Chile's Tax Service Targets Online Gambling Over VAT

June 6, 2022
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Chile’s Internal Revenue Service has declared it will enforce taxes against unregistered foreign companies, including gambling operators, that have not been paying value added tax (VAT) to the government.

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Chile’s Internal Revenue Service has declared it will enforce taxes against unregistered foreign companies, including gambling operators, that have not been paying value added tax (VAT) to the government.

The tax service (SII) has published a list of non-registered foreign companies it says are not in compliance with a 2020 law that imposes a 19 percent tax on digital entertainment services offered in Chile. Among them are Betsson, bet365, Entain, Betway and Plus500, as well as crypto companies like Coinbase and Crypto.com.

The published list is current as of February 14 of this year.

Diego Rodríguez, a partner at CMS Carey & Allende law firm, explained: “Nowadays, rendering digital services can be done from everywhere in the world. As a general rule, those digital services are subject to a 19 percent VAT, to the extent that the service provider voluntarily registered itself at the Chilean IRS as a digital service provider, being obliged to account, declare and pay the VAT related to Chilean transactions.”

The SII says it has been holding working meetings with card issuers to make sure the payment system is functioning properly and that VAT can be collected.

The director of the SII, Hernan Frigolett, declared that companies offering digital services in Chile that do not pay VAT are in non-compliance.

“Our service has developed coordinated work with banks and other payment card issuing entities, in order to obtain information to determine if the registered platforms are declaring and paying the tax; or identify the platforms that do not declare or pay digital VAT, and must do so,” he told Diario Financeiro.

According to the SII, there are still 110 platforms, including several international online gambling operators, that are not registered with a new simplified tax structure designed to make it easier for foreign companies to pay VAT in Chile.

Rodríguez said: “Gambling is a regulated activity under Chilean Law. Thus, our current panorama is non-resident digital gambling services providers not accounting for the VAT and carrying out regulated activities within the country. The tax bill seeks to ensure that online gambling activities are considered in Chile's current legislation, levelling the playing field with the rest of the competitors.”

An estimated $13m in tax revenue is lost due to this oversight a year, SII estimates.

The Chile government proposed legislation in March of this year to regulate online casino games and sports betting. The bill includes a 20 percent tax on companies' revenues. If passed into law, Chilean gamblers would also pay a 15 percent tax on winnings from these platforms.

In March, Alejandro Weber, Chile’s undersecretary of finance, told La Pulsera that he believed fully regulating the gambling market could bring the government up to $55m in taxes.

According to the Superintendent of Casinos, which regulates land-based gaming, Chileans have access to at least 900 online gaming sites, which generate $150m per year.

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