Chile: VAT treatment of digital services from abroad
Recent VAT and indirect tax developments
Recent VAT and indirect tax developments
A report prepared by the KPMG member firm in Chile addresses two instances of the value added tax (VAT) treatment of digital services from abroad.
VAT for the purchase of digital services abroad
- A Chilean company advertised on the page of a provider in Ireland, for which it used an intermediary in Chile (a Chilean advertising company).
- Under certain assumptions, if the paid advertising services are not subject to withholding tax, the services are subject to VAT.
- Because the consulting company was subject to VAT on the transactions, it must inform the foreign provider so that taxes are not withheld for the services provided.
- The company must issue a purchase invoice for the transaction, and declare and pay the tax (without the intervention of the service provider).
- Regarding the validity of using a third party to administer the account as an intermediary, the tax authority (Servicio de Impuestos Internos—SII) stated that it does not have jurisdiction over the matter, notwithstanding that from a strictly tax point of view, nothing prevents the SII from using this mechanism to administer payments, provided that the amounts paid are duly accounted for.
Purchase invoice for digital services from abroad
- Taxpayers without a domicile or residence in Chile that provide digital services to individuals and legal entities that are not VAT taxpayers must register under the simplified taxation regime, which enables them to declare and pay VAT levied on such services.
- If the recipient of the digital services is a VAT taxpayer, it will be considered as being subject to tax, provided that the provision is made by a provider domiciled or residing abroad, and for which the taxpayer must issue a “purchase invoice” and declare and remit the tax (without the intervention of the service provider).
- The address of the foreign supplier used in the purchase invoices must be agreed to by the parties.
Read an October 2021 report (Spanish and English) [PDF 901 KB] prepared by the KPMG member firm in Chile
Other recent VAT and indirect tax developments described briefly in this KPMG report include the following:
- VAT on construction—Temporary reduction of the amount that is deductible from the monthly provisional payment on income tax; reduced to 32.5% of the VAT debit and 6.175% of the sale value (applicable to sales and real estate construction contracts as of 1 January 2022) and eliminated (as of 1 January 2024) of the VAT credit on construction
- Appraisal of land-for-sale with a construction (building)—Real estate with construction, reflecting VAT, acquired by real estate company
- Installations of property so that its lease is subject to VAT—Application of VAT in the lease of a property only with kitchen spaces and that does not include counters
- VAT on computer services—Services consisting of the transfer of rights of use and distribution, technical adaptation and maintenance of software
- Restitution of VAT tax credit in the merger of companies
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