The tax is withheld, declared, and paid by the payer of the
remuneration, independent of the means of payment.
Considering the number of users and different types of
digital services (with various applicable rates), the Chilean
tax system has a substantial flaw in how to control the
compliance of such taxes; the investment required to assess
every user and their payments exceeded the possible gains from
such an assessment.
Enter the indirect tax on digital services.
A major tax bill was presented in Parliament on August 23
2018, entitled Modernisation of Tax Legislation. The bill
proposes an assortment of changes, including a tax on digital
services, which aims to resolve the abovementioned issues.
The proposed tax is characterised as a specific, indirect,
and substitute tax, meaning that it only applies to a
particular sector of the economy (i.e. digital services); the
burden is easily passed on to consumers; and the tax replaces
any other applicable tax, direct or indirect.
The tax rate is 10%, applicable to the full price paid by
the consumer, and it is established by law that the withholding
agent is the issuer of the electronic means of payment, i.e.
the credit card issuer or online payment service provider.
Digital services means any digital intermediation activity
between users and service providers (even if the final service
is not digital), digital entertainment services (images,
movies, videos, music, or games), marketing, and data storage
The tax on digital services will coexist with the
withholding tax exemption on standard software already present
in Chilean legislation, and it remains to be seen how the
Chilean IRS will apply it, especially considering that in their
rulings, they have said that software-as-a-service benefits
from the standard software exemption.