Tax and corporate compliance are essential to the good standing of any company in Latin America, as they are key factors to successfully launching and managing a healthy business. Corporate compliance benefits not only shareholders but also employees as it conveys certainty, stability, and prosperity.
Foreign executives looking to enter the Chilean market must be aware of corporate income and withholding taxes. However, as emerging technologies and established Chilean industries are reinventing themselves to encourage tax compliance within the country, business owners must also understand Chile’s Digital Services Tax.
Chile’s digital services tax
On June 1st, 2020, Chile´s Digital Services Tax was enacted and put into effect. Since then, VAT – which in Chile is 19% – began to be charged on digital services provided by foreign suppliers. Therefore, providers such as Spotify, Netflix and Amazon had to start registering with the local Chilean tax authorities and submit the relevant monthly taxes in accordance with the new tax legal framework. As a result, consumer bills increased by 19%.
Chile’s digital services tax has its origin in the last tax reform carried out in 2020. The tax authorities have recently issued official instructions that explain how these digital services providers operating in Chile must register.
Some of the digital services providers that must carry out a registration process before the Chilean tax authorities are:
•Those regarding the provision of software, storage, computing platforms, or infrastructure.
•Intermediation of services provided in Chile.
Note that the new legislation for digital services also covers the use of credit cards in Chile or the use of a Chilean IP address. In this way, VAT would also be applied to these services.
Declaration and payment guidelines
According to the new tax regulation, a 19% VAT surcharge will be applied to all transactions made from June 1, 2020, and must be declared from July 2020 onwards. You can submit them either monthly or quarterly. Likewise, note that you must pay the return within the first 20 days of each month.
Foreign executives are allowed to make the statement of the declaration in foreign currency and through the Chilean tax authorities website.
Understand Chile’s tax digital services tax with the help of an expert
Chile is a steady and thriving destination to do business in and expand your business. However, tax regulations are complex and some difficulties may arise due to legal and cultural hoops. When entering the Chilean market, you must engage with a local tax advisory expert to ensure your business remains in good standing with local legislation.
At Biz Latin Hub, our team of legal and accounting multilingual specialists have broad experience in corporate compliance requirements in Latin America. With our full suite of market entry and back-office services, we are your single point of contact in Chile for company incorporation, accounting and taxation. Contact us today to receive personalized assistance and learn more about Chile’s digital services tax and the key corporate tax considerations in Chile.
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