Chile
Corporate - Other taxes
Last reviewed - 06 January 2025Value-added tax (VAT)
VAT is payable on the transfer of goods and the provision of services at a 19% rate. In general terms, this tax is levied over the price of the following goods and services:
- Sales and other agreements used to transfer the ownership of tangible goods (movable and unmovable), provided that said operations are customary. The law assumes that all sales made within the ordinary course of business are customary.
- Services that are commercial, industrial, or financial, or that are connected to mining, construction, insurance, advertising, data processing, and other commercial operations.
- Imports, customary or not.
The sale of fixed assets is subject to VAT, provided that the taxpayer was entitled to VAT credit for its acquisition, importation, or construction.
VAT works on a credit-debit system. The tax borne by a company or business in the acquisition of goods or services is called the ‘VAT credit’. The VAT charged on the goods and services sold to customers is called the ‘VAT debit’. As a general rule, the seller or service provider is obligated to withhold and pay the VAT. The tax amount is added to the invoice; consequently, the final consumer economically bears the VAT.
Exceptionally, when a seller or service provider is not domiciled in Chile or when, for other reasons, the Chilean IRS has difficulties assessing the correct payment of VAT, the responsibility to withhold and pay the tax is transferred to the buyer or beneficiary of the service.
The tax is paid every month by deducting the VAT credit from the VAT debit. The balance due (when the debit is greater than the credit) must be paid within the first 12 days of the month following the month in which the transaction took place.
If, in a given month, the VAT credit is greater than the VAT debit, the balance may be kept and carried forward to the following months.
Law N° 20,727 gradually establishes the compulsory use of electronic invoices and other tax documents, such as credit and debit notes, purchase invoices, etc. As of 1 February 2017, all taxpayers should be subject to it.
There are qualified exceptions to this electronic regime, such as zones where there is no public electricity, zones declared as a disaster area, and other exceptions authorised by the Chilean IRS.
Law N° 20,727 also established the express acknowledgement of the invoice receipt as an enabling requirement in order to use the fiscal credit.
Additionally, leasing agreements by a habitual seller are a taxable event. Notwithstanding that the above are exempted when the acquisition of the real estate property subject of the relevant leasing was not taxed with VAT and the aforementioned acquisition was performed to enter into the leasing agreement.
Digital services are also covered by VAT at a 19% rate as of June 2020.
Law No. 21,713 modified several provisions regarding the application of VAT:
VAT on the acquisition of goods abroad:
In general terms, the existing regime for digital services also applies to sales of goods located abroad (and to remote services in general). Therefore:
- The operator of a digital intermediation platform is considered a VAT taxpayer as if they were a regular seller or service provider, unless the respective buyer or user is a VAT taxpayer. In that case, a purchase invoice must be issued.
- If more than one platform jointly or simultaneously facilitates the respective operation, the platform authorizing or processing the payment for the taxed operation will be considered the taxpayer.
- Those determined taxpayers without domicile or residence in Chile will be subject to the simplified taxation system already in place for digital service providers.
- The possibility of designating payment card issuers or payment systems as withholding agents is extended when foreign providers do not adhere to the simplified system.
- It is established that movable tangible assets located abroad, acquired remotely by a non-domiciled or non-resident individual in Chile, by a person without the character of a seller or service provider, will be considered located in national territory when destined for it, provided their price does not exceed USD 500.
- Low-Value Imports: Another relevant issue relates to eliminating the VAT exemption that currently benefits imports of goods valued at up to US$41. To combat informal trade, it is now proposed to create a tariff exemption for the importation of goods, with a ceiling of up to US$500 per unit. However, controls will be required, such as the use of credit or debit cards or limiting the number of purchases subject to the benefit.
VAT on fixed assets :
The SII may assess and collect VAT on movable and immovable tangible assets that form part of the immobilized assets, carried out by the company that creates or subsists on the occasion of a business reorganization, when the main purpose of this has been to avoid the payment of the tax.
Authority to assess VAT:
The possibility is introduced for a taxpayer to request the assessment of the VAT to be paid when they provide evidence that they are unable to determine it themselves. In this regard, the procedure for assessing the taxable base is restricted by incorporating into Article 20 of the law (applicable when the taxpayer is unable to determine the tax to be paid) the stipulation that when sales determined by the Internal Revenue Service (SII) do not exceed 2,400 UF.
Export VAT:
Exporters who cease their activities are required to demonstrate that they have exported, in the last 36 months, an amount equivalent to the refunded tax, in accordance with Article 36 of the VAT Law. If they do not comply, they must return the proportional part of the refund, unless they are in bankruptcy liquidation.
Additionally, if an exporter with an advance refund is absorbed by another company during a reorganization, the new company will retain the rights and obligations of the refund without the need to return what has already been refunded, if the original project continues.
Customs duties
As a general rule, the customs duty rate is 6%. However, as Chile has an extended network of free trade agreements (FTAs), reduced or zero-rate customs duties are available.
Duties on goods are imposed on the cost, insurance, and freight (CIF) price, without deducting special discounts.
In general, Chile has a very open economy, and there are no significant barriers to foreign trade.
Excise taxes
Alcoholic beverages, certain non-alcoholic beverages (e.g. beverages high in sugar levels, hypertonic beverages), tobacco, and certain luxury items (e.g. jewels) are subject to an additional sales tax ranging from 10% to 50%.
A variable gasoline tax is also levied on the difference between a fixed amount and the sales price of gasoline and diesel oil.
'Green taxes' are taxes that are levied on the issuance of certain pollutants by some non-eco-friendly assets, such as boilers or turbines. A corrective tax is also established on the issuance of certain local pollutants connected to vehicles' performance.
Real Estate Tax
Real Estate Tax is levied over an official valuation of real estate at an annual rate of 1.4% in case of non-farming real estate and 1% for farming real estate. Some real estate is exempt from this tax.
A surcharge is progressively applicable to the immovable properties that a taxpayer has with a total fiscal value that exceeds approximately USD 530,000.
Transfer taxes
Currently, Chilean law has not established any transfer taxes.
Stamp tax
Stamp tax is levied mainly on documents that evidence money lending operations, and its rate varies depending on the executed document.
For documents subject to a specific date, stamp tax applies at 0.066% per month or fraction of a month. The maximum stamp tax rate is 0.8%. For documents payable on demand or without an expiration date, the tax rate is 0.332%.
Payroll taxes
The income that the employer pays to the employee that provides personal services in a subordinate and dependent relationship under an employment contract is subject to payroll tax.
Payroll tax is characterised as a single tax that is based on a progressive scale of rates, ranging from 0% to 40%, applicable to income brackets. Only the income or remuneration received is subject to this tax. Whoever pays the taxable income must deduct and withhold the tax on a monthly basis.
Social security contributions
Pursuant to Chilean legislation, affiliation to the Chilean social security system is mandatory from the moment that any individual starts rendering services due to an employment contract.
In order to contribute to the Chilean social security scheme, the assignee needs to be incorporated into the Chilean pension fund (AFP), the Chilean health insurance (private health insurance [ISAPRE] or public health insurance [FONASA]), death and disability insurance, work related accidents and professional illness insurance, and unemployment insurance.
An employer’s obligation for social security is low, as it only assumes part of the unemployment insurance (2.4% calculated over the worker’s gross salary). Whilst the employee assumes most of the social security contribution (approximately 20% of gross salary).