Saturday, July 4, 2009

Chili: VAT on Services Considered Export Transactions

Excerpt from Practical Latin American Tax Strategies by Miguel A. Zamora (Cruzat , Ortúzar & Mackenna Ltda.)

Services qualified as export by the Chilean Custom Service are exempt from VAT and are also entitled to recover from the Treasury the VAT borne in rendering those services.

Former regulations by Customs stated that a case by case qualification was necessary until in 2007 the Customs authority issued Resolution No. 2511 of 2007 under which it issued a list of services qualified as export transactions. According to this regulation, the same requirements are applicable but with a listed service any taxpayer performing it may enjoy the tax benefits associated with such qualification. Services not included in the list may be included by special request but unlike what took place before, its inclusion would benefit all taxpayers performing the same service. This regulation left to the tax authority the ability to audit the use of this benefit.

In 2008, the tax authority issued a Rev. Ruling stating that Resolucion 2511 requested that the services were VAT taxable in order to enjoy the VAT recovery benefit. This Rev. Ruling indirectly creates a new requirement in Customs regulation and may generate the odd situation in which a taxpayer performs a listed service but may not be in a position to recover the VAT borne to perform such export activity.

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