Chile Publishes Letter Ruling on VAT Treatment of Software Development Services Provided from Abroad

The Chilean tax authority (Servicio de Impuestos Internos – SII) has published Letter Ruling No. 1039 of 23 April 2021 concerning the application of VAT on software development services provided from abroad.

It makes a note that the software, storage, platforms, or IT infrastructure being made available to the Chilean public may be subject to VAT although an exemption is possible if withholding tax applies on the related payments. In this respect, if the payments to the Peruvian company are exempted from withholding tax by the application of Article 7 (Business Profits) of the Chile-Peru tax treaty, the payments could in principle, be subject to VAT.

However,  software analysis, design, and development activities are not the type of activities expressly covered as subject to VAT in Chile, therefore, payments for such activities would not be subject to VAT.




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