Chile: Tax Reform Law

Undoubtedly, Tax Reform Law 20.870 is the largest break in Chilean tax history. The reform has the peculiarity that its implementation will take place over four years, from 2014 up to and inlcuding 2017, in order to minimise the effects of it on the economy and companies.

With this reform two new tax systems are created: Attributed Income (or imputation of income with full integration) and Semi Integrated Income – in which the final taxpayers only pay for their retirement but can only integrate 65% of the corporate tax credit. It also includes an increase in the corporate tax rate from 20% to 25% or 27% depending on the chosen system. The Profits registry (FUT) is removed and replaced with two new records which operate generally on the basis of financial differences. The use of carry back is removed and the use of goodwill is limited to only effecting income.

In addition to the above mentioned, standards as important as the inclusion of Standards CFC (Controlled Foreign Companies); generic anti-elusive clause, rules for foreign investment information (active and passive), trusts and underlying are introduced. 

Increases in specific taxes are incorporated such as, alcohol, tobacco and, CO2 emissions both for companies and cars. The tax franchise for promoting construction is removed (reduced VAT for constructions from 4.000 to 2.000 tax unit). It has set a limit to the benefit on capital gain on the sale of properties up to 8.000 tax units, and the taxation of capital gains on shares sales has changed to be incorporated as a taxable event with taxation on the sale of real estate.

The rules on excessive indebtedness for purposes of lowered tax rate interests in international loans are modified. All this and much more require a detailed study in each case.


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