Relevant VAT changes

On 24 February 2020, the new Law No. 21.210 was published. This law includes a series of modifications to different laws with tax content in force in Chile. As regards the VAT Law, by way of summary, some of the main changes are:

1. Whilst applying VAT, the presumption of habituality is eliminated when the sale of real estate occurs prior to one year after its acquisition or construction. In turn, the presumption of habituality for taxpayers with an effective real estate business line is eliminated. With this modification, it will be the “SII” (“Servicio de Impuestos Internos” – Chilean Internal Revenue Service) which shall determine, on a case-by-case basis, the quality of the usual alienating seller, for the purposes of whether or not VAT is applied.

2. VAT is levied on the remuneration for certain digital services provided by individuals domiciled or residing abroad, adding a new taxable event related to the provision ofremunerated services performed by non-residents in Chile, which are the following:

• The intermediation of services provided in Chile, independent from its nature, or sales made in Chile or abroad, provided that the latter give rise to an import;
• The supply or delivery of digital entertainment content, such as videos, music, games or other analogues, via download, streaming or other technology, including for these purposes, texts, magazines, newspapers and books;
• The provision of software, storage, platforms or computer infrastructure; and
• Advertising, regardless of the medium through which it is delivered, materialised or executed.

Another new feature included in the reform is that the VAT Law establishes a new simplified procedure to declare VAT for non-resident service providers, which provide B2C digital services to be used in Chile.

3. The regulations on the early repayment of tax credits in Article 27-bis were modified. Prior to the reform, taxpayers had to maintain the remaining VAT credit for the acquisition of fixed assets for a period of 6 consecutive tax periods. Said period has now decreased to 2 tax periods and taxpayers are able to request a refund of the VAT credit.

4. In addition, the VAT exemption for services taxed with Withholding Tax is modified. Priorto Law 21.210, the exemption from VAT with respect to services subject to Withholding Tax had the exception that they were provided in Chile and benefitted from an exemp-tion from Withholding Tax by applying the laws or the agreements to avoid double taxation in Chile. In this regard, the rule adds the services ‘used’ in Chile to the excep-tions of this exemption.