Credit and debit card issuers to withhold VAT on digital services in Chile

14 July 2022

From 1 August 2022, the Chilian Internal Revenue Service has confirmed that banks and credit card companies will be responsible for withholding VAT on payments of digital services received by non-resident suppliers who are not VAT registered in Chile.

During 2020, Chile introduced new VAT rules stating that VAT should be charged at 19% on the sale of digital services supplied by non-resident (foreign) companies to consumers in the country. This was to remove the unfair advantage that non-resident companies had over resident suppliers who had to charge VAT on their sales. 

However, since its introduction, many non-resident digital service suppliers have ignored these VAT rules and are still not VAT registered or charging VAT on their supplies in Chile. 

In an effort to recoup this VAT, the Chilian authorities have now confirmed that from August, it will produce a list of non-resident digital service suppliers that are VAT registered in Chile. They will then distribute this to banks and credit card companies on an annual basis, who will use this list to identify if suppliers are VAT registered. If they then receive payments for these types of suppliers that are not VAT registered, they will be required to withhold VAT at 19% on any payments received in their accounts.