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 of the following transactions:

• Sales of tangible goods.
• Services consisting of work performed by an individual or a company for the benefit of another in exchange for some kind of remuneration.
• Transactions considered as “sales” or “services” by the VAT law. Examples of these transactions are:
  
  • Imports
  • The leasing of tangible goods and real estate includes furniture in general or equipment that fits the property for commercial or industrial use.
  • Regular/habitual sale of real estate.
  • Contribution of tangible movable and immovable goods to a company.
  • 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 before the following 36 months of their acquisition.
  • Withdrawal of tangible assets from the company’s inventory.

Transactions not subject to VAT include:

• Professional and technical assistance services, whenever they are rendered by individuals and “professional partnerships”
• Sales of used vehicles
• Interest on loans and securities
• Leasing of real estate under certain conditions
• Exports
• Export of services, if they are considered exportable by Chilean Customs
• Transfer of real estate under certain circumstances
• International freight, both by air and by sea
• Payment of life insurance and reinsurance premiums
• Foreign currency income perceived by hotels
• Outpatient medical services and procedures.

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 seller or the service provider must file a monthly tax return and pay the net debit on the twelfth day of the following month. If the taxpayer is an electronic biller, the tax return can be paid online until the 20th of the same 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.

There is a specific registration regime for taxpayers who are not domiciled nor resident in Chile and who provide services or make sales subject to VAT, to persons domiciled or resident in the country and who are not VAT taxpayers. Registration can be done entirely through the Chilean IRS website.

As a rule of thumb, all services are VAT levied if they are rendered in Chile or if they are used in Chile.

Additionally, there is a specific legislation, and according to it, 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 of the support through which it is delivered, materialized or executed. 

The foreign entities rendering those services should be registered as VAT digital service providers in the Chilean IRS. If the entities are not registered, Banks and PSP will start withholding VAT over payments made to them.

It is mandatory to appoint a tax representative in Chile if the non-resident company carries out taxable transactions in Chile.

VAT returns cover an accounting period of one month, ending on the last day of a calendar month.

As mentioned above, VAT payers can deduct their VAT credit from their VAT debit on a monthly basis. The excess of the VAT debit must be declared and paid monthly. On the other hand, if the VAT credit exceeds the VAT debit in a given month, the remaining VAT credit is carried forward and cannot be refunded in cash. A cash refund is only possible for VAT credits resulting from the acquisition of fixed assets, provided that the credit balance remains for at least two months.

In general, only registered VAT payers can benefit from VAT credits.

In the case of taxpayers registered under the simplified VAT regime, they can choose to file monthly or every three months (quarterly).  This filing period choice can be changed once a year if the taxpayer doesn't have any outstanding payments or penalties.

Failure to file a VAT return on time or failure to pay the tax due on time will result in the imposition of a penalty by the tax authority.

Late filing or failure to file a VAT return that is not the direct basis for determining the tax is subject to a penalty. If the return is the direct basis for determining the tax, the penalty is a percentage of the accrued tax.

Late payment of tax to the Treasury, subject to withholding or surcharge, is subject to a penalty of 10% of the tax due. The penalty increases by 2% for each month or a fraction of a month of delay, up to a maximum of 30% of the tax due. If the failure is detected by the Chilean IRS, the penalty will be 20%, up to 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 used for VAT. The rates of these taxes vary according to the class of items sold.

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

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

No, VAT cannot be reclaimed by foreign businesses if these are not registered before the Chilean IRS.

A VAT invoice must have:

• an invoice number that 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 on the previous day
• the customer’s name and address
• a description sufficient to identify the goods or services supplied to the customer
• the type of transaction: cash and carry, credit, non-cash, etc.
• the total amount of VAT charged expressed in Chilean pesos.

For each different type of item listed on the invoice, the following must be indicated:

• the unit price or rate, excluding VAT
• the quantity of goods or the scope of the services
• the VAT rate (19%)
• the total amount payable, excluding VAT.

Invoices must be issued in electronic form. The VAT must be declared according to the information that the Chilean IRS has on the company, as the Chilean IRS has a control of all invoices issued on its online register system; however, it can be changed manually if the system shows some inconsistencies.