The following is a summary of the main issues affecting foreign investors contained in the Tax Reform Bill filed by the government of Chile before Congress on 23 August 2018.
Amendments to the current GAAR, intending to bring greater certainty to taxpayers.
Limitations imposed to the tax authority regarding the possibility to challenge tax losses, calculation of tax equity and VAT credit balance beyond the statute of limitations.
New regulations concerning the powers that the Chilean tax authority has regarding tax assessments. These new rules include international reorganizations that affect Chilean assets.
Simplification and reestablishment of a two tier integrated tax system, where corporate tax is fully creditable against final taxes, the latter are not triggered while profits are not distributed. This tax system would be applicable regardless of the fact that the foreign investor is domiciled or resident in a country with whom Chile has a DTA in force or not.
Substitute tax on accumulated taxable profits as of December 31, 2016, at a 30% tax rate.
Simplification and consolidation in one article of the Income Tax Law of the provisions that grant tax credits for taxes paid abroad, setting the maximum tax credit at a 35% rate.
Regarding withholding tax applicable on interest remitted abroad, back to back loans are no longer entitled to a 4% tax rate, but will be subject to a 35%.
New term and efficiency regarding the VAT recovery procedure regarding fixed assets.
Services rendered abroad by a non-tax resident or domiciled entity to a Chilean taxpayer that are exempt from withholding tax would be subject to VAT in Chile.
The tax bill introduces a new tax applicable to digital services rendered from abroad by a non-tax resident or domiciled entity to a Chilean individual. This tax will be a unique tax and should replace any other tax, and is applicable at a 10% rate.
New amnesty tax at a 10% rate. In contrast with the tax amnesty in force during 2015, this procedure will include the registration of immovable assets.
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Taxand's Take
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