Chile Introduces Mandatory VAT Withholding by Payment Card Issuers for Non‑Resident Remote Sellers

This represents a significant expansion of Chile’s digital VAT enforcement, shifting the tax collection responsibility from non‑resident merchants to domestic financial intermediaries.

1. Background and Legal Framework

The resolution builds on several provisions of Chile’s VAT Law (DL 825):

• Article 3 bis: Establishes that operators of plataformas digitales de intermediación are VAT taxpayers when facilitating taxable transactions.
• Article 35 A and following: Define the simplified VAT regime applicable to non‑resident suppliers of digital services or remote sales to non‑VAT‑registered consumers in Chile.
• Article 3, inciso séptimo: Grants SII the power to impose change of VAT collection agent (“cambio de sujeto”) on credit/debit card issuers or similar payment intermediaries.

Using this authority, the SII is now targeting foreign remote sellers who:

• operate without domicile or residence in Chile, and
• do not comply with the simplified VAT regime, either by not registering or by failing to declare/pay VAT.

2. Scope of the New VAT Withholding Mechanism

2.1 Who becomes the VAT withholding agent?

The following Chile‑domiciled payment card issuers are now designated as agents retenedores:

• Banks
• Banking support companies (sociedades de apoyo al giro)
• Savings and credit cooperatives
• Non‑bank card issuers

These entities are responsible for transactions made using:

• Credit cards
• Debit cards
• Prepaid cards
• Any other analogous electronic payment systems

2.2 For which transactions?

For remote sales of tangible goods located abroad and imported into Chile, when purchased by non‑VAT‑registered consumers, and when the foreign seller or platform appears in the SII list:

“Contribuyentes IVA Digital Bienes Afectos a Cambio de Sujeto”

Only foreign sellers included in that list are subject to withholding.

3. How the VAT Withholding Works

3.1 VAT Recargo to the cardholder

When a transaction is processed through the payment issuer:

• The issuer must recargar (add) the VAT to the cardholder’s charge.
• VAT is calculated at the standard Chilean VAT rate applied to the transaction value.
• The recargo must be made in the same currency used in the transaction.

3.2 Exceptions

No VAT recargo applies if the cardholder is a VAT taxpayer in Chile.
However:

• The cardholder must notify their VAT‑payer status.
• If there is any inconsistency with SII records, the issuer must still recargar VAT.

3.3 Retention, declaration, and payment

Issuers must:

• Convert VAT amount to CLP using the Central Bank exchange rate on the date of the charge.
• Declare and pay withheld VAT monthly through Form 29.
• Use specific codes ([100]–[104]) in the “Cambio Especial de Sujeto” section.

Adjustments for reversals and chargebacks must be recorded and can generate credit balances.

4. Management of the SII List of Non‑Compliant Foreign Sellers

4.1 Annual publication

The list is published every 15 December and applies from 1 January of the following year.

For 2026 only, due to the mid‑year implementation:

• First list is published 15 June 2026, effective 1 July–31 December 2026.

4.2 Causes for exclusion from the list

A foreign seller can be removed when they:

• (a) Register in the simplified regime and pay all outstanding VAT
• (b) File all pending F129 returns
• (c) Pay all VAT debts and penalties
• (d) Demonstrate that they sell only:
  • goods over USD 500, or
  • exclusively to VAT‑registered buyers

4.3 Procedure and timing for exclusions/inclusions

Requests may be submitted to [email protected] with full supporting documentation.
The resolution includes a detailed calendar establishing:

• When the exclusion will take effect
• When it will be published on the SII website

5. Reporting Obligations for Payment Issuers

Issuers designated as agents retenedores must submit a new report:

“Reporte Retenciones IVA Digital Bienes”

Due dates:

• Last business day of August: covering Jan–Jun
• Last business day of February: covering Jul–Dec

The first report is due February 2027.

The report includes granular data per transaction: merchant name, MCC, country, value, VAT charged, VAT withheld, reversals, etc. (Full list in Anexo 1.)

6. Sanctions

Failure to withhold, declare, or pay VAT:

• Multa under Article 97 N° 11 of the Tax Code
• Plus interest and inflation adjustments (Article 53)

Failure to submit the biannual report:

• Multa under Article 97 N° 1

7. Entry into Force

• General effective date: 1 June 2026
• First withholding applies to transactions from 1 July 2026, linked to the initial June‑published list.

Conclusion

Resolution SII N°05/2026 marks a decisive step in Chile’s enforcement of VAT on cross‑border sales of goods. By designating domestic payment card issuers as VAT withholding agents, the SII closes major compliance gaps associated with foreign e‑commerce and ensures effective VAT collection even when non‑resident sellers fail to comply.

This model strongly aligns with global trends in digital VAT enforcement and places significant operational, technological, and compliance responsibilities on the Chilean financial sector.