Chile: Tax treatment of expenses and donations associated with catastrophes; VAT development
Instructions on associated donations and expenses issued as a result of forest fires
Instructions on associated donations and expenses issued as a result of forest fires
As a result of the forest fires that have affected the Ñuble, Biobío and Araucanía regions, and its declaration under the constitutional state of emergency of catastrophe, the Internal Revenue Service of Chile (Servicio de Impuestos Internos) issued instructions on associated donations and expenses.
Expenses associated with fires
In order to maintain the development of economic activities by companies and protect the health of their workers and third parties, the following can be deducted as an expense:
- Those amounts incurred voluntarily or compulsorily by taxpayers and intended to prevent, contain, or reduce the spread of fires
- Those disbursements intended to lessen or alleviate its effects and whose purpose is, in general, to protect the interests of the taxpayer's business, guaranteeing, for example:
- The present or future income
- The maintenance or support of its workers, including the payment of salaries despite the fact that they have not been able to attend or report to their places of work due to a fortuitous event, force majeure or another cause attributable to the effects of the fires
Donations to Treasury
Donations made to public bodies and services will have the following benefits:
- They are exempt from all kinds of taxes, including value added tax (VAT) on the importation of donated goods.
- They have the quality of expense necessary to produce income for purposes of the tax law.
- They are not subject to the absolute global limit (LGA).
- They do not require the insinuation process.
Donations associated with fires
Donations made in order to satisfy the basic needs of food, shelter, housing, health, cleanliness, ornamentation, debris removal, education, communication and transportation of the inhabitants of the affected areas, will be exempt from all payment or encumbrances that affect them, and will not be subject to the LGA.
Donations to the National Reconstruction Fund
Donations from both Chile and abroad to the National Reconstruction Fund or to finance specific works may qualify for tax benefits.
Read a March 2023 report (Spanish and English) [PDF 1.3 MB] prepared by the KPMG member firm in Chile
Other topics discussed in this report include:
- Affidavit update – fiscal year 2023
- VAT on the consignment sale of used bicycle
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