Digital service providers face 19% tax in Chile

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South American nation Chile has introduced a new 19% value added tax (VAT) for OTTs and other providers of digital services, effective from 1 June.

Applicable to a swathe of digital services businesses that have operations in the country, among OTTs the tax will apply to the likes of Airbnb, Amazon, HBO Go, Netflix and Spotify.

The move, unveiled as part of the Tax Modernisation bill in January, has increased the price of consumer tariffs for some streaming services, such as Netflix, by as much as one fifth.

The Bill said taxes apply to: “The intermediation of services provided in Chile; The supply or delivery of digital entertainment content; The provision of software, storage, platforms or IT infrastructure; and advertising, regardless of the medium through which it is delivered.”

Regarding B2B digital services provided to other VAT taxpayers “a reverse charge mechanism will apply with the beneficiaries of the service retaining the corresponding tax, granting them the right to VAT fiscal credit for it”.

In total, it is hoped that reforms in the bill will generate as much as US$2.2 billion in funds for the government, equating to around 0.6% of Chile’s GDP.

Chile follows in the footsteps of Colombia, Mexico and Argentina. Brazil has drafted but not yet implemented its reforms and Uruguay, Paraguay, and Costa Rica are still in the discussions phase.


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