Chile’s tax authorities (SII) issued Ruling No. 578 on 6 March 2026, clarifying the VAT and tax treaty implications of software licensing and sublicensing in cross-border arrangements, specifically in the context of the Chile-US tax treaty.
The ruling responds to a request by a Chilean company that acquired software from an unrelated supplier in the US and subsequently sublicensed it to customers located in third countries. The company sought guidance on the VAT treatment of the software acquisition and whether the sublicensing activity qualifies as a VAT-exempt export service.
The SII ruling distinguishes between two transactions:
Cristian Vargas
BDO in Chile
The ruling responds to a request by a Chilean company that acquired software from an unrelated supplier in the US and subsequently sublicensed it to customers located in third countries. The company sought guidance on the VAT treatment of the software acquisition and whether the sublicensing activity qualifies as a VAT-exempt export service.
The SII ruling distinguishes between two transactions:
- Software acquisition: The Chilean entity obtained only distribution and resale rights but not rights to reproduce, modify or otherwise exploit the software. As a result, the transaction falls under the business profits article of the Chile-US tax treaty. No withholding tax is levied unless the supplier has a permanent establishment in Chile. Because the software acquisition payment is not subject to withholding tax, the transaction is subject to VAT.
- Sublicensing: The sublicensing of the software to foreign customers is considered a VAT-taxable service. However, the transaction may qualify for the VAT exemption for export services subject to certification by the National Customs Service.
Cristian Vargas
BDO in Chile