We share LexLatin’s interview with our Tax Group Director, Andrea Bobadilla, where she discussed how companies must adapt to effectively develop tax sustainability in their operations.
In October 2024, Chile became the first country in Latin America to incorporate the concept of tax sustainability into its legislation. With Law No. 21.713, or the Law on Compliance with Tax Obligations, the Tax Code was amended to include Article 8, number 18, which defines tax sustainability as the set of measures implemented by a taxpayer to promote mutual cooperation and transparency in complying with tax obligations.
Since then, the Chilean tax authority — the Internal Revenue Service (SII) — has taken steps to implement this change with the goal of reducing tax evasion and avoidance. It is expected that the SII will soon issue a resolution specifying the requirements and process for certifying tax-sustainable companies, based on specific indicators.
Even before the reform was enacted, the authority had already collaborated with the Pontificia Universidad Católica de Valparaíso to develop an analysis model that incorporates tax sustainability indicators. This work led to the creation of the Tax Social Responsibility Form (Formulario de RST), which is based on the experience of so-called Business Groups (GE). The form has been available since mid-May 2024.
Chile’s pioneering approach to tax sustainability highlights the importance of this issue, not only for the tax authority, but also for companies operating in the country.
“Today, tax sustainability is a key concept — it’s not just about how much companies pay, but how they pay, and how the act of tax payment translates into sustainable value. It reveals the social role organizations play beyond simply maximizing profits or reporting returns to shareholders, as was previously the norm. The role that companies play in our society is essential,” says Andrea Bobadilla, Director of the Tax Group at Albagli Zaliasnik (AZ).
Background
Although the concept is new to Chilean legislation, tax sustainability is not unfamiliar to companies in the country — especially those listed on the Santiago Stock Exchange’s main index, the Selective Stock Price Index (IPSA). These companies have for some time been preparing reports that follow certain international standards.
A study on tax transparency in Latin America, led by Antonio Faúndez, a professor at the Pontificia Universidad Católica de Valparaíso and published last year, revealed that listed companies have long been adopting sound tax practices. These efforts are often guided by standards such as the Dow Jones Sustainability Index (1999) and the Global Reporting Initiative (2021), among others.
The study also showed that the number of IPSA companies disclosing their tax strategies grew from 28% in 2020 to 75% in 2022.
Bobadilla highlights the GRI 207 standard, which many Chilean companies use in their tax disclosures. This standard includes aspects such as the existence of a tax strategy, risk management, and total tax contribution by country.
Growing Interest
Despite the experience some companies already have in adopting good tax practices, Bobadilla notes that AZ has seen a growing number of inquiries on the topic — particularly from large companies, including those with global operations.
According to Bobadilla, the new regulation is an invitation to all taxpayers, including medium-sized and small businesses. While the final resolution outlining implementation is still pending, there are already steps that companies should take — such as creating a tax risk matrix to define potential risks, contingencies, and how they comply with obligations. This internal structure will help companies work in alignment with the tax authority.
Implementing the reform will be a challenge for both the tax authority, particularly its auditing teams, and companies seeking to ensure the process runs smoothly.
“Although it’s currently a tool, how well it is implemented and whether it achieves the expected benefits for both sides will ultimately depend on time and measurement.”
Certification
According to Chilean law, in order to be considered tax-sustainable, a company must be certified annually by independent certification firms. The names of these firms will soon be published on the Internal Revenue Service’s website.
Through this process, companies can demonstrate that their operations and tax strategies align with tax sustainability.
Another certification mechanism involves cooperation agreements between the SII and two or more companies within the same business group. This is established in Circular No. 06, published by the SII in January, which refers to business groups and unified audit procedures. Bobadilla notes that such cooperation agreements will have the same effect as annual certification.
Certification is voluntary. Bobadilla emphasizes that companies that do not certify will not face penalties. However, she points out that the recent tax reform under Law No. 21.713 has strengthened the powers of the SII — particularly with respect to auditing — making transparency and compliance increasingly important.
“So while there may not be penalties, if a taxpayer doesn’t get on board with tax sustainability, they could face more audits or miss out on tangible benefits that certified companies may receive — such as fewer audits, more fluid communication, and, ultimately, a relationship of trust with the State.”
A Strategic Asset
In Bobadilla’s view, tax matters have evolved from being merely financial or accounting concerns to becoming a strategic asset within corporate governance.
This issue will become even more relevant with the June 30 deadline for over 22,000 large taxpayers to submit Form 1913 — a sworn statement on global tax characterization. This form includes questions related to tax sustainability, such as the implementation of tax best practice standards, the individuals responsible for ensuring compliance, corporate governance structure, tax control framework, and risk matrix across business groups implementing tax governance, as outlined by the SII.
“These topics will become highly strategic within companies. One dimension is the relationship with the tax authority — with transparency and cooperation, companies may benefit from fewer audits, technical support from the SII, and a smoother communication channel.”
She refers that the other dimension is positioning and reputation, which -he assures- are today super strategic values, important within the companies, and even translate into better conditions in the market.
According to AZ’s Tax Group Director, the impact may be seen as an intangible benefit — shaping how other stakeholders, investors, banks, and institutions perceive tax-sustainable companies in the market.
ESG, Information Use, and Tax Sustainability
Bobadilla does not believe that the resistance to ESG criteria in some countries will hinder Chile’s progress in tax sustainability.
“ESG criteria are one dimension, but the regulation makes it clear that a company cannot be considered sustainable if its tax practices are not transparent and sustainable. It’s just another ingredient to add to the sustainability indicators — but ultimately, they’re not mutually exclusive.”
Regarding certification, concerns have emerged around the use of taxpayer-provided information — particularly that it might be used for audits or shared with other government entities.
Bobadilla dismisses this concern, explaining that the relationship between companies and the tax authority should be based on good faith, transparency, and cooperation — allowing financial and tax-related information to flow properly.
“The expectation is that the SII, in fulfilling these agreements, will use the information appropriately and not misuse it, leak it, or transfer it to other entities. In this cooperative framework, it’s also expected that the authority fulfills its commitment and acts collaboratively.”
