As countries in Latin America chase new sources of revenue in response to economic pressures, jurisdictions throughout the region are simultaneously striving to adhere to the OECD’s standards governing the collection of VAT on cross-border sales. These factors, in conjunction with the soaring use of electronic services in an increasingly digital global economy, are causing countries to rethink how they tax electronically supplied services (ESSs).
The European Union has taken the lead in implementing digital-era regulations governing the taxation of ESSs. These rules determine which services qualify as electronically supplied and how VAT is applied based on where the services are consumed. (Prior coverage: Tax Notes Int’l, Jan. 5, 2015, p. 33.) The EU’s actions have inspired other countries around the world, including those in Latin America, to reconsider how they apply VAT on cross-border virtual services. The ESS taxation approaches in Argentina, Brazil, and Colombia are worth highlighting because they characterize the frequently contentious, confusing, and complex evolution of ESS taxation in the region.