Sunday, March 5, 2017

Emptying the VAT? Argentina, Chile & Uruguay Offer Tourists Tax Breaks

Recent developments in tourist taxation, in the Southern Cone countries of Chile, Argentina and Uruguay, should interest readers of this blog. In the near future, though, I’ll also be addressing potential visa complications in the face of the United States’ new xenophobic government.

For many years, I’ve advised visitors to Chile that, when paying for accommodations in US dollars or by foreign credit card, they are entitled to a 19 percent discount. That’s because foreigners on a tourist visa are exempt from the country’s Impuesto de Valor Agregado (IVA, or Value Added Tax).
Termas de Puyehue, an historic spa hotel eligible for IVA discounts
For those unfamiliar with VAT, it’s a sort of sales tax that levied on products and services within Chile, but not on those intended for export. For some reason, Chile has chosen to define accommodations and some related services as export items, though it’s always mystified me that sleeping in, say, a Puerto Natales hotel might qualify as an export. It’s a legal fiction that also applies, in some cases, to meals and even tours that are part of an all-inclusive package at destinations like Termas de Puyehue Wellness & Spa and the Puyuhuapi Lodge & Spa.
The remote Puyuhuapi Lodge & Spa can also grant IVA discounts.
It’s not quite automatic, though. In the first instance, not all hotels can take advantage of it—they must apply to Chile’s Servicio de Impuesto Internos (SII, Internal Revenue Service) for a franquicia tributaria (export permit) and, in the process, prove that a minimum percentage of their clientele comes from outside the country. In reality, this requirement excludes many modest but perfectly acceptable hostales (B&Bs) and hostels from consideration, even though such facilities could probably use the tax break more than their far wealthier counterparts.
Modest accommodations, like Puerto Natales's Hostal La Cumbre, are often ineligible for IVA discounts.
There’s a recent change in the law that merits noting. Generally, on arrival, foreign visitors receive a 90-day visa, and hotels must make a photocopy of your passport and tourist in order to provide the IVA discount. Though the immigration policy itself has not changed, however, visitors who have been in the country more than 60 days are no longer eligible for the discount.

While the great majority of visitors are unlikely to stay longer than 60 days—even a brief detour in Argentina or another country restarts the clock—it’s worth noting. If it’s more, though, you might as well be a Chilean resident. Note also that the discount depends on an exchange rate that the hotel may have set early in the season, and could be less (or perhaps more) advantageous than the current daily rate.

To receive an IVA discount at Jacinto, pay with your foreign credit card.
I spend far less time in Uruguay than I do in Argentina and Chile, and only recently became aware of developments in their tourist taxation regime according to Ley 17934. Set at 18 percent, Uruguay’s IVA discount benefits tourists not only in accommodations refunds, but also services such as car rentals and meals. Last year, while dining at Jacinto in Montevideo’s Ciudad Vieja neighborhood, I was surprised to find the discount applied directly to my bill when I paid by credit card. In some cases, though, the discount appeared only when I received my credit card statement at home in California.
My receipt from Jacinto indicates the IVA discount under Ley 17934
For none of the transactions in question did I have to show proof of tourist status—merely paying with a foreign credit card was sufficient. This makes the Uruguayan policy far more convenient than its Chilean counterpart but also potentially vulnerable to abuse—in theory, I suppose, a foreigner could pay for a large dinner by credit card and be reimbursed by Uruguayan friends who would thereby receive the benefit indirectly.

It’s worth adding, though, that the IVA discount for accommodations is only 10.5 percent, and it has seasonal limits—this year, for instance, it is available only until April 21st. Still, the policy benefits everyone, or at least these able to pay with the proper card.

Stays at Camping El Bolsón - which has its own brewery - are now eligible for IVA discounts in Argentina.
Both Chile and Uruguay have been doing IVA discounts for some time, but Argentina’s a latecomer to the party. The law’s been on the books since 2001, but only this summer did the government of President Mauricio Macri declare that foreign hotel guests would not have to pay the 21 percent IVA that applies to all other products and services in the country. It’s also applicable to all accommodations, ranging from campgrounds to five-star luxury hotels, though clients will have to show their passports or other identification (visitors from neighboring countries may not need passports). The only acceptable means of payment, though, is a foreign credit or debit card, or a bank transfer. Cash is not acceptable (though Argentine hotels often provide cash discounts).
A stay at Bariloche's classic Hotel Llao Llao also means an IVA discount for foreign visitors.
As always, there’s a strange twist in Argentina’s new measure—it applies only to provinces with international borders. Thus, the interior provinces of Tucumán, Santiago del Estero, Santa Fe, Córdoba, San Luis and La Pampa will not benefit from it. All these provinces probably draw more in-country visitors than foreigners, but Córdoba, San Luis and Tucumán especially could be at a disadvantage to neighbors which do have foreign borders.
Because Córdoba province has no international border, guests at Hotel Sierras in Alta Gracia - Che Guevara's boyhood home - cannot receive IVA discounts.
One final note. The current issue of Condé Nast Traveler misleadingly says that “Argentina did away with its 21 percent hotel tax for foreigners.” This is simply wrong—there never was a hotel tax for foreigners, and Argentine tourists and residents will still be on the hook for that 21 percent IVA (presuming they’re not paying cash under the table).
This kiosk poster in Santiago de Chile promotes Argentina's new tourist tax refund.


Anonymous said...

Info provided here is much clearer than some other blogs I have read. We are visiting Uruguay in Dec and we asked our hotel if the rate online includes VAT and foreign travelers are exempted from it. They confirmed VAT is included and we have to pay the VAT. I guess it has to do with the seasonal application of the exemption till April 2017, right?

As for hotels in Argentina which only accept cash, we contacted all of them in advance via email to make sure we get the VAT exemption. Most of them agreed to it with one says they will do it for us as 'an exception.


KS said...

I have been in Chile on and off since August 2017. I leave the country so I have not been in Chile more than 60 days without leaving. I am very familiar with the VAT. However, I am now in the south and hostels are the norm. One hostel I stayed at for 4 days charged me the 19% extra on the room rate. I paid with my credit card so that met the requirement of paying in a foreign currency - us. The owner first told me I was being charged the 19% because I was using a credit card. After telling him, that cannot be true..the owners daughter told me that her parents did not fill out the forms required for them to not charge their customers the VAT. There was nothing I could I paid it. Is there someway to get that amount back? I will be in Santiago in a week or there a form I can get, hopefully online, from the SSI to get a refund? It doesn't seem right that I was not told I would have to pay the extra 19% until the end of my stay when I was checking out.

Wayne Bernhardson said...

Thank you for the question, KS. I don't pretend to know all the intricacies of Chilean tax law, but if the hostel owners have done the paperwork - which should be to their advantage - you get the discount on the spot. For some small hotel owners, it may not be worth the trouble, since they have to prove that a certain percentage of their clients are foreigners, but for most hostels that shouldn't be an issue. Still, given that your hosts apparently didn't do the work, I doubt there's any way to get a refund now.

KS said...

Wow. I guess I will contact the booking site and tell them they should disclose this in their pricing. I was quoted one price on the booking site and ended up paying 20% more. Thanks for confirming what I had suspected.

Wayne Bernhardson said...

Is this a hostel chain, or a single independent hostel? If the former, you might be able to pursue a solution with their central offices.

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