Chile proposes VAT refund mechanism for medicines and diapers

A legislative initiative is advancing in the Chilean Congress that proposes a new mechanism for VAT compensation on essential goods. Rather than reducing the tax rate, the bill establishes a system where consumers pay the standard 19% VAT and subsequently receive a refund for specific purchases.

The benefit is targeted at individuals within the most vulnerable 80% according to the Social Household Registry. It specifically covers the purchase of diapers and certain medications. The amount refunded will correspond to the lesser of the actual VAT paid or the amount calculated based on a monthly reference basket.

To ensure tax compliance, purchases must be made through formal commerce and supported by electronic receipts. For medications, a valid electronic medical prescription is required. The Internal Revenue Service will validate tax information, while the Social Security Institute will manage and grant the benefit.