Taxation of foreign engineering services in Chile
Engineering services: Payments that are made from Chile for technical services are regulated by Article 59 Nº 2 of the Income Tax Law, which is the general rule on this matter. It establishes an Additional Tax, which is a unique income withholding tax with a 15% rate, applied on the total of the remittance without any possible deduction.
Payment made to any company with residency outside of Chile are subject to the unique Additional Tax of 15%, as it would be technical advice. However, for the engineering services to qualify as a technical advisory, it must exist as a document, which can be a guidance, report or a plan.
However, this rate is higher (20%) if the foreign company that is providing the services is related to the company that requests or pays for these services.
The services wouldn’t be levied the value-added tax.
Also, according to article 74 Nº 4 of the Income Tax Law, the taxpayers that remit incomes affected to Additional Tax must withhold this tax at the moment of payment, hand it to or deposit it on the account of the service provider or interested party. This rate is applied to the full remittal amount with no deductions whatsoever. The amounts withheld must be paid to the Internal Revenue Service within the 12th day of the month following the payment of the services via Form 1850 (Article 79 of the Income Tax Law). This form is filled and paid online
If the services are rendered from a country that does have a double tax agreement (DTA) with Chile different rules apply and in some cases, these services will only be taxed in the country the services are rendered. For more information about the DTA Chile has with different countries, check this link http://www.sii.cl/normativa_legislacion/convenios_internacionales.html
Last modified: 06/05/2020