Digital Taxation in Latin America: Country-Specific Approaches

Digital taxation is becoming increasingly critical as Latin American countries adapt to the digital economy. Effectively taxing digital services that cross traditional borders presents a challenge for governments aiming to capture revenue from global tech giants operating in their jurisdictions.

Each nation in the region has developed distinct strategies to address these challenges, shaped by their economic priorities and regulatory environments. Examining these country-specific approaches highlights how Latin America is reshaping fiscal policies for the digital age.

Taxation of Digital Services in Brazil

Brazil employs a multifaceted regulatory framework to tax the digital economy. The Imposto Sobre Serviços (ISS), a municipal tax on services, applies to digital offerings like streaming platforms and cloud computing, with rates between 2% and 5%, depending on the municipality.

In addition, the Contribuição para o Financiamento da Seguridade Social (COFINS) and the Programa de Integração Social (PIS) taxes are levied on gross revenue, with a combined rate of around 9.25%. Foreign companies must establish a local presence or appoint a representative to comply, adding administrative complexity.

The government is also considering a digital services tax (DST) targeting revenue from digital advertising and user data sales, signaling Brazil’s determination to modernize its tax policies for the digital economy.

Mexico’s Approach to Digital Taxation

Mexico has implemented a robust digital taxation framework. In June 2020, the Value-Added Tax (VAT) law was updated to apply a 16% VAT on digital services provided by foreign companies to Mexican consumers. This includes streaming, digital advertising, and online educational platforms.

To ensure compliance, non-resident digital service providers must register with the Mexican tax authority, SAT (Servicio de Administración Tributaria). Penalties for non-compliance include the suspension of internet services. Mexico is also exploring an income tax on digital platforms, aligning with global efforts to tax profits where economic activities occur under the OECD’s BEPS 2.0 initiative.

Argentina’s Digital Service Tax Policies

Argentina imposes a 21% Value-Added Tax (VAT) on digital services provided by foreign companies, ensuring consistent treatment with traditional goods and services. This tax encompasses online gaming, streaming, and cloud-based solutions.

The Administración Federal de Ingresos Públicos (AFIP) requires foreign digital service providers to register for VAT collection, with financial intermediaries such as banks and credit card companies acting as withholding agents. Argentina is also considering a digital services tax (DST) on revenue from digital advertising and user data sales, demonstrating a proactive stance on digital taxation.

Chile’s Digital Tax Framework

Chile applies a 19% Value-Added Tax (VAT) on digital services provided by non-resident companies, covering streaming services, digital marketplaces, and software applications. This policy has been in effect since June 2020.

The Chilean Internal Revenue Service (SII) has simplified the registration and VAT remittance processes for foreign providers, utilizing technology to streamline compliance and reduce administrative burdens.

Colombia’s Digital Taxation Strategies

Colombia levies a 19% VAT on digital services provided by foreign entities, applicable to online entertainment platforms, digital subscriptions, and remote services.

The Directorate of National Taxes and Customs (DIAN) requires foreign providers to register with the tax authority, facilitating easier tax collection. DIAN has also made VAT filing more accessible for companies without a physical presence in Colombia. The country is evaluating a digital services tax (DST) to target revenue from digital advertising and data monetization, aligning with global initiatives to tax tech giants where they generate value.