Chile: Can VAT Be Applied to a Gambling Contract?

The recent Exempt Resolution No. 69 issued by Chile’s Internal Revenue Service (SII) has reopened a particularly interesting legal debate regarding the taxation of online gambling.

The first issue concerns regulatory consistency. It is difficult to overlook the fact that the SII previously excluded online betting operators from the simplified VAT regime on the grounds that they were carrying out an unlawful activity. Today, however, it has established a specific procedure allowing those same operators to register and pay VAT in Chile.

Yet the real debate does not lie in this apparent contradiction, but rather in a much deeper question: whether VAT is truly the appropriate tax instrument to apply to a gambling contract.

VAT was originally conceived as a consumption tax, primarily applicable to the sale of goods and the provision of services. Participation in a gambling activity, however, is neither a contract for the sale of goods nor a service agreement. From an objective legal perspective, it is an aleatory contract, the essence of which lies in the uncertainty of the outcome and the possibility of gain or loss for either party.

This raises the question of whether an online wager can simply be equated with a digital entertainment service. The player is not merely purchasing content or receiving a service; rather, they are entering into an aleatory legal relationship whose economic outcome is inherently uncertain.

This distinction helps explain why, in much of the world, the prevailing taxation model has not been VAT, but rather specific gambling taxes, generally calculated on the operator’s Gross Gaming Revenue (GGR).

The legal question is therefore clear: does Chile’s VAT Act genuinely authorize the taxation of online gambling contracts, or are we facing an expansive administrative interpretation of legislation originally designed for other types of digital entertainment services?

Regardless of the answer, the discussion deserves attention because it touches upon fundamental principles of tax law, particularly the principle of legality and the limits of the tax administration’s interpretative powers.

Previously published in: https://www.linkedin.com/feed/update/urn:li:activity:7468298959673933824/