According to our legislation, the services will be taxed with Value Added Tax (“VAT”) when they are provided or used in the national territory, irrespective of the corresponding remuneration is paid or received in Chile or abroad. It will be understood that the service is provided in the national territory when the activity that generates the service is developed in Chile, independently of the location where it is used.
In this matter, on February 24, 2020, was published Law No. 21.210 on Tax Modernization, which introduces several amendments to the tax legislation, in particular, it incorporates a new taxable event subject to Value Added Tax applicable to service providers not domiciled or resident in Chile who, from abroad, provide services used in the national territory.
The law foresees four special situations that will constitute the new taxable event subject to VAT, as follows:
1. The intermediation of services provided in Chile, regardless of their nature, or of sales made in Chile or abroad, provided that these give rise to an import.
This rule imposes VAT on remunerated "intermediation" services performed by suppliers domiciled or resident abroad and provided or used in Chile, regardless of the underlying service. For these purposes, intermediation is understood as the services similar to the concept of brokerage, which import a paid intermediation to the parties in order to facilitate the conclusion of their contracts, whatever form such intermediation takes, that is, through digital platforms or other means.
2. The provision or delivery of digital entertainment content, such as videos, music, games or other similar, via download, streaming or other technology, including texts, magazines, newspapers and books.
3. The provision of software, storage, platforms or IT infrastructure by providers domiciled or resident abroad.
4. Advertising, regardless of the support or means through which it is delivered, materialized or executed.
Territoriality of the tax
For the purposes of this tax, services are presumed to be used within the national territory if at least two of the following situations apply:
a) the IP address of the device used by the user or other geolocation mechanism indicates that it is in Chile
b) the card, bank account or other means of payment used for payment is issued or registered in Chile;
c) the address indicated by the user for billing or issuance of payment vouchers is located in the national territory; or,
d) That the subscriber identity module (SIM) card of the mobile phone through which the service is received has Chile as its country code.
Simplified system and issuance of documents
In accordance with the recommendations of the OECD, our country has implemented a simplified system for the registration and payment of the tax, in order to facilitate tax compliance by taxpayers who are not domiciled or resident in Chile and who provide services to be used in Chile, by natural or legal persons who are not payers of Value Added Tax (B2C).
Under this new legislation, the foreign service provider may register with the Internal Revenue Service, and shall file and pay electronically the total tax, with a 19% rate, charged on its operations. Such payment may be made monthly or quarterly, until the 20th of the month following the end of the referred period.
Those who register in this record are released from the obligation to issue tax documents (invoices, receipts, credit or debit notes).
It is important to specify that the registration does not imply in any case the constitution of a permanent establishment in Chile, nor does it generate more obligations than those expressly imposed by law.
In the case of foreign taxpayers duly registered under this regime, who carry out operations whose beneficiaries inform them that they are payers of Value Added Tax (B2B), it will be the latter who must comply with the tax obligations (change of subject), who shall issue a "Purchase Invoice" for the respective operations, and file and pay the tax directly, without any intervention by the service provider.
In the absence of such information, the foreign provider must withhold the tax and pay it the Treasury.
For more information, please contact Claudia Sossa, Lead Partner, Tax.
T: +56 2 2253 9050
E: [email protected]