On an earlier post we look into the concept of Software as a Service or SaaS and exposed the possible legal implications associated with it use and merchandise.
Today we are looking to solve the following query: What is the tax effect on the deliver of SaaS from abroad to a user located in Chile?
For being a service delivered from abroad, but being used in Chile, is subject to the “Additional Tax” (Impuesto Adicional), regulated for this matter in the article 59 of the Law of Income Tax (Ley de Impuesto a la Renta or LIR). If the general rule applies, this concept should be taxed with an Additional Tax with a special rate of 15% in the case of use and exploitation of computer software.
But the Law 20.630 that “perfects tax regulations and finance the educational reform”, has reformed this article, incorporating an exemption to the first part of said article:
“Unless the amounts are paid or paid in advance for the use of the standard computer software, meaning by this those in which the rights that are being transferred are limited to those necessary to permit the use of the software, and not the commercial exploitation, or its reproduction or modification with any other means different than allowing its usage, in this case will be exempted of the payment of this tax.” (Translation).
About this disposition the Tax Authority (SII), through its Director has indicated that:
The payments or advance payments done in favor of a Software as a Service provider from abroad, are exempted of Additional Tax, because the operation consist only in the temporal use of the software by the local clients, without giving the company any kind of license to such clients, or their intermediaries or resellers in Chile, for this to exploit by their own account on our country or reproduce or modify with any other means different from allowing the usage of the software. (Oficio Nº 1482/2014).
Regarding the IVA Tax (Tax to the Added Value of products and services), if the services are delivered from abroad and are only used in Chile, as in this case, the payments are also exempted.
On other opportunity we will review what happens when the Software as a Service is delivered from within Chile.
Santiago Henríquez C., Lawyer
Picture: Paul Itkin (CC0)