Chile VAT Exemption for Charitable Used Goods Sales

The Chilean Internal Revenue Service, commonly referred to as SII, released instructions on how and when VAT exemption applies to the sale of used goods carried out by charitable institutions that come exclusively from donations received. The instruction specifies which conditions must be fulfilled for a tax benefit to apply. The purpose of these VAT rules is to support charitable organizations that finance or sustain their activities through the resale of donated items, such as clothing, furniture, appliances, or other second-hand goods.

VAT Rules for Charitable Organizations

As explained by the SII, non-profit entities recognized as charitable institutions are exempt from charging VAT when they sell used tangible movable goods, provided those goods come exclusively from donations they have received. Notably, several conditions must be met simultaneously for this tax benefit to apply.

First, the transaction must legally qualify as a sale under VAT rules. Second, the goods sold must be used, tangible, and movable property. Third, those goods must originate entirely from donations received by the organization. Fourth, the seller must be a non-profit entity recognized as a charitable institution. Lastly, the organization must be registered in advance in a special registry established by Chile’s SII.

Concerning registration, the instruction clearly states that SII is authorized to regulate the registration process through an official resolution. Nonetheless, VAT exemption cannot be applied without organizations' prior registration in this special registry. Consequently, even if all other key conditions are satisfied, an unregistered organization cannot benefit from this measure.

Conclusion

Organizations engaged in charitable work in Chile should further review SII's instructions, as they include a detailed review of each of the conditions set for applying the VAT exemption. Additionally, the SII noted that the exemption became applicable on March 1, 2026, and that it can apply even when the donated goods were received before that date. In other words, the decisive factor is not when the donation was received, but when the sale takes place, provided all defined conditions are met.

Source: Chilean Internal Revenue Service (SII)