CFA - Chile Finance Advisors
  • Our Company
    • Our Team
    • Blog
  • Our Services
    • Audit
    • Outsourcing
    • Tax Planning
    • M & A
  • Our Clients
  • Contact

Tax Reform Law Nº 21.120 starting 2020.

  • November 19, 2020
  • in: Economía @en
Tax Reform Law Nº 21.120 starting 2020.

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.

Read More

Chilean Tax Reform starting commercial Year 2020 Large Companies

  • March 25, 2020
  • in: Economía @en
Chilean Tax Reform starting commercial Year 2020 Large Companies

Corporate Tax (First Category Tax “FCT”) for Large Companies.

The partially integrated system is established as the only tax regime for large companies, with a rate of 27%. The right to use only 65% ​​of the FCT paid as a credit against the final taxes is the rule now, however there is a exception to residents in a country with which Chile has a treaty in force to avoid double taxation, in which case they have the right to use 100% of the FCT as credit. Regarding the order of allocation of withdrawals, remittances or  dividends distributions of profits

Imputation order and its tax effects.
In the chronological order in which withdrawals, remittances or distributions are made, until the positive balance of the RAI, DDAN and REX records is exhausted, in the order and with the effects listed below:

(i) Firstly, to the income or amounts recorded in the RAI registry, affecting the corresponding final tax.
(ii) Secondly, to the income or amounts recorded in the DDAN register, affecting the corresponding final tax.
(iii) Thirdly, to income with tax compliance, then to exempt income and then to income not constituting income, recorded in the REX registry, which will not be affected by any tax, considering in any case those made charged to income exempt from the complementary global tax for the purposes of progressivity established in article 54. In the event that the income is only exempt from the complementary global tax, and not from the additional tax, the tax will correspond to the latter.
(iv) Once the amounts indicated above have been exhausted, the allocation will be made to the balance sheet profits retained in excess of the taxable ones, as reflected in the balance sheet of the company at the end of the commercial year, affecting the corresponding final tax.
(v) Subsequently, after exhausting the retained balance profits in excess of the taxable ones, the allocation will be made to the capital and its adjustments, until the concurrence of the participation that corresponds to the owner in the capital. When the withdrawals, remittances or distributions are imputed to the capital and its readjustments, they will not be affected with any tax, according to article 17 number 7 .-, to the extent that the withdrawals, remittances or distributions imputed to the capital are formalized as decreases of capital according to the type of company in question. For this purpose, the capital decrease must be formalized no later than February of the year following the year of withdrawal, remittance or distribution. In the case of the individual entrepreneur, to make use of this imputation, the decrease in capital must be reported to the Service within the same period.
(vi) Finally, any withdrawal, remittance, or distribution that exceeds the amounts indicated above, will be affected with the corresponding final tax.


Provisional Payments for Absorbed Profits (“PPUA”)
The PPUA refund is gradually eliminated for the profits received from other companies that are absorbed by the losses of the receiving company, according to the following detail:

Year 2020: 90%
Year 2021: 80%
Year 2022: 70%
Year 2023: 50%
Year 2024 and following: 0%

Read More

International Taxation Affidavits Tax year 2019- Commercial year 2018

  • June 24, 2019
  • in: Economía @en
International Taxation Affidavits Tax year 2019- Commercial year 2018

Three important Affidavits are to be filed to the Chilean Servicio de Impuestos Internos before July 1, 2019: 1907, 1929 and 1946.

-Sworn Statement No. 1907 on Transfer Pricing: Corresponds to taxpayers who, during the 2018 business year, have carried out transactions with related parties from abroad, in accordance with the rules established in article 41 E of the Chilean Income Tax Law (ITL).

-Sworn Statement No. 1946: Corresponds, among others, to: (i) Taxpayers with residence in Chile who make payments abroad from operations that a person without residence in Chile performed in the country or abroad; (ii) management companies of public or private investment funds and mutual funds that make payments to a person without residence in Chile; (iii) taxpayers with residence in Chile who have determined amounts indicated in subsection third, of article 21 of the ITL (rejected expenses attributed to a partner/shareholder); (iv) Withholders of Additional Tax.

-Sworn Statement No 1929: Corresponds to (i) taxpayers domiciled in Chile who on a perceived or accrual basis produce income abroad; (ii) taxpayers to which the CFC rules apply, among others. Contact us if you need our assistance for tax compliance with the Chilean SII.

If any queries don’t doubt to contact CFA.

Photo: Santiago from Bicentenario Park.

Read More

Chilean Income Tax Return Process Year 2019

  • February 8, 2019
Chilean Income Tax Return Process Year 2019

Income Tax Return Process Year 2019

The Tax Year 2019, which considers the income obtained by taxpayers in the 2018 business year, represents once again a great challenge for companies and for natural persons, since it’s the second year in which the Tax Reform introduced in Chile through laws 20,780 and 20,899 are fully applied.


Companies.

For the Partially Integrated Tax Regimes of Article 14 B or the Attributed Income of Article 14 A to which the company is subject to, various tax obligations will be generated for purposes of consolidating the TY 2019 and in order to comply with the legislation those obligations will need to be met.

 

Below is a summary of the Affidavits-Sworn Statements that must be submitted to the Chilean IRS according to the Tax Regime chosen and the deadlines for the TY 2019.

Régimen ART 14 A)

Formulario

Certificado

Resolución

Vencimiento

1923 Renta Líquida Imponible + Atribución

52

N°82/08-2017 29.03.2019
1938 Movimientos y saldos de registros de rentas empresariales

N/A

N°83/08-2017 14.05.2019
1940 Retiros, Remesas, Dividendos Distribuidos y Créditos correspondientes

53

N°79/08-2017 29.03.2019

Régimen ART 14 B)

Formulario

Certificado

Resolución

Vencimiento

1926 Renta Líquida Imponible

N/A

N°101/10-2017 07.05.2019
1939 Movimientos y saldos de registros de rentas empresariales

N/A

N°84/08-2017 14.05.2019
1941 Retiros, Remesas, Dividendos Distribuidos y Créditos correspondientes

54

N°80/08-2017 21.03.2019

Find here the Chilean IRS Supplement for Sworn Statements TY 2019:

http://www.sii.cl/declaraciones_juradas/suplemento/2019/suplemento_ddjj_2019.pdf.

The summary of the Main Sworn Statements according to the Chilean IRS Supplement:

Captura de pantalla 2019-01-31 a las 4.58.01 p.m.

Natural Persons.

The Chilean IRS has already published Circular Nº1 dated January 7, 2019 that reports natural persons progressive income tax, tables corresponding to tax year 2019. You can check the table below:

Captura de pantalla 2019-01-31 a las 3.30.28 p.m.CFA provides full and complete advice for the process of Income Tax Declaration TY 2019 (F. 22), which will be essential with the full introduction of the Tax Reform, taking into consideration that the Internal Revenue Service has issued multiple Resolutions and related Affidavits with the New Tax Regimes that must be considered by the taxpayers.

Read More

Chilean Income Tax Return TY 2018

  • January 25, 2018
  • in: Economía @en
Chilean Income Tax Return TY 2018

The Tax Year 2018, which considers the income obtained by taxpayers in the 2017 business year, represents a great challenge for companies, since it is the first year in which the Tax Reform introduced in Chile through laws 20,780 and 20,899, applies fully.

Thus, for each Tax Regime – Partially Integrated of Article 14 B or of the Attributed Rent of Article 14 A – to which the company is hosted, various tax obligations will be generated for purposes of consolidating the AT 2018 Income Tax Operation and complying with the legislation.

It is in this sense that CFA is committed to providing full and complete advice for the Income Tax Declaration process AT 2018 (F. 22), which will be essential with the full introduction of the Tax Reform, taking into consideration that the Internal Revenue Service has issued multiple Resolutions and Affidavits related to the New Tax Regimes that must be considered by taxpayers.

Find here the Supplement of Affidavits issued by the Chilean IRS (SII) : https://lnkd.in/djfxstY

Read More

SII published a list of 150 countries and jurisdictions that have a preferential tax regime

  • December 27, 2017
  • in: Economía @en
SII published a list of 150 countries and jurisdictions that have a preferential tax regime

Chilean IRS decided to publish the list for estimating that it is important information to facilitate the correct voluntary tax compliance of taxpayers, since the rating is relevant for the application of a series of rules of the Income Tax Law.

The list includes the Bahamas, Bermuda, Puerto Rico, Cuba, Qatar, Honduras, the Arab Emirates, Thailand, Taiwan, the Virgin Islands, the Cayman Islands and Hong Kong, among other territories.

The Chilean Internal Revenue Service published a preliminary list of 150 countries and jurisdictions that are considered to have a preferential tax regime or zero or low taxation, a rating that is relevant for the application of a series of rules included in the Income Tax Law (LIR)

The list was built after a rigorous analysis by the specialized teams of the agency that have participated in various international instances that analyze the tax issue and will be updated at least once a year to collect changes that may occur in the behavior of countries.

Its publication aims to provide certainty and facilitate the correct voluntary tax compliance of taxpayers, contemplating additionally the possibility of knowing and receiving the doubts, observations and recommendations of the different stakeholders.

The effect of considering that a territory or jurisdiction has a preferential tax regime is relevant to the practical application of different rules of the ITL, such as Article 14 letter E), No. 1, letter a), which establishes certain reporting obligations investments abroad; Article 41 F on excess of indebtedness; Article 41 G on controlled foreign entities that obtain passive income; and article 59 regarding a reduced rate of the Additional Tax for royalties and remunerations.

As an example, those who pay income or amounts consisting of royalties or remunerations for professional or technical work or services to people living in countries with preferential tax regime, should withhold the Additional Tax with a 30% rate, in the case of royalties, and of 20% for the remunerations, without it being appropriate to use the reduced rates contemplated in article 59.

The law prescribes that a territory or jurisdiction has a preferential tax regime, when it verifies the concurrence of at least two of a total of six requirements expressly stated, provided that they are not member countries of the Organization for Economic Cooperation and Development (OECD).

This allows maintaining a dynamic list that adjusts to the behavior of those jurisdictions over time, as it verifies the commitment assumed to comply with international standards in matters of transparency and exchange of information, as well as the clarifications requested by taxpayers for changes in the jurisdictions that are part of the preliminary list, among other elements that must necessarily be taken into consideration.

A good example of this is Liechtenstein, country included in the year 2003 in the list of countries or territories considered “tax havens”, by Decree No. 628 of the Ministry of Finance, a condition that remained in force without modifications until its current repeal .

The new list, however, takes into consideration for its classification that Liechtenstein signed the Multilateral Convention on Administrative Assistance (MAAT), which allows Chile to exchange information for tax purposes with that country; the rating of “substantially compliant” of the internationally accepted standards on transparency and exchange of information for fiscal purposes by the OECD, as well as that its legislation does not maintain a preferential regime for tax purposes, in accordance with the rating issued by this Same Organization.

The SII recalled that it carries out its processes of tax compliance analysis and case selection based on methodologies and technical disciplines of risk management of general acceptance, a framework in which transactions or transactions entered into with territories or jurisdictions with zero or low taxation receive a greater weight of risk and prioritization for the purposes of its treatment and remediation, which is in accordance with the standards that have been developed at the domestic and international levels.

Finally, it pointed out that taxpayers can consult the Service for compliance with the requirements established by the regulation, both with respect to the countries included in the list and those that are not included in the list, providing the necessary information so that the agency can pronounce in particular cases.

Read More

Tax Reform. Income Tax, Taxation Regimes and rates for commercial year 2017.

  • July 1, 2017
  • in: Economía @en

Tax reform
Income Tax: Taxation Regimes and commercial year rates 2017.

  • Attributed Income System Letter A) of Article 14

As of January 1, 2017, the regime set forth in letter A) of article 14 of the Income Tax Law, which consists of a system in which the income obtained by the company, is  attributed for the taxation of owners , members, partners or shareholders from the companies in which they participate,  in the same year in which said income was generated by the company.

At the company level, year by year it determines its taxable net income, income to which will be applied a rate of First Category Tax (Impuesto de Primera Categoría,IDPC) of 25% for their incomes of business year 2017 and the same rate for their Income for the years 2018 and following.
Regarding the integration, under this regime the IDPC paid by the companies is 100% integrated with the final taxes to be paid by its owners, since the credit granted by the IDPC paid by the companies is 100% of said tax when Impute to final taxes to be paid by their owners, Global Supplemental Tax (natural person income tax) or Additional Tax (non residents withholding tax). However, unlike the partially integrated regime, the owners will be taxed for the income attributed to them by the company in which they participate in the same year in which the company generates the income, completing the taxation of the company and its owners in a same period, regardless of whether the owners received said income by making a withdrawal or receiving a dividend.

  • Partially Integrated Regime of Letter B) of Article 14.

As of January 1, 2017, the regime established in letter B) of article 14 of the Law on Income Tax, which consists of a system that obligates the taxation of owners, community members, Partners or shareholders from the companies in which they participate, only to the extent that they withdraw profits or distribute dividends.
At the company level, year by  year it determines its taxable net income, income to which will be applied a rate of First Category Tax (IDPC) of 25.5% for their incomes of business year 2017 and 27% for their income for the years 2018 and following.

Regarding the partial integration, under this regime the IDPC paid by the companies is not integrated with the final taxes to be paid by their owners, since the credit granted by the IDPC paid by the companies is only 65% ​​of said tax when to be imputed to the final taxes to be paid by their owners, Global Supplemental Tax or Additional Tax. Notwithstanding this, the credit may be used 100% if the owners of the company are resident in countries with which Chile has signed an agreement to avoid double taxation.

In CFA we determine the net taxable income of the companies and we review the corresponding taxation year by year to our Clients, together with a complete and accurate tax advice.


Read More

Law 20.720 of Insolvency and Re-entrepreneurship, replacing the Bankruptcy Law.

  • December 30, 2014
  • in: Economía @en
Law 20.720 of Insolvency and Re-entrepreneurship, replacing the Bankruptcy Law.

In october 2014 the law N°20:720 was enacted “replacing the actual concursal system by a new law of reorganization and liquidation of companies and persons assets , improving the role of the institution that oversights the process, Superintendency of Insolvency and re-entrepreneurship , Superintendencia de Insolvencia y Reemprendimiento.


This law puts emphasis in the reorganization of viable companies , creating procedures for reestructuring  their debts, keeping the company as a productive unit and job generator. One of the great novelties that incorporates this law is the possibility to renegotiate  the natural persons or not comercial debtors debts, and to give them a fast execution of their goods. Also the creation of the Superintendencia of insolvency and re-entrepreneurship , Superintendencia de Insolvencia y Reemprendimiento, with presence all over the country and it’s regions, that replaces the Bankruptcy Superintendence.


The current bankruptcies in court , arrangements and assignments of property that are being processed and the ones that start before the validity of the law will be ruled by the dispositions of the Commerce Code, Book IV, Libro IV del Código de Comercio.

Scope of Application of the new Bankruptcy Law

It will be applied to the concursal proceedures meant to reorganize and liquidate the assets and liabilities of a debtor company, and to renegotiate the assets and liabilities of a debter natural person.

New Authorities 

The new law of insolvency and re-entrepreneurship changes the main characteristics of the former law. Also, it includes new authorities and actors:

1.- Veedor, Viewer: Natural person under the supervision of the Superintendence of Insolvency and re-entrepreneurship, which mission is to reach the agreements between the debtor and his creditors, to supply the propositions of Agreements of Judicial Reorganization and to keep the interests of the creditors, requiring the precautionary measures and conservation of the debtor’s assets, according to what is said in the law.

Their faculties  are similar as the ones the Receiver or  Síndico had with the former law in the agreemente that tried to avoid or put an end to the bankruptcy. Now the main objective of the Concursal Proceedure of Reorganizaion is to restructure the liabilities and the assets of a debtor company, in which the liquidation of their assets has not been done.

2.- Liquidador/Liquidator: Natural person under the supervision of the Superintendence of Insolvency and re-entrepreneurship, which main mission is to realise the assets of the Debtor and try to do the payment to the creditors. This new actor, the Liquidator, will replace the functions of the former Receiver of Bankruptcy or Síndico de Quiebras.

3.- Martillero Concursal /Concursal Auctioneer : Public Auctioneer that voluntarily subjects to the supervision of the Superintendence of Insolvency and re-entrepreneurship, which main mission is to realise the assets of the Debtor, according to what is agreed by the Creditors Commitee and this law.

4.- Deudor/Debtor: In order to avoid the stigmatizacion that the baknruptcy process leads, the new law no longer applies the concept of Failed , being replace by  Debtor, this includes every Debtor Company or Natural person, depending on the concursal proceedure that is being done .

5.- Empresa Deudora/ Debtor Company: Every private legal person , for-profit or non-profit , and every natural person that pays the First Category Tax ,Impuesto de Primera Categoría or the ones that are in the number 2 of the article 42 of the decree law N° 824, of the Ministry of Finance, from 1974, that aprooves the income tax law.

6.- Persona Natural Deudora/ Natural Person Debtor: Every natural person not comprehended in the definition of Debtor Company

Read More

Tax Law Reform in the year 2014.

  • April 7, 2014
  • in: Economía @en
Tax Law Reform in the year 2014.

 


Tax law reform.

Chilean Tax Reform was presented on April 1 of the present year 2014 to the legislators by the new Michelle Bachelet’s government (pending approval).

The motivations of the government are to improve Chilean education system and other measures in order to become a developed country.

The main changes to the Chilean tax law  are to the Income Tax. Briefly, the rise of the First Category tax (Impuesto de Primera Categoría) rate, tax that as a general rule the companies have to pay. Also, there is a modification of the time in which the owners of the companies pay their personal taxes, which is now when the income is earned by the companies. This is a modification to the FUT system (Fondo de Utilidades Tributables) or Taxable Income Register.  The former system allowed the owners to pay the personal taxes on a different time, not when the income  was earned by the company. Another very important objective of this reform is to reduce tax evasion and elusion.

Therefore this reform seeks to increase taxation through changes to income tax, among other measures. The main changes specifically are:

1 – . Increased First Category Tax rate.

First, it rises, gradually, the rate of corporate tax from the current 20 % to 25% (21.0 % in 2014 , 22.5 % in 2015 , 24% by 2016, and 25 % from 2017) . This tax will continue to operate as an advance payment of personal taxes, thus keeping tax integration between companies and owners. This means that the First Category Tax paid will be a credit to the global tax to be paid by business owners.

2 – . Taxation on an accrual basis and term Taxable Income Fund.

On 2018 Income Tax Operation and declaration, the owners of the companies will have to pay taxes for all their companies incomes and not only for the incomes that they withdraw. The system will be changed because now the owners will have to pay immediately the personal taxes. This is the end of the FUT system.

The FUT or the different moment of paying personal taxes was originated in a particular economic situation. 1984 Chilean companies had no ability to finance their investments.

It states: “The situation in Chile today is completely different. The Chilean banking system is similar in many developed countries, depth, and has shown its strength in the last global financial crisis. The capital market has had a great development in the last decades allowing large companies can be financed by issuing bonds and stocks. Finally , firms can obtain financing abroad at reduced interest rates , thanks to the low country risk presented today Chile ” .


To move to this new system of income taxation on an accrual basis , consider the following rules in time :


Steady state : that is regulated in detail in the amendments to the Law on Income Tax contained in Article 1 of the project , which comes into force in the business year 2017, to engage in property during the tax year 2018.


Transition to December 31, 2016 : whose rules are contained in the second and fourth transitory articles .

. 3 – personal tax rate decreased from 40 to 35 %.

This adjustment seeks to address more equitable labor income , in relation to capital gains manner. To contribute to greater horizontal tax equity , the maximum personal tax rate from 40 % today to 35% , is reduced from 2017 calendar goes into effect when the new system on an accrual basis .


4.- Adjustments to taxation on capital gains

There are a number of changes to the project , including:

a) Any capital gains should be taxed at the income tax , no income except capital gains of share funds with bond market presence and revenue specified by law .

Read More

Contact

CFA
Ebro 2740. Of. 601, Las Condes
Santiago, Chile
RM
7550169
Phone: +562 2329758
Email: cfa@chilefa.cl

Sitio

  • Home
  • Our Company
    • Our Team
      • Our Team
  • Blog
  • Contact
  • Our Clients
  • Our Services
    • Tax Law Reform

Busca en nuestro sitio

Languages
  • en  English
  • es  Spanish
  • pt-br  Portuguese (Brazil)
Chile Finance Advisors © 2012 | Todos los derechos reservados

Follow:

  • linkedin