Chile - VAT Rules for Suppliers of Digital Services

Although Chile was not the first country in Latin America to implement VAT on Digital Services, the platform developed by the Servicio de Impuestos Internos (SII) in 2020 so that international operators could register and declare this tax has already been highlighted internationally.

Google, Netflix, Apple, Spotify, Meta Platforms Ireland, Sony Interactive Entertainment, Microsoft, Amazon, Valve Corporation, and Rasier Operations BV (Uber) are the ten platforms that have paid the most taxes since the tax came into effect on June 1, 2020.

Digital Services and VAT

Starting June 1, 2020, foreign providers of digital services should register for VAT when the place of supply of their services is within the country. The Tax Authority has developed a simplified registration for tax purposes for foreign providers of digital services. 

The new regulation introduced under which conditions the foreign supplier of digital services is obliged to register, collect, and remit Chilean VAT. The conditions can be reviewed below : 

1. Intermediation - facilitation for provision of services by third parties and import of goods from abroad;

2. Supply or delivery of digital entertainment content, such as videos, music, games, or other analogs, through downloading, streaming, or other technology, including, for these purposes, texts, magazines, newspapers, and books;

3. Supply of software, storage, platforms, or computer infrastructure;

4. Advertising, regardless of the medium or medium through which it is delivered, materialized, or executed.

For a service to be considered as used in the national territory, at least two of four conditions have to be met:

1. The IP address of the device used by the user or another geolocation mechanism indicates that it is located in Chile;

2. The card, bank checking account, or other means of payment used for payment is issued or registered in Chile;

3. The address indicated by the user for billing or the issuance of receipts, or the payment is located in the national territory; either

4. The mobile phone's subscriber identity module (SIM) card is used to receive the service with Chile as the country code.

Foreign providers of digital services should adhere to the simplified tax regime. They can declare and pay VAT either monthly or quarterly until the 20th of the first month following the reporting period. All those who register for this regime are freed from the obligation to issue receipts, invoices, credit or debit notes, and other tax documents for their operations.

Conclusion

Worth noting is that taxpayers who use the Simplified Tax Regime are not entitled to claim an input tax credit. This provision brings this regime closer to the so-called “pay-only regimes,” seeking to ensure an adequate balance between simplification and protection of tax collection since the foreign taxpayer benefits from a declaration of less complex taxes.

Source: CIRCULAR N° 42, Servicio de Impuestos Internos