Chile: Preview of tax reform project

Report summarizing central elements of the tax reform project as previewed by the government

Report summarizing central elements of the tax reform project as previewed by government

The Chilean Ministry of Finance on 1 July 2022 released a preview of a tax reform project.

Text of the tax reform bill is not currently available, but is soon expected. The following report summarizes, in six areas, the central elements of the tax reform project as previewed by the government.

  • Income tax—partial disintegration
    • The tax reform preview refers to a "semi-dual" system applicable to corporations that would separate the taxation of companies and their shareholders. The corporate income tax paid at the company level would no longer be a credit against the shareholder's tax; both taxes would be added together.
    • The tax reform preview would establish a 22% tax rate on withdrawals or dividends from companies.
    • Taxpayers whose individual (personal) tax (IGC) rates are below 22% could re-assess the tax on dividends and withdrawals.
    • Under the preview, the corporate income tax (IDPC) rate would be 25% for all companies; however, an additional tax rate of 2% would be added but may not be paid in the case of investment in research and development (R&D) and certain other activities.
    • The tax reform preview proposes incentives for investments in R&D, amplifying the tax credit against the corporate tax from CLP$800 million (approximately U.S. $842,000) to CLP$2,500 million (approximately U.S. $2.6 million), allowing a refund of the credit if it is not used.
    • A rate of 1.8% would apply to the deferral of the payment of final taxes, with respect to accumulated profits in non-operating companies. This measure would apply for companies whose income comes from more than 50% passive income (except for financial institutions).
    • The tax reform project would propose increases to the rates of the existing sections of the individual income tax that would apply to taxpayers whose income is greater than 70 UTA (approximately U.S. $4,210). The new maximum tax rate for income over 140 UTA (about CLP$8 million or U.S. $8,420) would place the rate at 43%.
    • The deduction of losses from previous years would be maintained, and such losses could be carried forward without a time limit; however, an important restriction would be imposed on the use of such losses, with a limit of 50% of the net taxable income of each year.
  • Wealth tax
    • The tax reform preview proposes a 1% wealth tax, which would apply to persons with assets of a value above U.S. $5 million.
    • For assets above U.S. $14.7 million, the wealth tax rate would increase to 1.8%.
    • Assets valued at more than U.S. $100,000 would be considered, and special valuation rules would be established for such assets.
  • A new royalty for large-scale mining and mining income tax
    • The tax reform project would establish a royalty for large-scale mining that would apply to income and a tax on mining income.
    • The proposal would target copper exploiters with production greater than 50,000 metric tons of fine copper per year.
    • The new tax would be of a hybrid nature, combining a royalty applied to sales. The rate of that tax would range between effective rates of 1% and 2% for producers with between 50,000 and 200,000 metric tons of fine copper (TMCF), and starting at 1% for those with more than 200,000 TMCF. There would also be a tax on mining income, with rates of between 2% and 32% on operational profitability, for copper prices between two and five dollars per pound.
    • The rates would increase as the price of copper increases; thus, the tax would “grow” as the economic income in the sector increases.
  • Limits to tax exemptions
    • Private investment funds would become IDPC contributors, except for those whose investment policy is risk capital.
    • Public investment funds would maintain the IDPC exemption. But once they distribute profits to legal entities, the dividends would be subject to this tax. It is also noted that the 10% rate applicable to foreign investors in these funds would be eliminated.
  • Proposals to address tax evasion and avoidance
    • The preview of the tax reform project proposes the creation of a registry of final beneficiaries, so that individuals or final taxpayers who are partners or shareholders of the companies, with a participation greater than 10%, would be known and would be a tool of the Chilean tax authority.
    • A general anti-avoidance rule would have an administrative and not a judicial qualification.
    • The proposal would modify the transfer pricing regulations in relation to advance agreements and the procedure for applying adjustments.
    • Another proposal would modify the passive income control rule to close up what are perceived to be areas of avoidance.
    • One measure would modify the rule on excess indebtedness.
    • There would be changes to the rule on preferential regimes.
    • A proposal would create the concept of a “tax whistleblower” that would allow for financial compensation to the tax whistleblower.
  • Corrective taxes in a second stage
    • The preview indicates that these measures are in the design phase and will be processed in a separate bill during the fourth quarter of the year.

For more information, contact a KPMG tax professional in Chile:

Andrés Martínez J |


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