Chilean Government Encourages The Export Of Services Through New Productivity Measures

Over the last ten years, the export of Chilean services has expanded significantly and now account for about 13% of total exports and more than 4% of gross domestic product. Among them, exports of business services (professional services, consulting, technical services) and computer and information services (IP services), increased from around US $ 1 Billion in 2004 to nearly US $ 3 Billion in 2014

Recently, the Bachelet Administration sent to Congress and other Public Institutions a package of several measures to incentivise productivity and lift up the Chilean economy.

This month the Chamber of Deputies has approved the bill and the measures should go into force in the next couple of months. The goal is to expand funding, simplify procedures to facilitate entrepreneurship and investment along with promoting the export of Chilean services.

There are 10 actions to encourage the Chilean export of services abroad. The goal of the Administration is to continue promoting this area and for this purpose the package of measures has several tax benefits. The most relevant ones, that will have a positive impact on Chilean foreign investment are the following:

Expand the definition of export services. The Chilean VAT Law exempts taxation, currently at a 19% rate, to those exports made to neither non-residents, nor domiciled taxpayers. For this matter, the Chilean Duty House has a list of "export services" deemed exempt currently. In addition, taxpayers must fulfil the general criteria to qualify as exportable services, which are:

The service must be rendered to a foreign entity and performed entirely in Chile; The service must be actually rendered, and must be proven in its existence and at fair market value; and The service has to be used exclusively abroad. The new approach will allow other services to be exempt from VAT as it will include those services where the transfer of people to an offshore territory is needed, expanding the scope of the exemption and relaxing the aforementioned requirements.

New norms that will allow for all service exporters, and not only those related to technical advisory and similar services, to credit any direct taxes paid abroad, avoiding double taxation for all export services qualified as so by the Custom Duty House. In the past, Chile already improved the credit tax system allowing local taxpayers to recover more taxes paid abroad. In addition to this, the country has currently 26 in force treaties that avoid...