Key elements of Chile’s digital services tax

The measure has generated US$306 million in tax revenue since its implementation. Google, Netflix and Apple have paid the most, followed by the Sony, Spotify and Facebook platforms. The United States has the highest number of entities subject to the tax in Chile, with a total of 112 companies.

June 1 marked the first anniversary of VAT began to be charged for digital services. Beginning on that date, digital services platforms without a domicile or residence in Chile had to register with the Chilean Internal Revenue Service (SII) to meet the filing and payment requirements for this tax. 

The platforms were given monthly and quarterly filing and payment options. According to the SII, most chose the quarterly option and so five payment periods have passed since the new tax was introduced, and a total of CLP$265 billion (US$306 million) has been collected. Furthermore, 252 digital service providers with no Chilean domicile or residency have registered so that they can file and pay the tax in the country. 

The United States has the highest number of operators in Chile, with a total of 112 companies. 

“This is the result of the work that the Service has done over the past few years in order to align our tax code with new business models that are emerging in the context of the global digital economy,” SII representatives stated. 

Chile was not the first country in Latin America to charge VAT on digital services. However, the SII developed the platform in record time. The tax code modernization that created the new tax was passed in March 2020, and charges began to accrue in June of that year. 

SII data show that the electronic platforms that have paid the most in digital taxes are Google, Netflix and Apple,  followed by Sony, Spotify and Facebook. 

What does payment of Chile’s Digital Services VAT involve? 

As part of its tax compliance strategy, SII provided support and guidance to companies subject to the tax through virtual meetings with its technical and regulatory teams. The companies subject to the tax joined the meetings from their countries of origin. The goal was to explain the process and answer any questions. SII staff have continued to offer this service, maintaining contact and answering questions posed by taxpayers as needed. 

The registration portal on the sii.cl website also contains a form that allows interested parties to contact SII staff with any queries they may have. 

In an effort to provide key information for the process,  the SII stated that banks must provide information on the acquisition of goods or services by national taxpayers from sellers or service providers not domiciled or residing in Chile through credit or debit cards, mobile payment services or similar payment systems. Banks cover 95% of the transactions completed using credit cards. 

The SII uses the information received to cross-reference the data and verify that the tax is paid. It also identifies platforms that have not yet registered to file and pay the VAT on digital services. In this case, staff members are designing measures such as VAT taxpayer changes based on the information received from credit card payments. This involves holding payments made by clients in order to ensure compliance with the tax regulations. 

How was Chile’s Digital Services VAT implemented? 

Chile’s Digital Services VAT was implemented through a Tax Compliance Management Model focused on prevention, that is, on taking actions to facilitate compliance. 

The agency contacted each foreign business and platform identified to explain the characteristics of the new tax, address their questions and explain the system to them in order to facilitate the process. “The results show that the strategy was adequate because we have collected a significant amount in just a year and a half based on five reporting and payment periods,” SII staff note. 

How is the Digital Services VAT paid in Chile? 

When a foreign platform or  business starts operating in Chile, it must register with the SII website to file and pay the Digital Services VAT. The registry will gradually grow.  

SII Director Fernando Barraza noted that, “This new tax has been in place for 18 months. The results obtained thus far show that the strategy that we have implemented has been the right one. We first contact the digital platforms to encourage them to comply with tax regulations. We then offer them opportunities to receive explanations of the tax and how filing and payment are handled.” 

He added, “We are moving through the next steps in our tax compliance strategy, engaging in the corresponding analyses, and cross-referencing information. We are taking progressive oversight steps regarding 117 foreign operators that are providing services without complying with the regulations, a list of which has already been published online.” 

For more information on foreign investment in Chile and the exportation of digital services from and to our country, see the next article.  

Source: El Mercurio