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16/09/2016

AZ Alert l Tax Reform: Decision Making Time

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AZ Alert l Tax Reform: Decision Making Time

There is less than 120 days until year end, a period in which big decisions are to be made and will ultimately have an important economic impact on companies and their owners or shareholders.

In accordance with the new requirements introduced by the tax reform, as of January 1st, 2017, two new tax systems are going to co-exist. These will have different effects and consequences in the First Category Tax Rate, as soon as taxes are due for the owners or shareholders and also in their terminal taxes.

As to the silence of taxpayers, it is the law which has already assigned the tax system that will affect taxpayers, primarily based on the type of corporate structure of the taxpayer, as well as the legal nature of their controllers (natural or legal persons).

Notwithstanding the foregoing assignation established, certain taxpayers who meet the legal requirements established in this law, have the possibility to choose the tax system of their preference for the next 5 years, a choice that must be made before December 31, 2016.

It is essential to make a diagnosis in order to assess if the taxpayer is in a position to choose one tax system or another, as well as to take measures to enable those not considered, to have the option. The diagnosis will help determine what actions need to be taken for free choice of the tax system.

Similarly, in the context of that process, it is pertinent to also make a decision regarding the use of an important temporary benefit established by the Tax Reform, which expires at the end 2016.  By paying the substitute tax on retained earnings (FUT), business owners are allowed access to a certain amount of the earnings of the company, without additionally being charged for the Complementary Global Tax, which as a result can be very significant.

We urge you to learn more about this matter and to make an informed decision that will allow you to adequately face the imminent changes of the current tax system in Chile.

To obtain further Information on this subject, please contact:

 

rodrigoalbagli

Rodrigo Albagli

Corporate Group Director

ralbagli@az.cl

 

alvarorosenblut

Alvaro Rosenblut

Corporate Group Director

arosenblut@az.cl

 

javierswett

Javier Swett

Tax Group Director

jswett@az.cl