On January 1, 2020, most of the provisions of Law No. 21,210 on Tax Modernization come into force. This regulation mainly brings changes in the tax regimes, eliminating the Regime of Article 14 Letter A of Attributed Income, setting forth the General Regime of article 14 D Nº3 for Medium and Small Business (“ProPyme”) and the Transparent Regime of article 14 D Nº8.
Pro Pyme General Tax Regime.
Tax Regime focused on micro, small and medium taxpayers (SMEs), which determines their tax result, as a general rule, based on income received and expenses paid, being obliged to keep complete accounting with the possibility of opting for a simplified one. They are subject to the First Category Tax (IDPC) with a 25% rate and their owners will be taxed based on withdrawals, remittances or effective distributions, with full imputation of the credit for First Category Tax in the final taxes that affect them, except for those owners who are IDPC contributors and are not covered by the Pro Pyme regime. ”
Entry requirements.
The average gross income in the last three years cannot exceed 75,000 UF, which may be exceeded once, and, in no case, in any one year the income may exceed 85,000 UF. This average includes income from your related parties.
At the time of commencement of activities, its effective capital must not exceed 85,000 UF.
It is capped at 35% of income from certain rents:
Income of N ° 1 and 2 of art. 20 LIR (except Agricultural Real Estate).
Participation account contracts
Social rights, shares or investment fund quotas.
Benefits.
1. Proposal for the declaration of the SII to the company, based on information from the Purchase and Sales Registry (RCV) supplemented by the taxpayer.
2. No monetary correction applies.
3. Your existing stocks or supplies at the end of the year are recognized as an expense.
4. Applies instant depreciation of your fixed assets.
5. Determines the simplified tax base, according to income received and expenses paid (except in the case of operations with related companies).
6. It is released from maintaining business income records (RRE), provided that it does not generate or receive income to be controlled in the REX registry.
7. In the event of generating or receiving income to be controlled in the REX registry. And continue with the release of carrying the RRE, you can issue Electronic Tax Documents that account for asset movements.
8. There is no imputation order for withdrawals, remittances or profit distributions to their owners, to the extent that it does not generate or receive income to be controlled in the REX registry.
9. Applies the exercise rate to assign the credit by IDPC.
10. Determine a simplified Tax Equity.
11. Use fixed PPM rates.
12. You can access a tax status report that will allow you to access the banking system to obtain financing.
13. A reduction is applied to the IDPC tax base for investment incentives (50% of the RLI with a ceiling of UF 5,000).
14. Against the IDPC determined by the company, all credits contained in the LIR and other laws apply.
15. Tax status of withdrawals, remittances and distributions is determined at the end of the fiscal year.
First Category Tax Rate.
From 25%, with a temporary reduction to 10% due to a health crisis in the coming years. The First Category rate and Monthly Provisional Payments were reduced to 10% for all companies under the Pro Pyme Regime during the years 2020, 2021 and 2022, that is, until tax year 2023.
Monthly Provisional Payments.
In the starting year of 0.25%.
If the gross income from the previous year’s business does not exceed 50,000 UF, it is 0.25%.
If the gross income from the previous year’s business exceeds 50,000 UF, it is 0.5%.
Business Income Registries.
A record of business income is required to the extent that they possess or receive income that must be entered in the register of Exempt Income and income not constituting income (REX) and that do not take advantage of the Electronic Tax Document (DTE) where they must report their equity movements.