Comments (click for details)||Rate||Date||Threshold||Comments|
|Bahamas||10%||Jan 2015||BSD 100,000|
|Barbados||17.5%||Dec 2019||BBD 200,000|
|Costa Rica||13%||Oct 2020||Nil||Withholding VAT option|
|Dominican Republic||18%||2023?||Nil||Currently withholding VAT|
|El Salvador||13%||2022||-||Replace Withholding VAT|
|Paraguay||10%||Jan-21||Nil||Withholding VAT; 4.5% DST|
|Puerto Rico||10.5%||Jan 2020||$100,000; or 200 transactions||Marketplaces|
|Uruguay||22%||Jan 2018||Nil||VAT and Withholding Tax|