International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Chile aiming to join era of indirect tax on digital services

Sponsored by


As a rule, remuneration for services – digital or otherwise – rendered by a non-resident non-domiciled in Chile to Chilean taxpayers are subject to a withholding tax, with rates of up to 35% over the full paid amount depending on the type of service.

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 (cloud 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.

more across site & bottom lb ros

More from across our site

David Pickstone and Anastasia Nourescu of Stewarts review the facts and implications of Ørsted’s appeal at the Upper Tribunal.
The Internal Revenue Service will lose the funding as part of the US debt limit deal, while Amazon UK reaps the benefits of the 130% ‘super-deduction’.
The European Commission wanted to make an example of US companies like Apple, but its crusade against ‘sweetheart’ tax rulings may be derailed at the CJEU.
The OECD has announced that a TP training programme is about to conclude in West Africa, a region that has been plagued by mispricing activities for a number of years.
Richard Murphy and Andrew Baker make the case for tax transparency as a public good and how key principles should lead to a better tax system.
‘Go on leave, effective immediately’, PwC has told nine partners in the latest development in the firm’s ongoing tax scandal.
The forum heard that VAT professionals are struggling under new pressures to validate transactions and catch fraud, responsibilities that they say should lie with governments.
The working paper suggested a new framework for boosting effective carbon rates and reducing the inconsistency of climate policy.
UAE firm Virtuzone launches ‘TaxGPT’, claiming it is the first AI-powered tax tool, while the Australian police faces claims of a conflict of interest over its PwC audit contract.
The US technology company is defending its past Irish tax arrangements at the CJEU in a final showdown that could have major political repercussions.