Chile has announced tax changes that come into effect from 1 April 2022. Law No. 21,420 of 4 February 2022 details tax updates relevant for companies operating in Chile, as well as inheritance and gift tax, land tax and luxury goods tax.
Let’s take a look at the updates relevant to companies.
The new law repeals the 4% tax credit for purchases of fixed assets by companies with an average annual revenue exceeding UF 100.00.
From 1 April 2022, there will be a single tax rate of 10% on capital gains from transactions. (This will not apply to institutional investors.) The rules for calculation allow taxpayers to use the value as of the date of acquisition, or the official closing price as at 31 December in the year of acquisition.
Losses will not be deductible as an expense, but must be deducted only from income of the same type.
For non-resident taxpayers, the acquirer or stockbroker will be obligated to withholding tax at rate of 10% on capital gains or 1% of the total amount.
The Law also repeals a special VAT credit allowed for construction companies, and modifies the “basic taxable event of services”.
The tax treatment of leases is also modified in the Law.
Other relevant tax points included in the Law:
- Tax on inheritance and gifts is to be levied on sums for beneficiaries of life insurance policies, excluding disability and survival insurance.
- Land tax (impuesto territorial) adjustments include an increase in the territorial tax surcharge to 0.425% (up from 0.275%).
- There will be in annual 2% tax on certain luxury goods, including helicopters, aircraft, certain yachts and vehicles.
In addition, the Law lists changes of requirements when requested to appear in person before the SII (Chilean Internal Revenue Service – the tax authority); taxpayers can now appear in person or by proxy. ‘In person’ includes remotely via electronic means, and proxies must have powers of the agent in writing, either hard or soft copy, duly signed by the principal, or other acceptable mandate in company bylaws, signed by the board of directors, or similar.
All these changes come into effect from 1 April 2022.
If you’d like more information on any of the points included in Law No. 21,420 of 4 February 2022, or find out if/how your business is affected, our experts in Chile are ready to help.