Latin America’s evolving VAT rules for digital services and marketplaces

Countries across Latin America are modernizing their value-added tax (VAT) frameworks to capture revenue from the growing digital economy. These reforms increasingly cover e-commerce, software as a service (SaaS), digital platforms and the import of low-value goods.

For U.S. companies selling into the region without a physical presence, challenges have evolved beyond simply understanding where VAT applies. Now they include managing compliance. Registration models, withholding mechanisms and platform liability rules vary by country, and they can materially affect pricing, systems and contractual arrangements.

Below, we highlight key developments across the following Latin American markets and outline why these changes matter for nonresident suppliers:

• Chile
• Peru
• Mexico
• Brazil
• Argentina and Colombia

Chile

VAT rules now cover digital services and low-value goods supplied cross-border

Chile has steadily expanded its VAT framework to capture revenue from the digital economy. In 2020, the country introduced its simplified VAT regime requiring nonresident suppliers of digital services to register, collect and remit VAT on business-to-consumer (B2C) transactions.

Chile also extended VAT liability to certain platform and marketplace operators, particularly when they facilitate transactions and provide payment processing. Payment intermediaries such as credit card companies and banks could be required to withhold VAT on behalf of nonresident providers not registered for VAT. To support compliance, the tax authority launched a dedicated online portal for nonresident suppliers.

In October 2025, Chile expanded the scope of the simplified regime to include imports of low-value goods (LVG) by remote overseas sellers. (Chile defines LVG as imports valued at less than 500 U.S. dollars, including insurance and shipping).

As a result, nonresident sellers and e-commerce platforms importing goods with a value equal to or less than US$500, destined for final consumers in Chile, must register under the simplified VAT regime. 

Under that regime, those providers:

• Are not required to issue VAT invoices or other tax documents to their customers.
• Are not entitled to VAT credits, reflecting the pay-only design that is very common in other simplified regimes globally.

To avoid unnecessary VAT withholding by payment processors, nonresident suppliers should notify payment intermediaries and digital platforms as soon as they have registered under the simplified regime. Distinguishing between B2C and business-to-business (B2B) customers remains crucial, as VAT-registered businesses typically self-account for VAT.

Peru

VAT reforms for nonresident digital service providers

In December 2024, Peru implemented new rules requiring nonresident digital service providers supplying services to end-consumers in Peru to register, collect and remit VAT on B2C transactions and file monthly VAT returns through a simplified process.

Similar to Chile, Peru also relies on payment intermediaries for enforcement and distinguishes between B2C and B2B transactions, with B2B transactions subject to reverse charge of VAT by the recipient of services.

Nonresident suppliers that have failed to comply with the new rules may face assessments for past-due Impuesto General a las Ventas (IGV), interest and penalties. Those suppliers should assess whether their digital revenue streams in Peru may create unmitigated VAT exposure.

Mexico

A mature and highly prescriptive VAT framework for digital services and platforms

Mexico has one of the most developed VAT regimes in Latin America for nonresident suppliers of digital services and for digital platforms facilitating transactions.

Since 2020, the Mexican VAT law has included a dedicated framework governing nonresident providers of digital services, as well as a separate, more complex regime for digital intermediary platforms.

Nonresident suppliers providing digital services to end-consumers in Mexico are generally required to register for Mexican VAT, collect and remit VAT, and file monthly VAT returns through a simplified process—even if they have no physical presence in Mexico.

The regime differs from that in Chile and Peru in that it applies to both B2C and B2B suppliers of digital services. VAT-registered business customers in Mexico are generally not required to self-account for VAT under a reverse-charge mechanism. Rather, the nonresident digital service provider is responsible for charging and remitting Mexican VAT, regardless of whether the transaction is B2C or B2B.

The Mexican framework draws a clear distinction between suppliers acting as principal and those operating as an intermediary or platform.

When a business operates a digital platform that facilitates transactions for third-party suppliers, a significantly more involved regime applies, requiring the platform operator to complete each of the following:

• Register as a digital platform operator in Mexico.
• Withhold and remit VAT and income tax (ISR) on certain transactions carried out by underlying suppliers.
• File monthly tax returns and detailed informational reports.
• Issue and manage the corresponding electronic tax documentation under Mexican rules.

From an operational perspective, Mexico’s rules are not limited to tax payment mechanics. They also impose substantial systems, invoicing, reporting and data management requirements, particularly for businesses with mixed models (e.g., acting partly as principal and partly as intermediary, or serving both B2B and B2C customers).

Mexico has also intensified its focus on cross-border e-commerce and platform-based business models. Changes to operating structures or contractual flows or the introduction of third-party suppliers can materially alter a group’s Mexican VAT profile.

As a result, nonresident digital and platform businesses operating in Mexico must undertake a careful, fact-driven analysis of their operating model to determine which regime applies. That determination will guide registration, compliance, and the implementation and maintenance of reporting procedures.

Brazil

Brazil is undertaking a substantial overhaul of its indirect tax system, moving from a complex patchwork of federal, state and municipal taxes toward a dual VAT-style model consisting of federal and state levels:

• CBS (Contribuição sobre Bens e Serviços): A federal consumption tax replacing PIS and COFINS.
• IBS (Imposto sobre Bens e Serviços): A state/municipal VAT replacing ICMS and ISS

The taxes together create a modern, destination-based VAT framework and were formally adopted through constitutional and tax legislation.

This reform is not limited to digital services but encompasses the entire consumption tax system. Under the reform, the following changes are expected:

• Digital services, SaaS, software, platforms and other intangibles will generally be subject to CBS and IBS based on place of supply (destination), i.e., where the service is consumed.
• Nonresident suppliers will face registration and compliance requirements for CBS and IBS when providing services used in Brazil.
• Foreign digital platforms may be liable for CBS and IBS where they facilitate transactions or deliver services to Brazilian users.

The formal implementation phase and e-invoicing integration for CBS/IBS started in early 2026, and a gradual phase-in of CBS/IBS and phase-out of existing indirect taxes (ICMS, ISS, PIS and Cofins) is scheduled through 2033.

Argentina and Colombia

Argentina and Colombia were among the first Latin American countries to introduce VAT rules targeting cross-border digital services supplied by nonresident providers.

Rather than focusing primarily on direct registration models, both countries initially adopted withholding-based collection mechanisms, relying heavily on local financial institutions and payment intermediaries to collect and remit VAT on payments made to foreign digital service providers.

Between 2023 and 2025, Argentina slowly evolved its VAT withholding regime from a payment-processor system to a platform-based system.

The obligation of platforms to withhold VAT depends on whether the provider is considered a “habitual” seller, which is determined by the number of transactions carried out per month and the value of its turnover. Habitual sellers would be subject to VAT withholding by digital platforms, but the onus is on the platforms to correctly classify sellers as habitual, and to withhold VAT on the appropriate transactions.

Colombia follows a similar approach, with VAT on digital services provided by nonresident suppliers generally withheld by payment intermediaries. While Colombia also allows for voluntary registration by nonresident digital service providers, in practice many opt for withholding through a local payment processor, indicating some level of regulatory flexibility in this area.

Where digital platforms are involved, withholding is still performed primarily by the payment processors, but a platform must take secondary responsibility for VAT collection if the payment processor does not do so, or if the Colombian tax authority (DIAN) designates it to do so.

Recently, DIAN introduced new reporting obligations for both resident and nonresident digital platforms facilitating qualified services such as services to local users, sales by resident sellers or rental of local real estate. The platforms are now required to report detailed data annually, including sellers’ tax IDs, transactional values, financial account identifiers and any fees or taxes withheld.

Lastly, in a 2025 budget discussion, Colombia was looking to expand its platform rules to include digital platforms in the gig economy, ride-hailing and short-term accommodation spaces.

What Latin American VAT reforms mean for nonresident digital businesses

Across Latin America, tax authorities clearly are modernizing their respective VAT frameworks to bring cross-border digital activity, e-commerce and platform-facilitated transactions into the tax net.

Authorities are prioritizing destination-based taxation, strengthened data transparency and reliance on intermediaries to enforce compliance.

Nonresident suppliers are increasingly expected to register directly, collect VAT at the source and maintain systems capable of customer classification, location validation and monthly reporting. Marketplaces and payment processors are positioned as compliance gatekeepers, with growing responsibilities for withholding, data sharing and transactional reporting.

The scope of these rules is widening from digital services to LVG and hybrid models that blur the boundaries between content, services and logistics. Compliance models that once operated in silos—such as e-commerce, SaaS, app stores, digital content and payment processing—are converging under regulatory expectations.

Companies with digital or remote operations in the region should ensure their systems can support multi-jurisdictional VAT registration, customer identification and withholding reconciliation. Businesses that proactively align contractual terms, internal data flows and platform interactions with these rules will be better equipped to manage risk and remain compliant as Latin American VAT frameworks continue to evolve.

How an advisor can help you navigate Latin America’s evolving VAT rules

An advisor can help translate Latin America’s evolving VAT rules into practical actions that align with how your business operates. Many organizations benefit from a coordinated view of their cross-border digital footprint and the systems that support it, rather than approaching VAT compliance country by country in isolation.

Support may include:

• Assessing where VAT registration and collection obligations apply across jurisdictions
• Evaluating operating models (principal vs. platform, B2B vs. B2C) and how they affect tax outcomes
• Reviewing billing, invoicing and data flows to support customer classification and reporting
• Designing processes for withholding, reconciliation and ongoing compliance
• Identifying risks tied to historic transactions and changes in business structure

Expanding and converging VAT regimes challenge businesses to apply them consistently across systems, contracts and workflows. An experienced advisor can help connect those pieces so that compliance keeps pace with growth and businesses can manage their tax obligations with fewer disruptions.