Crypto Exchanges Functionality in Chile’s Unregistered Non-Resident Digital Service Provider List

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A year has passed since the entry into force of the Chilean VAT on Digital Services (ISD) and many developments in this particular area of ​​Chilean tax law and practice have occurred since. The most recent of these developments is the publication issued by the Chilean IRS, listing entities that have not applied for inclusion on the list of non-resident digital service providers. The publication of this list sheds light on the continuation of Chilean DSI assessments in the near future, as will be explained below.

To put the debate in context, with the 2020 tax reform, Chile introduced an amendment to its VAT law to tax certain digital services provided by non-resident or non-domiciled service providers. These services began to be subject to Chilean VAT at the general rate of 19%.

The central question to determine the Chilean ISD would be applicable to a given service, is to determine whether or not the recipient of the services is a taxable person for VAT, whether in business-to-business (B2B) or in business-to. -consumer (B2C) operations. In this sense, the interaction of the VAT law and the Chilean withholding tax (Impuesto Adicional) is very relevant.

For cases where the Chilean ISD is applicable and the recipient of the service is a taxpayer excluding VAT (which is mainly the case for individuals, but it is also very common for businesses), foreign taxpayers are allowed to s ” register in a simplified register. This simplified ledger allows these foreign entities to charge the corresponding Chilean ISD to their clients and pay the tax directly through a website that the Chilean IRS has set up. Registration in this simplified register does not imply that the foreign taxpayer becomes a full taxpayer in Chile, nor does it mean a presence in Chile for tax purposes.

A year has passed since the introduction of the Simplified Chilean DSI Mechanism and to date, more than 200 foreign entities have duly registered and started billing Chilean CIOs for services rendered to Chilean beneficiaries. As expected, the internet giants were among the first to sign up.

Another course of action taken by the Chilean IRS to obtain information on foreign digital service providers is to impose information obligations on issuers of means of payment (banks and non-bank issuers). These issuers are required to report transactions for the purchase of goods or services from non-domiciled or non-resident sellers or service providers with their respective payment solutions.

In this sense, the Chilean IRS has collected information on foreign service providers who are registered in the simplified register and also had access to other service providers who are not registered there.

This is why, the Chilean IRS recently published a list comprising 123 entities which have not registered in the simplified mechanism of the Chilean ISD.

Among the service providers included in this list, which also contains betting sites, marketplaces, and marketing service providers, some of the largest cryptocurrency exchanges in the world have been found.

The inclusion of these crypto-exchanges is not surprising, since the Chilean DSI includes in its taxable facts the intermediation of services rendered in Chile, whatever the nature, or of sales made in Chile or in the foreign, provided that they give rise to an importation.

As stated at the outset, the Chilean IRS has been very proactive in seeking information regarding foreign service providers that may be subject to the Chilean DSI and has also put in place other mechanisms to allow a constant flow of payment information in order to detect entities that may be failing to comply with the Chilean DSI.

That is why all service providers who are not domiciled or resident in Chile, but who may have Chilean clients or beneficiaries of their services, should very carefully consider their obligations to register on the list of service providers. non-resident digital documents and in general with ISD Applications, in order to avoid any undesirable evaluation by the Chilean tax authorities.

Sandra benedetto

Partner, PwC Chile

Jonathan Israel

Manager, PwC Chile

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