VAT payment is extended to digital services: Who is affected?

General Changes and things to consider.

The rapid growth in the digital age that we are experiencing around the world has brought about the emergence of a variety of new tools and technological platforms that are very useful in everyday life.

However, several countries have started to take a closer look at these types of businesses and are trying to legislate on the related tax obligations that correspond to them. Chile is no exception: since June 1, 2020, the VAT surcharge on digital platforms has been introduced in our country. What do you think and how does this change affect taxpayers?

It is important to point out that within the law, the most significant change corresponds to the addition of Article 8 of the LIVS (Law on Sales and Services Taxes). To said article, the letter N has been added, stating that “the paid services of “mediation” provided by suppliers established or resident abroad constitute services used domestically.” 

It is common knowledge that several companies operating in Chile (Uber, Spotify, Netflix, among others) do not have a physical presence in the country where the consumer is located, as their services have the characteristic of not requiring such presence in the country or countries where they operate. Therefore, prior to this change in the law, the SII could not verify the issuer of the service.

How does tax modernization affect Art. 59 of the LIR?

The tax modernization also affects art. 12, letter E), n. 7 of the LIVS; it is part of the more general context of the changes necessary to harmonize the introduction of the new taxable event established in letter n) of Art. 8 of the LIVS with, IA of Art. 59 of the LIR.

In summary, the SII aims to clarify the difference between the classifications of services provided by the taxpayer so that they can be easily distinguished in the law and thus comply with the tax payment for those services rendered.

Impuesto Digital

What services are subject to VAT?

The mediation of services rendered in Chile, of whatever nature, or sales made in the country or abroad, provided that the latter result in an import.

The provision or supply of digital entertainment content, such as videos, music, games, or other analogs, through downloading, streaming, or other technologies, including for these purposes’ texts, magazines, newspapers, and books.

The provision of software, storage, platforms or IT infrastructure.

Advertising, regardless of the support or medium through which it is delivered, materialized or executed.

Who has to pay this tax?

According to Art. 10, second paragraph of the LIVS, the tax will affect the person who performs the service in those operations defined as services. The tax subject is therefore the provider of the respective taxable service, i.e. the person who is legally obliged to declare the tax and pay it into the tax fund.

At Addval, we have an expert tax team with 15 years of experience advising and assisting companies in various sectors. We aim to ensure that your business meets its tax obligations efficiently and effectively.

TAX Team

Erick Kessler: TAX Manager, Certified Public Accountant -Universidad Central- with advanced studies in Tax Reform. More than 10 years of experience in accounting outsourcing and tax compliance for companies in various industries.

Jannette Cornejo: Tax Supervisor, Accountant Auditor DUOC UC.

Charitty Manriquez: Tax Senior, Accountant Auditor IPCHILE.