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.

CHILE

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.

URUGUAY

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.

ARGENTINA

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.