Indirect tax - Chile

Value Added Tax (VAT) is the main type of indirect taxation in Chile. The VAT has a flat rate of 19%.
In general, VAT is applicable over the price charged for the following transactions:
• Sales of tangible goods provided by habitual sellers
• Services, whether habitual or not, that can be considered commercial, industrial, financial, or related to mining, construction, insurance, advertising or other commercial activities
• Imports, whether habitual or not
• Transactions deemed by the VAT law as “sales” or “services”. Examples of these transactions are:
– The leasing of tangible goods and real estate that includes furniture in general or equipment which fits the property for commercial or industrial use
– Regular/habitual sale of real estate
– Royalties or lease payments for the use of patents, trademarks or similar rights
– Constructions of any kind when built totally or partially by construction companies
– Fixed assets sales
– Withdrawal of tangible assets from the company’s inventory
– Interest accrued in a sale on credit.
Among the transactions not subject to VAT are:
• Professional and technical assistance services; however, from January 1st, 2023, these services will be levied with VAT, unless they are rendered by “professional partnerships”.
• Sales of used vehicles
• Interest on loans and securities
• Lease of real estate under some circumstances
• Exports
• Real estate transfer under some circumstances
• International freight, both by air and sea.
The VAT paid on imports, purchases, and services received (tax credit) is deducted from the VAT due on sales and services rendered (tax debit). The vendor or the service provider must file a monthly tax return and pay a net debit the twelfth day of the subsequent month. If the taxpayer is an electronic biller, the tax return can be paid online until the 20th of that month.

There is no registration limit for VAT.

Every ‘individual’ or ‘legal entity’ that has operations in Chile, either for sales of goods or services rendered, must register at the Chilean Internal Revenues Service (IRS).

This tax also applies to the Treasury, semi-public institutions and autonomous bodies of the state administration, municipalities and enterprises belonging to them or in which these agencies have participation.

A penalty may be imposed by the tax authority if a business fails to register at the correct time.

VAT registration also applies for businesses that are carried out in Chile by foreign persons or entities. This registration applies without limit.

From June 2020, VAT to digital services was incorporated in Chile. Under this new tax provisions, the following services rendered by non-resident taxpayers will be subject to VAT in Chile:
1. The intermediation of services rendered in Chile or of sales made in Chile or abroad, if in this latter case the sale generates an import.
2. The supply or delivery of digital content or entertainment through downloading, streaming, or any other technology.
3. The use of software, storage, digital platforms or computer infrastructure.
4. Advertising, regardless the support through which it is delivered, materialized or executed.

From August 1st, 2022, Banks and PSP will start withholding VAT over payments to foreign entities that are not registered as VAT digital service providers in the Chilean IRS.

It is mandatory to appoint a fiscal representative in Chile, if the non-established business is rendering services subject to taxes in the country.

VAT returns cover an accounting period of one month, ending on the last day of a calendar month.
As said, on a monthly basis, VAT taxpayers may deduct their VAT credit from their VAT debit. The excess of VAT debit should be declared and paid monthly. On the contrary, if in a given month the VAT credit exceeds the VAT debit, the remaining VAT credit balance is carried forward and cannot be refunded in cash. A refund in cash is available only for VAT credit derived from the acquisition of fixed assets where a credit balance persists for at least two months.
In general, only registered VAT taxpayers can benefit from VAT credits.

A penalty is imposed by the tax authority if VAT Returns are not submitted on time, or the related tax is not paid by due date.

The delay or omission in the presentation of statement that are not the immediate basis for determining tax, is punishable with a fine.

The delay in paying taxes to the Treasury, subject to withholding or surcharge is punishable by a fine of 10% of the taxes owed. The fine will increase by 2% for each month or fraction of a month of delay, which cannot exceed 30% of the tax due. If the failure is detected by the Chilean IRS the fine will be 20%, and reach a maximum of 60%.

In Chile, taxpayers must also pay indirect taxes for alcoholics (ILA), fuels (IEPD), gas (GLP) and luxury goods.

These indirect taxes must be paid through the same tax return that the VAT returns. The rates of these taxes vary according to the class of item sold.

Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.

Fines and interest can be applied for inaccuracies or omissions made on tax returns, or where the tax is paid late. Penalties and interests can also be applied where the business does not maintain adequate records.

No, VAT cannot be reclaimed by cross borders businesses if these are not registered as having operations in Chile.

A VAT invoice must show:
• an invoice number which is unique and sequential
• the seller’s name and address
• the seller’s VAT registration number
• the invoice date
• the detail of the waybill if the supply is made in a previous day
• the customer’s name and address
• a description sufficient to identify the goods or services supplied to the customer
• the rate of any cash discount
• the total amount of VAT charged expressed in Chilean pesos.

For each different type of item listed on the invoice, the following must be shown:
• the unit price or rate, excluding VAT
• the quantity of goods or the extent of the services
• the rate of VAT (19%)
• the total amount payable, excluding VAT.

Invoices must be issued in electronic format. VAT must be declared according to the information that the Chilean IRS has of the company, as the Chilean IRS has a control of all invoices issued; though it can be changed manually if the system shows some inconsistencies.