VAT on digital services

• Special territoriality tests of article 5 of VAT Law (such as IP address, address for billing purposes, etc.) would apply to all services rendered remotely (and not only to digital services taxed with VAT pursuant to article 8 letter n) of VAT Law as it is now).
• It is proposed that the fulfillment of only one of the special territoriality tests is required for the relevant service to be deemed used in Chile (currently the fulfillment of at least two special tests is required for these purposes).
• A new special territoriality test would be incorporated, corresponding to the user of a remote service having declared, at the time of registering in the relevant platform, support, or remote system (or when updating the information contained therein), that he/she has a residence in Chile for tax purposes.

• Registration in the simplified regime of paragraph 7 bis of the VAT Law would become mandatory for all foreign taxpayers who perform sales or render services subject to VAT (currently it is mandatory only regarding VAT on digital services under Article 8 letter n) of the VAT Law).
• In addition, Chilean IRS may request the withholding, reporting and payment of VAT (currently only reporting) to issuers of cards or other similar payment systems, with respect to transactions taxed with VAT and carried out by non-resident that are not registered in the simplified regime. Same obligation may be established by Chilean IRS regarding intermediaries of services rendered by non-residents when the underlying service is subject to VAT and the users are not VAT taxpayers. In both cases the simplified regime of paragraph 7 bis of VAT Law shall apply.

Entry into force: First day of the month following the publication of the law.

Article 59 bis of the Income Tax Law would be amended, extending the Withholding Tax exemption to all VAT taxable services rendered by non-residents to individuals who are not non VAT taxpayers. Currently, this exemption is only available for services taxed with VAT in accordance with Article 8 letter n) of VAT Law.

Entry into force: from 2023.