Issuers of means of payment: Change of VAT subject

Circular 42 of June 2020 issued by the Chilean Internal Revenue Service (“SII”) instructs on the VAT taxable event established in letter n) of article 8 of the Sales and Services Tax Law (“LIVS”) and states its power to apply a change of subject so that the issuers of means of payment act as VAT with holders, which must be established by means of a well-founded resolution.

Thus, on May 13th, 2022, the SII issued Exempt Resolution number 46, which establishes a change to the total VAT subject for the services covered by Circular 42.

Its objective is to avoid tax damage due to the fact that there may be digital service providers without residence or domicile in Chile that have not registered in the Simplified Regime established for these purposes, or, being registered, have not fulfilled their obligations.

Therefore, when the instructions of this resolution come into force, the issuers of means of payment must make the 19% surcharge on payments made from the means of payment they manage and whose beneficiaries of the payments are in the current payroll published by the SII for the change of subject. Thus, the cardholder will see a charge in its payment method for this concept to the extent that he is not a VAT payer.

Main guidelines:

  1. To whom does the change of subject apply?

The change of subject falls on Banks, Banking Support Companies, Savings and Credit Cooperatives and Non-banking Issuers, which must be incorporated in Chile and be issuers of any of the following means of payment: credit cards, credit cards, debit, payment cards with provision of funds or any other payment system analogous to the above.

Those who comply with the above, will become VAT withholding agents and must recharge the current VAT rate (currently 19%) to the corresponding transactions.

  1. On what transactions does the VAT subject change apply?

The change of subject applies only to payments for services contemplated in letter n) of article 8 of the LIVS made to non-residents or domiciled in Chile. These services are:

  • The intermediation of services provided in Chile, whatever their nature, or of sales made in Chile or abroad, provided that the latter give rise to an import.
  • The supply or delivery of digital entertainment content, such as videos, music, games, or other analogs, through download, streaming or other technology, including for these purposes, texts, magazines, newspapers and books.
  • The provision of software, storage, platforms, or computer infrastructure.
  • Advertising, regardless of the support or medium through which it is delivered, materialized, or executed.

The issuer of means of payment will identify the transactions to which to make the surcharge by a list called “SD VAT Taxpayers Affected by Subject Change”, which the SII will issue on December 15 of each year. Therefore, each time payments are made to beneficiaries contained in said payroll, through the means of payment that they administer, they must recharge the VAT to the cardholder.

  1. How the declaration and payment of VAT due to a change of subject will work?

Once the transactions on which the subject change applies are identified, the issuer must recharge VAT on the value of the transaction in the same means of payment by which the payment was made and in the same currency of the transaction.

For declaration and payment purposes, the VAT withheld due to change of subject must be declared and paid in Chilean pesos, and those withholdings must be converted into foreign currency according to the exchange rate published by the Central Bank of Chile on the withholding date. The determined amount must be declared on Form 29 on the corresponding date of the month following that in which the withholding was made.

The tax withheld must be declared and paid in full, without any allocation or deduction. Adjustments may be made for reversals and chargebacks, if applicable.

  1. Should withholding be applied to all applicable transactions?

Yes, unless the cardholder is a VAT payer. In this case, the change of subject established by the resolution is excepted, since the change of subject of letter e) of article 11 of the LIVS is applicable, that is, the issuance of a purchase invoice by the VAT taxpayer beneficiary of the service.

The status of VAT taxpayer must be informed by the cardholder himself to the issuer of the means of payment through the means established by the latter. In the absence of such communication, or if it is not consistent with the information of third parties available on the SII website, the issuer must recharge VAT on transactions with beneficiaries of the payments listed in the payroll.

  1. What is the validity of the list “SD VAT Taxpayers Affected by Change of Subject”?

The payroll will be published on December 15 of each year so that the change of subject is applied from January 1st of the following year, being valid for that year.

However, given that the payroll is established in order to charge VAT on transactions with service providers that have not taken advantage of the simplified regime to pay VAT for the indicated services, the payroll will be updated to the extent that there are reasons for excluding any of the service providers from the payroll, as in turn it will be updated by providers that must be incorporated according to the information handled by the SII.

Therefore, the SII will publish on its website an updated payroll according to the following dates:

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Thus, the issuer of means of payment must consult the update of the payroll on a quarterly basis in order to apply the updated payroll until the publication of a new one.

  1. Is it an obligation to inform the SII of the details of transactions recharged due to change of VAT subject?

Yes, it is for the issuer of means of payment that applied a change of VAT subject. The “SD VAT Withholding Report” must be sent to the SII on two dates: (1) until the last business day of August of each year for the withholdings made between January 1st and June 30th of the same year; and (2) until the last business day of February for withholdings made between June 1st and December 31st of the previous year.

The format and details of the information that the report must contain can be found in the annex to Exempt Resolution number 46 of 2022.

  1. Sanctions

Failure by the withholding agent to recharge, withhold, declare and pay VAT will be sanctioned with the fine established in number 11 of article 97 of the Tax Code, that is, a fine of 10% of the taxes owed, percentage that will increase by two units (2%) for each month or fraction of a month of delay up to a maximum of 30%.

  1. Validity

The change of subject and VAT withholding obligation will take effect as of August 1st and will apply to the considerations charged in the means of payment as of that date.

The first list of “SD VAT Taxpayers Affected by Subject Changes” will be published exceptionally and only on June 1st, 2022 and will be valid until December 31st, 2022, without prejudice to subsequent modifications. The payroll was published through Exempt Resolution 49 of May 31st, 2022.

The first “SD VAT Withholding Report” to be reported has a deadline of the last business day of February 2023 for withholdings made between August 1st, 2022 and December 31st, 2022.


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