Chile is currently planning to introduce a 19% VAT on non- resident supplied digital services. No wonder as Chile leads the e-commerce market in Latin America with an annual growth of 20%. The bill was already accepted by the government and it will become effective from 1st of June, 2020.
However, the concept of jurisdiction defined in the bill is a bit broad, but here is the list of services that most probably will be affected:
- The supply or delivery of digital entertainment content, such as videos, music, games or similar, through downloads, streaming or other technology, including books, texts, magazines, and newspapers;
- Making available software, storage, platforms or technological infrastructure; and,
- Advertising, regardless of the support or media through which it is materialized, delivered or performed.
- Intermediation of services rendered in Chile, of any nature, or sales performed in Chile or abroad (if the latter results in an import);
For business-to-business (B2B) transactions, a reverse charge mechanism will apply, which means the tax must be reported and paid to the government by the beneficiary of the service. For business-to-consumer (B2C) transactions, the bill contains a simplified registration system that the Tax Administration will have to implement. The simplified registration system is meant to apply to foreign companies that provide digital services used in Chile. A previous estimate from the Economic Commission for Latin America and the Caribbean (ECLAC) stated that this bill could raise USD$40 million annually for the Chilean government.
General information on taxes in Chile: the standard VAT rate is 19% in the country. As per the VAT threshold: so far there is none in Chile – the first taxable supply evokes a mandatory registration to the system. (1) (2) (3) (4)
Global VAT Compliance specializes in helping international business be VAT compliant around the world offering VAT solutions to Digital Companies, so if you can foresee these developments impacting your business, do not hesitate to contact us.