Executive Summary:
This document provides an overview of the Chilean VAT system, focusing on its key aspects: application, rates, registration, compliance, and digital services. Chile has a broad-based VAT system, applicable to most goods and services. E-invoicing is mandated, and there is a strong emphasis on digital reporting. Critically, registration is compulsory for both resident and non-resident businesses undertaking any taxable activity, meaning there is no registration threshold. Foreign businesses providing digital services to Chilean customers must register for VAT.
1. Core VAT Principles & Application:
- Definition: VAT in Chile is an indirect tax on consumption. “Value Added Tax (VAT) is an indirect tax on the consumption of goods and services. It is applied to the value added at each stage of the supply chain.”
- Governing Body: The Chilean Tax Code governs VAT in Chile.
- Scope: VAT “applies to most goods and services supplied within Chile, as well as on imports.” This indicates a broad application of VAT within the Chilean economy.
- Currency: Chilean Peso (CLP).
2. VAT Rates:
- Standard Rate: 19%. This “applies to most goods and services.”
- Zero Rate: 0%. This rate “applies to exports and specific exempt goods.” It’s important to remember that a zero-rated sale is still considered a taxable sale.
3. VAT Registration:
- Mandatory Registration: “Mandatory for both resident and non-resident businesses conducting taxable activities in Chile.” This is a critical point: there is no registration threshold. Any taxable activity triggers a registration requirement.
- Non-Resident Businesses: “Typically require fiscal representation” to manage their VAT obligations.
- Voluntary Registration: “The VAT law in Chile contains no provisions for voluntary VAT registration, as there is no registration threshold.” This underscores the compulsory nature of registration.
4. VAT Filing and Payment Deadlines:
- Frequency: Monthly
- Electronic Filing Deadline: “20th day of the following month.”
- Paper Filing Deadline: “12th day of the following month.”
- Important Note: The deadlines are also applicable for both electronic and paper tax documents being completed.
5. VAT on Digital Services:
- Applicability: “Foreign digital service providers supplying services to consumers in Chile are required to register.”
- VAT Rate: 19%.
- Registration Threshold: “No threshold; registration required for any taxable activity.”
- B2B Sales and Reverse Charge: “Reverse charge mechanism applies (In certain circumstances, if the supplier is a foreign taxable person and does not have any established business in Chile and the transaction is subject to VAT, the responsibility to withhold VAT is on the purchaser.” This shifts the VAT accounting responsibility to the Chilean purchaser.
6. Examples of Digital Services Subject to VAT:
- “Website supply, web-hosting, and maintenance.”
- “Supply of software and updates.”
- “Streaming or downloading of music, films, and games.”
7. Digital Service Exemptions (Conditional):
- “Access to electronic newspapers and periodicals may be exempt under specific conditions, typically for educational or public interest purposes.”
- Educational media for regulated government content
- Provision of webpages and remote maintenance of hardware and software
8. E-invoicing and Digital Reporting:
- E-invoicing: “E-invoicing is mandatory for all businesses in Chile, with the exception of taxpayers registered under the simplified registration regime.” This promotes efficiency and transparency.
- E-invoice Format: “E-invoices are required to follow the format set by the Chilean tax authority (SII).”
- Digital Reporting: “Chile mandates digital reporting of VAT-related transactions through the SII’s electronic system.”
9. VAT Identification Number:
- The VAT number is the RUT number, with a format of “9 digits with a hyphen (e.g., 12345678-9).”
10. Key Acronyms:
- SII: Servicio de Impuestos Internos (Chilean tax authority).
- CLP: Chilean Peso
Implications and Considerations:
- For Foreign Businesses: The mandatory registration requirement, without a threshold, means even small-scale or occasional transactions with Chilean customers necessitate VAT registration. Fiscal representation might be required, adding to compliance costs.
- Reverse Charge Complexity: While the reverse charge mechanism simplifies VAT for some foreign suppliers, it places the onus on Chilean businesses to accurately account for VAT on imported digital services.
- Digital Focus: The mandatory e-invoicing and digital reporting requirements indicate a strong push towards digitalisation and transparency in Chile’s VAT system. Businesses must be prepared to comply with these digital mandates.
- Compliance is Key: Because of the complexity involved in understanding international VAT, enlisting support from VAT professionals may help with compliance and growth.
Disclaimer: This briefing is for informational purposes only and does not constitute professional tax advice. Consult with a qualified tax advisor for specific guidance related to your business.
Source VATit
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