Chile Tax Agency Clarifies Determination of VAT Taxable Base for Property Lease-Purchase Contracts

The Chilean Internal Revenue Service March 20 issued Official Letter No. 555, clarifying the VAT-taxable base for a property lease with an option to purchase. The taxpayer sought to calculate VAT based on the invoiced installment amount rather than the property’s tax-appraised value. The Tax Agency disagreed, and clarified that: 1) VAT applies to a real property lease with an option to purchase; 2) the taxable base must be determined by including the value of each lease installment, after deducting the profit or interest included in the transaction; 3) the taxpayer may also deduct the land acquisition value from each ...