Chile Proposes Taxation on Digital Services by Non-Resident Companies

The Chilean Ministry of Finance announced on 21 June the introduction of a new income tax on digital services when provided by non-domiciled or non-resident companies.

The Chilean Ministry of Finance announced on 21 June the introduction of a new income tax on digital services when provided by non-domiciled or non-resident companies. The Minister of Finance, Felipe Larraín, has been emphasising that ‘it is not fair’ to have different rates of tax for the same service provision, and a key government objective is to tax these companies the same way they tax Chile-based companies.

Digital services offered through intermediation platforms, such as transport platforms like Uber, tourism platforms like Airbnb and entertainment platforms including Netflix and Spotify will be liable for income tax as part of the government’s Tax Modernisation plan. While intended to equalise rates with domestic income tax, the minister noted that indirect alternatives are being considered, such as a transaction tax, in order to avoid the difficulties of directly taxing companies not incorporated in Chile.

Larraín added that there would be a modernisation of mechanisms for the taxation and collection of VAT and customs tariffs (where no free trade agreement is in place) to strengthen border controls on imported goods. While the tax is not new, the effort is intended to better capture goods imported through digital platforms such as Amazon and Aliexpress and, again, ensure they’re treated the same way as traditional imports.

‘It is the duty of the public authority to ensure that everyone can compete on equal terms. We want to create an even court for everyone,’ said the minister, arguing that the current situation where some pay and some don’t pay taxes for provision of the same service is unfair. ‘This issue is not facing only Chile, but the whole world.’

Author: Marilyn Kawakami, Policy Analyst, Access Partnership

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