Chile VAT Ruling on Non-Resident Services Explained

January 7, 2026

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The second half of 2025 brought many novelties and public releases by the Chilean Tax Authority, commonly referred to as SII. In addition to several Resolutions and guidelines, on December 18, SII published Letter Ruling No. 2627 (Ruling), which clarifies the VAT and income tax treatment of services supplied by non-residents, in this case, a Spanish company providing software installation services in Chile.

Key Facts from the Letter Ruling

As noted in the Ruling, a Spanish company providing software installation services for wind farms inquired about the correct application of VAT rules, and, if applicable, about the procedure for requesting a VAT refund. In its Ruling, SII underlined that, under Chilean law, services provided for consideration in the country are generally subject to VAT. Still, an exemption applies if the services are instead subject to Additional Tax or withholding tax, provided no income tax treaty exempts them.

For a Spanish company, it is essential that the Chile-Spain tax treaty applies. As a result, the company’s income is only subject to tax in Spain unless it has a permanent establishment in Chile. Regarding the VAT, if a Spanish company does not have a permanent establishment, services are subject to Chilean VAT, which the local recipient must pay but can generally recover as input VAT.

Therefore, the SII concluded that, under the concept of the taxable event, services provided from abroad and used in Chile are subject to VAT unless the VAT exemption applies because the services are subject to the Additional Tax.

Conclusion

Following the Ruling, foreign service providers must carefully assess their activities in Chile and consider both domestic VAT rules and any applicable international treaties. Equally important, local service recipients must understand how international treaties affect the transactions, as they may be required to act as the taxable persons for VAT purposes.

Source: Chilean Internal Revenue Service (SII), VATabout - Chile Clarifies Tax Rules for Influencers and Creators, VATabout - Chile Expands VAT Rules for Digital Platforms in 2025

What does Chile’s Letter Ruling No. 2627 clarify?

Letter Ruling No. 2627 clarifies how VAT and income tax apply to services supplied in Chile by non-resident companies, focusing on services provided from abroad but used in Chile and the interaction with tax treaties

Are services supplied by foreign companies subject to VAT in Chile?

Yes, services supplied for consideration and used in Chile are generally subject to Chilean VAT, unless a specific exemption applies, such as when the services are subject to Additional Tax.

How does the Chile–Spain tax treaty affect the taxation of services?

Under the Chile–Spain tax treaty, income earned by a Spanish company is taxable only in Spain unless the company has a permanent establishment in Chile, which affects whether Additional Tax applies.

Does the absence of a permanent establishment change the VAT treatment?

Yes, if the foreign service provider does not have a permanent establishment in Chile, the services remain subject to VAT, but the VAT must be paid by the local recipient rather than the foreign supplier.

Can the Chilean customer recover VAT charged on foreign services?

In general, the local recipient that pays the VAT on services supplied from abroad may recover it as input VAT, provided the usual VAT recovery conditions are met.

What should foreign service providers consider after this ruling?

Foreign service providers should carefully assess their activities in Chile, review domestic VAT rules, and analyze applicable tax treaties to determine their tax exposure and compliance obligations.

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Cross-Border Supply of Services