This content is from: Direct Tax
Crypto-exchanges feature in Chile’s unregistered non-resident digital services provider list
Sandra Benedetto and Jonatan Israel of PwC Chile explain why there is little surprise that crypto-exchanges have not been registered in the simplified mechanism for Chilean ISD.

One year has
passed since the Chilean VAT on digital services (ISD) entered into force and a
lot of developments in this particular area of Chilean tax law and practice
have transpired since. The most recent of these developments is the publication
issued by the Chilean IRS, listing entities that have not requested their
registration in the non-resident digital services provider list. The
publication of this list gives light on how assessments in Chilean ISD will
follow in the near future, as will be explained below.
To put the
discussion in context, with the 2020 tax reform, Chile introduced a modification to its
VAT law in order to tax certain digital services that are rendered by
non-resident or non-domiciled service providers. These services started to be
subject to Chilean VAT at the general rate of 19%.
The core
issue to determine Chilean ISD would be applicable to a given service, is to
determine whether or not the beneficiary of the services is a VAT taxpayer, either
in business-to-business (B2B) or in business-to-consumer (B2C) transactions. In
this sense, the interaction of the VAT law and Chilean withholding tax (Impuesto
Adicional) is very relevant.
For the cases
where Chilean ISD is applicable and the recipient of the service is a non-VAT
taxpayer (which is mostly the case for individuals, but it is also very common
for companies), foreign taxpayers are allowed to register in a simplified
registry. This simplified registry allows those foreign entities to charge the
corresponding Chilean ISD to their customers and to pay the tax directly
through a website that the Chilean IRS has setup. The registration in this
simplified registry does not imply that the foreign taxpayer becomes a full-fledged
taxpayer in Chile, and also it does not signify a presence in Chile for tax
purposes.
A year has
passed since the simplified Chilean ISD mechanism was introduced and to this
date more than 200 foreign entities have duly registered and started charging Chilean
ISD for the services rendered to Chilean beneficiaries. As was expected, the
internet giants were some of the first in line to register.
Another line
of action that the Chilean IRS has followed to get information on foreign
digital service providers is making mandatory information obligations for the
issuers of payment methods (banks and non-banking issuers). These issuers are obligated
to report transactions of purchase of goods or services from sellers or service
providers non-domiciled or non-resident with their respective payment
solutions.
In this
sense, the Chilean IRS has gathered information on foreign service providers
that are registered in the simplified registry and has also gained access to
other service providers which are not registered therein.
That is why, the
Chilean IRS recently issued a list including 123 entities that have not
registered in the simplified mechanism for Chilean ISD.
Among the
service providers included in this list, which also contains betting sites, marketplaces
and marketing services providers, some of the world’s largest cryptocurrencies
exchanges were found.
The inclusion of these crypto-exchanges come as no surprise, since Chilean ISD
includes within its taxable events the intermediation of services rendered in
Chile, whatever its nature, or sales made in Chile or abroad, provided that
they give rise to an import.
As noted in
the beginning, the Chilean IRS has been very proactive in finding information
regarding foreign service providers that may be subject to Chilean ISD and has
also put in place other mechanisms to allow a constant flow of information on
payments to detect entities that may be left out of the compliance with Chilean
ISD.
That is why all service providers that are not domiciled or resident in Chile, but that may have Chilean customers or beneficiaries of their services, should look very carefully into their obligations to register in the non-resident digital services provider list and in general with Chilean ISD application, in order to avoid any unwanted assessment by the Chilean tax authorities.
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