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.

Ice, or Ice Cream? Or Both?

Almost everyone who visits Patagonia looks forward to seeing the great glaciers of Chile’s Fuegian fjords or the massive southern icefields that culminate in Argentina’s Moreno Glacier (pictured below). There are other cool treats that await visitors, though - on their palates, in the form of ice cream (or gelato, if you prefer). Some of it is found in Patagonia itself, but it’s also popular in gateway cities like Buenos Aires.

Most but not all of those treats are from Argentina, stemming from the Italian tradition that has spread throughout the country. I’d like to recommend a sample of ice creameries and flavors, though I’ll acknowledge a personal prejudice at the beginning: I do not share the adoration for dulce de leche, made from caramelized milk (which Chileans call manjar) that all Argentines and many Chileans drool over. Personally, I find it sickly sweet and, if you choose to try it, don’t say I didn’t warn you. I will not mention it further.

For more than three decades, my personal favorite has been Cadore (pictured above) in the Congreso district of downtown Buenos Aires (one of the gateway cities for many a Patagonia itinerary). In the same family since it opened in the 1950s. it’s won awards in Italy itself. The roster of flavors may be less diverse than some more contemporary heladerías, but the quality is extraordinary. My recommendations: chocolate amargo (bittersweet chocolate) and mousse de limón (lemon mousse) are an unbeatable combination.

In northern Argentine Patagonia, at the base of the Andes, the town of El Bolsón is the cradle of Helados Jauja (pictured above), which produces many standard flavors but specializes in local fruit flavors, among them the wild calafate berry (according to legend, whoever eats the berry will come back to Patagonia for more). In recent years, this one-of-a-kind ice creamery has opened branches in Buenos Aires and elsewhere, but still produces everything at its home base. My recommendation: calafate con leche de oveja (calafate berries with sheep’s milk) and mate cocido con tres de azúcar (Argentines’ favorite infusion, roughly comparable to green tea, is also popular in parts of Chile).

Meanwhile, in the Chilean ferry port of Puerto Natales – the gateway to Torres del Paine – Mesita Grande (pictured above) is a pizzeria that takes its name from the single long table that its diners necessarily share. That said, it prepares its own ice cream and, when I offhandedly mentioned Jauja’s calafate flavor, Mesita’s Argentine manager went out of her way to track down berries and sheep’s milk to try to duplicate it. A couple days later, she phoned me to come try it, and the result was a promising experiment that’s not on the regular menu. Still, in its absence, here are my recommendations: chocolate and ruibarbo (rhubarb). There’s also a branch in Punta Arenas, the gateway to the glacial fjords of Tierra del Fuego (pictured below).

What is Jauja?

I first really noticed Jauja when, writing my first guidebook to Argentina in the early 1990s, I visited the alternative Andean community of El Bolsón and tasted some of the most exquisite ice cream ever. Though I had been to Peru, where there’s a city of that name, it never occurred to me that it meant anything more than a place name.

It’s still something of a puzzle to me, even after watching the Argentine director Lisandro  Alonso’s film of the same name (trailer above) on Netflix. I had seen Alonso’s previous film “Liverpool” – a gritty realist effort set, despite the name, in Ushuaia, the world’s southernmost city – but “Jauja” is something else entirely.

To start with, Alonso recruited a big name actor, Viggo Mortensen, as his leading man. That interested me partly because the Danish-American Mortensen shares something of my own Scandinavian heritage but also spent much of his youth in Argentina, where he learned to speak Spanish. Mortensen portrays Danish officer Gunnar Dinesen who, at least in this film, was part of the euphemistically titled “Conquest of the Desert” that displaced the indigenous peoples of what is now Argentine Patagonia in the 1880s.

Patagonia, of course, always attracts my attention, and I’m eager to see whether I recognize the location of any given film. The opening scenes take place in a coastal area where Dinesen and his companions are taking a breather from searching for a deserter who’s become a bandit, and his daughter runs off with a young soldier. It appears to be a western, perhaps resembling US director John Ford’s “The Searchers,” but there’s quite a twist at the end. It's worth stressing, however, that this is not an action movie.

As for the locations seen in the film, I couldn’t catch all the final credits, but one of them mentions the city of Viedma, whose coastline (pictured above) resembles some of the early scenes (including the sea lions along the shore). Alonso probably filmed Dinesen’s search through the mountains at Sierra de la Ventana (pictured below) in southern Buenos Aires province.

Meanwhile, I should point out the ostensible meaning of “jauja” in the Southern Cone - it’s something of a Garden of Eden metaphor, which is ironic in the context of this movie. It’s not, though, in the context of El Bolsón’s ice creamery, which now has branches in other Argentine cities, including my own Buenos Aires neighborhood of Palermo (pictured below).