Chile: VAT Exemption Denied if Tax Treaty Removes Withholding Tax on Foreign Professional Services

• Chile’s tax authority ruled that foreign professionals cannot claim VAT exemptions on services in Chile if their income is exempt from Chilean tax under a double taxation treaty.
• The VAT exemption only applies if the income is actually taxed in Chile under Articles 42 or 48 of the Income Tax Law (labour/professional income).
• If a tax treaty prevents Chile from taxing the income, the VAT exemption does not apply.
• This creates a situation where treaty benefits may unintentionally increase overall tax liability by disqualifying taxpayers from local VAT exemptions.
• Tax exemptions are strictly tied to the legal classification of income within Chile’s domestic tax framework.

Source: regfollower.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---