Chile Tax Authority Exposes Shell Company VAT Fraud

The Chilean Internal Revenue Service (SII) announced that its Valdivia Regional Office initiated criminal proceedings against two Chinese individuals who represented an import-export company operating as a so-called “Chinese mall,” accusing them of large-scale tax fraud involving false invoicing and the improper use of VAT credits. The criminal proceedings are the result of an SII's investigation that uncovered a sophisticated network of shell companies operating in a coordinated manner to facilitate the use of false tax documents.

Data-Driven Audits Expose the Scheme

The investigation determined that two Chinese individuals operated a coordinated network of 20 shell companies to simulate commercial activity and support fraudulent tax reporting. SII further determined that, between February 2023 and June 2024, the company allegedly issued and declared 163 e-invoices linked to transactions that never occurred. 

These fictitious invoices enabled the business to artificially inflate its VAT input credits, significantly reducing the VAT payable and causing substantial losses to public revenue. Moreover, the same documentation was used to report nonexistent costs and expenses in the company's corporate income tax filings for the 2024 and 2025 tax years, further reducing the company’s tax liability. According to the investigation, the scheme generated an overall tax loss of more than CLP 310 million (nearly USD 360,000) as of September 2025.

During the investigation, SII relied heavily on technological and data-driven audit methods, allowing auditors to identify suspicious patterns showing that multiple supplier entities issued invoices and submitted tax returns from identical IP addresses, suggesting centralized control rather than independent business operations. Additionally, SII revealed that the listed suppliers operated only through virtual offices, lacked employees, warehouses, or commercial infrastructure, and could not be located at their registered addresses.

Conclusion

The SII's investigation results show how effective a fully digital tax environment can be, and that modern VAT fraud is no longer defeated solely by inspections, but by analytics capable of exposing coordinated schemes hidden behind seemingly compliant e-reporting. This is a reminder that, as tax administrations continue to integrate technology, cross-agency cooperation, and transactional transparency, the margin for artificial tax optimization through fictitious structures is rapidly disappearing.

Source: Chilean Internal Revenue Service (SII), VATabout