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Chile - Indirect Tax Guide

Chile - Indirect Tax Guide

Explore the requirements and rules that apply to Indirect Taxes in Chile.

Explore the requirements and rules that apply to Indirect Taxes in Chile.

Traditional multi color houses in chile

General

Types of indirect taxes (VAT/GST and other indirect taxes). 

  • VAT.
  • Stamp tax.

Are there other indirect taxes? 

  • Additional tax on luxury goods. 
  • Additional tax on alcoholic beverages. 
  • Additional tax on non-alcoholic beverages with and without high sugar levels. 
  • Specific tax on gas and diesel supplies. 
  • Tobacco tax. 
  • Additional tax on emissions.

What supplies are subject to VAT?

The Chilean value-added tax (VAT), also known as impuesto a las ventas y servicios (IVA), is a tax applied on the value-added by suppliers in the supply chain. VAT is applied on:

  • the recurrent sale or transfer of movable corporeal property located in Chile
  • the recurrent sale or transfer of immovable corporeal property located in Chile, excluding lands
  • the supply in Chile of specifically listed types of services in the country
  • the utilization or consumption of specifically listed types of services in Chile
  • building activities
  • imports of goods
  • other taxable events specifically listed by the VAT law.

What are the standard or other rates (i.e. reduced rate) for VAT/GST and other indirect taxes?

  • VAT: standard rate of 19 percent. 
  • Stamp tax: money credit operations: 0.066 percent per month, with a 0.8 percent maximum; money credit operation on demand or without maturity .332 percent. 
  • Additional tax on luxury products: VAT plus 15 percent (in some cases 50 percent, such as fireworks). 
  • Additional tax on non-alcoholic beverages: VAT plus 10 percent or 18 percent (for beverages with high sugar levels). 
  • Additional tax on alcoholic beverages: VAT plus a tax rate of 20.5 percent and in some cases 31.5 percent. 
  • Specific tax on gas and diesel supplies: VAT plus, depending on the supply: gas 6 UTM/m3 (approximately 420 US dollars (USD)); diesel 1.5 UTM/m3 (approximately USD105); compressed natural gas 1.93 UTM/1000 m3 (approximately USD135); LPG: 1.40 UTM/m3 (approximately USD98). To all the fixed amounts previously mentioned, a variable amount determined by law must be added or subtracted.
  • Tobacco tax: VAT plus tax rate ranging between 52.6 – 59.7 percent over the retail price in case of cigar or manufactured tobacco products, respectively; and a specific tax of USD0.072 (0 0,0010304240 UTM) of the value per cigarette, plus an additional tax of 30 percent over the retail price.
  • Additional tax on emissions: lightweight and medium motorized vehicles pay a specific one-time tax under a fixed formula.

There are no reduced rates in accordance with indirect tax legislation.

There are no reduced rates in accordance with indirect tax legislation. However, there are exempt transactions and transactions reached at zero rate. Exempt VAT operations are those in which the supplies of goods of services are not subject to VAT. Therefore, such operations do not give rise to a right of an input tax deduction for the taxpayer (e.g. services rendered abroad, sales of immovable corporeal property as a consequence of mortgage guarantee and foreclosed real estate assets; or the auction of such properties).

A broad category of services that includes consulting and professional services are not subject to VAT.

Stamp tax is applied on acts or documents involving a money credit operation.

VAT/GST registration

Who is required to register for VAT/GST and other indirect taxes?

There is no special registration for VAT/stamp tax purposes. Nevertheless, there is an obligation for all taxpayers to obtain a taxpayer identification number (RUT), register with the Chilean Tax Administration (SII) and file a notice of commencement of activities with the SII.

Such registration not only includes VAT taxable persons but all other types of taxpayers and/or taxable persons that may be subject to Chilean tax laws as well (including income tax, VAT and others). These obligations also apply to a Chilean branch or permanent establishment in Chile of a non-resident taxpayer.

Bear in mind that according to Exempt Resolution N° 56/2016, the taxpayers or their representatives must obtain an Electronic Identity Card (e-RUT) to make their applications before the SII.

Is voluntary registration for VAT/GST and other indirect taxes possible for an overseas company (e.g. if the annual turnover is below the relevant VAT/GST and other indirect taxes registration threshold)? 

No, overseas companies cannot register voluntarily for the sole purpose of recovering VAT/GST. In order to obtain a tax registration, the relevant overseas companies should set up a PE or incorporate a branch or affiliate in Chile. The PE or the entity incorporated will become a Chilean taxpayer for all Chilean taxes.

Are there any simplifications that could avoid the need for an overseas company to register for VAT?

There are no simplifications. There is no special registration for VAT purposes. Registration before the Chilean tax authority – for general tax purposes – shall take place when a person or entity is eligible to be considered a taxpayer as a consequence of developing or expecting to develop activities subject to taxation. Non-registered taxpayers may not recover input VAT paid on the acquisition of goods and services required to provide taxable supplies.

Does an overseas company need to appoint a fiscal representative?

Yes, overseas companies obtaining a tax registration (as described above) should appoint a fiscal representative. This person should have a domicile or residence in Chile.

Which forms and supporting documentation does an overseas company need to submit for VAT/GST and other indirect tax registrations?

Applications for registration of a PE or local entity should be submitted by filing forms 4415.1 and 4418. In addition to the forms, the following documentation must be provided:

  • incorporation documents of the legal entity, translated if not in Spanish, and duly legalized 
  • certificate of good standing of the legal entity, translated if not in Spanish, and duly legalized
  • identification of the company’s representative in Chile and documents evidencing the powers of attorney granted to the representative (translated and legalized)
  • ownership title, lease agreement or other title related to the address used by the company in Chile.

Is grouping* for VAT/GST and other indirect taxes possible?

No.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

Monthly (in some special cases bimonthly). In the case of stamp tax, it will depend on the payer or the nature of the document.

What are the exchange rate rules in your country?

The tax authority can authorize certain companies to carry out accounting in a foreign currency (USD, Euros or Canadian dollars). Those authorized companies may apply for an authorization to file some or all of their taxes, make payments or request a refund (in the event of a credit balance of the applicable taxes) in the foreign currency.

Invoices issued by Chilean taxpayers should always be issued in Chilean currency (pesos), with the possibility to express the foreign currency values, indicating the exchange rate used to convert into Chilean pesos, which corresponds to the effective rate for the day of issuance of the respective invoice.

International Supplies of Goods and Services

Exports – Goods

How are exports of goods treated?

Exports of goods are generally VAT exempt. Exporters can recover VAT paid on their purchases, supplies, services hired or imports, either as an input credit against VAT charged on their local operations or in cash.

Exports – Services

How are exports of services treated for VAT/GST purposes?

Exports of services may be VAT exempt only if an export-service declaration has been previously obtained from the customs authority for the specific service, or if the service falls within a category of service previously declared as an export service by the customs authority. A list of services declared as export services is maintained by the authority and available at www.aduana.cl

Imports – Goods

How are goods dealt with on importation?

When goods are imported into Chile, import VAT and customs’ duties must be paid before the goods are released from customs’ control. VAT applies on the customs value of the goods plus customs duties imposed. VAT paid upon import may be recovered generally as an input credit in the same period by the importer.

Imports – Services

How are services brought in from abroad treated for VAT purposes?

Services in general provided outside of Chile, or technical, engineering or professional services provided either outside or in Chile are exempt from VAT provided the fees are subject to withholding tax.
In all other cases (i.e. services provided in Chile other than technical, engineering or professional) are subject to VAT.

In such cases, local taxpayer must self-assess the VAT payment in the month immediately after the taxable event is completed and then compute the VAT credit in the following month.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Yes, special provisions contained in the VAT legislation allow VAT recovery regarding certain exempt operations, such as:

  • exportation of goods
  • services provided to non-residents accepted as an exportation by the customs authority
  • sale of goods to foreign airplanes and ships making international transportation
  • international transportation services. 

In these cases, the law also provides for the possibility of a refund of the input VAT paid. This refund could be requested on a monthly basis for the VAT paid in the previous month.

Are there any restrictions to the deduction of input VAT?

Yes, the general rule is that taxpayers carrying out exempt operations cannot recover input VAT, such as:

  • some insurance transactions
  • financing operations not related to the sale of goods or services
  • educational services
  • some health services
  • transportation of persons.

Tax points

When is VAT/GST due on a supply of goods or services?

In general terms, VAT is due in the supply of goods and services on the date of issuance of the invoice or bill, as the case may be.

Invoices

Is a business required to issue tax invoices?

Yes, in most cases.

Is it possible/mandatory to issue invoices electronically?

Yes. As a general rule, the invoices must be issued electronically. It is possible and mandatory for some taxpayers.

Is it possible for the vendor to issue an invoice, (i.e. self-billing)?

As a general rule, self-invoicing is not allowed. However, in some very specific and particular cases, the VAT law and the Chilean tax authorities have allowed issue purchase invoices, allowing self-invoicing only for such cases (e.g. in case of a change of the person subject to paying VAT stated by the SII trough resolution).

Record-Keeping Requirements

How long must records and invoices be retained?

The books, accounting registry and invoices shall be kept for as long as the tax statute of limitations is open. When the proper tax return is filed, the statute of limitations is three years. Otherwise, the statute of limitations is six years.

However, please note that since August 2017, VAT taxpayers must operate through the Purchase and Sales Registry (Registro de Compra y Venta or RCV), a software created by the SII which compiles the information received from taxpayers. Based on that, companies must adapt their systems in order to reconcile the information that arise from their systems and the information provided by the SII.

Likewise, based on the foregoing, the SII will make available to taxpayers a Form 29 proposal with the VAT return for each period, which may be accepted or modified by the taxpayer.

Taxpayers must have a compatible technological system to operate in the SII systems through which the Purchase and Sales Registry is made available, and they must contrast the information of the RCV with their own records and controls.

Can the invoices be stored abroad?

No specific rule exists on this matter. In any case, it is advisable to keep all documents regarding taxable operations carried out in Chile as long as the statute of limitations is open, in order to deal with any requirement made by SII in a tax audit.

Audits

Do tax audits take place on a regular basis?

There is no regular schedule for tax audits. They depend on the audit planning, which is established by the tax authorities and based on taxpayers’ behavior. Taxpayers deemed ‘large business taxpayers’ are audited more frequently (at least once per year).

Are audits done electronically in your country (e-audit)? If so, what system is in use?

The authorities may request data in an electronic format during an audit.

What penalties can arise from non-compliance?

The penalty varies depending on the non-compliance or breach of the tax legislation. Penalties may be established as: a fine on a fixed amount or determined on a percentage of the corresponding tax due (e.g. a rate ranging from 5 to 300 percent of the tax due); the temporary closing of the business; or imprisonment.

Special Indirect tax rules

Are there any special rules for the sale of a company by one taxpayer to another where VAT is not due on the sale?

Transfers resulting from business reorganizations (mergers or spinoffs) and the transfer of a business structured as a share transfer deal are not subject to VAT.

The sale of a going concern is subject to VAT when it includes the transfer of movable personal property and/or real estate constructed by a construction company, but only on the value of such goods.

Are there unique specific indirect tax rules that you would not expect to find in ‘standard’ VAT jurisdictions?

No, but Chilean VAT is characterized by a flat tax rate, few VAT exemptions and low chances for the foreign taxpayer to recover VAT. VAT compliance is based on an input VAT/output VAT offset mechanism with carry-forward of excess input VAT. With few exceptions, there is no cash refund of excess input VAT credit (principal exceptions available for exporters and VAT incurred on the acquisition of fixed assets). As a general rule, excess input cannot be offset with other taxes, except if the taxpayer closes a business and gives notice of end of activities to the tax authority. In that case, the input credit balance may be offset against the corporate income tax (first category tax) payable for the same year.

Does a reverse charge mechanism apply for goods or services?

Yes, only in certain cases provided by law, or ruled by the tax authorities (e.g. the buyer should withhold the VAT regarding the sale of agricultural products and where the seller or service provider is not a Chilean resident).

Are there indirect tax incentives available (e.g. reduced rates, tax holidays)?

Yes, there is the possibility to request a refund of the VAT credit generated on the purchase of goods that form part of the taxpayer fixed assets, provided the VAT credit was accumulated in a period of six or more months.

Rulings

Are rulings and decisions issued by the tax authorities publicly available?

Yes, they are available at the Regulations and legislation link.

For further information please contact

Andrés Martínez
Partner
KPMG in Chile
T: +56 22 798 1412
E: avmartinez@kpmg.com

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

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