New Tax Reform | Executive submits bill that provides benefits to the middle class and SMEs

• Suspension of the 2026 revaluation: The revaluation process for non-agricultural real estate is postponed until 2027, with the aim of improving technical criteria and strengthening the transparency of the process with greater participation by municipalities.
• New limit on contributions for senior citizens: A cap is established on property tax payments, at a maximum of 5% of annual income for senior citizens belonging to the most vulnerable 60%, even if the property appraisal exceeds the current exemption limits.
• Deduction for rental expenses: A deduction is incorporated between the lesser of the rental fee and the amount of up to 8 UTA (approximately $6.6 million) per year of income tax for rental payments. The benefit applies in full to those with annual income of up to 90 UTA (approximately $74 million), decreasing progressively between 90 and 150 UTA. Those who own three or more properties are excluded.
• Education expenses: The application of the benefit under Article 55 ter of the Income Tax Law is simplified, considering only the parent with personal care. The annual income limit of 792 UF is maintained.
• Municipal Common Fund: Lo Barnechea is included in the group of municipalities that must contribute 65% of the property tax collected to the Municipal Common Fund.

• Transparent regime (Art. 14 letter D LIR): The regime for MSMEs is being redesigned. Companies whose owners withdraw all profits are exempt from First Category Tax (IDPC) and are only subject to Complementary Global Tax (IGC).
• Alternative regime with IDPC: A new regime is created for companies that choose to remain in an integrated regime, establishing an IDPC rate of 20%, which will be applied progressively from 2028, depending on economic growth, increasing by two points per year from 2029.
• Transitional regime for new ventures:

Entry requirements: 

1. Low-income companies: During the first two years, companies with annual incomes of less than 2,400 UF can replace VAT and income tax with a fixed monthly payment of 1 UTM. They do not need to keep accounts or auxiliary books.

From the third year onwards, they are eligible for a VAT reduction:

• 100% in the first 12 months.
• 50% in the following six months.
• 25% in the following six months.

2. Owners: They must have participated in DEDECON support programs. If they do not comply, the company will be excluded that same year. 3. Type of activity: Only companies that carry out activities under numbers 3, 4, and 5 of Article 20 of the Income Tax Law (LIR) may join. Investment companies, professionals, or other excluded entities are not allowed to participate.

Reasons for exclusion: 

1. Excess income: If they exceed the sales or income limits, they must switch to the simplified regime of Article 14(D) the following year.
2. Non-payment: If they fail to pay the substitute tax for three consecutive months or five alternate months, they will be excluded from the regime that same year.
3. Very low sales: If they sell less than 4,000 UF in the first year, they will be considered to have never entered the regime. They will automatically switch to the simplified regime under Article 14(D), and the tax paid will be taken as PPM.

• Social monotributo: A permanent and unified regime is established for micro-entrepreneurs, natural persons, with average annual income below 310 UF, belonging to the 80% of the Social Household Registry. Their tax and social security compliance will be carried out through the monthly payment of 0.5 UTM. They will be exempt from filing tax returns, keeping accounts, and auxiliary books.

In the event of non-compliance, they may be subject to the simplified regime of Article 14 D), unless they opt for another regime. If they are not affiliated with the pension system, they will be automatically affiliated.

• Reduction in VAT payment

Companies may access this reduction if:

1. Together with their related parties, they do not exceed 2,400 UF.
2. Whose owners have not owned companies subject to VAT in the 12 months prior to the start of activities.
3. Do not generate monthly net sales greater than 400 UF.

The benefit consists of:

• First 12 months: 100% reduction.
• Months 13 to 18: 50%.
• Months 19 to 24: 25%.

• Limitation on the presumed income regime: Access to the presumed income regime is restricted to individual taxpayers domiciled or resident in Chile, whose annual sales do not exceed 2,400 UF, and whose effective capital does not exceed 4,800 UF. In the event of non-compliance, they may opt for the simplified regime or the general regime.

• Increase in upper IGC brackets 
  • Monthly income between 120 and 150 UTM (approximately $8.2 to $10.2 million): the marginal rate rises from 35% to 38%.
  • Monthly income above 150 UTM: Will be subject to a rate of 40%. Currently, this only applies to income above 310 UTM.
  • The applicable IGC rate is unified, eliminating Article 52 bis regarding the table applicable to the President of the Republic, ministers, undersecretaries, senators, and deputies.
• Limitations on investment fund exemptions: 
  • Public funds: they maintain the IDPC exemption at the fund level, but profits distributed to companies domiciled in Chile must be included in their taxable income.
  • Private funds: the IDPC exemption is eliminated and they must be taxed under the general regime, except for those that invest in venture capital.
  • The single tax rate is increased to 20% for taxpayers without domicile or residence in Chile.
• Inheritance and gift tax: 
  • Exemptions applicable to revocable gifts and gifts made to heirs and related parties are eliminated.
  • The tax may be paid in up to three annual installments without interest.
  • The rules for valuing assets are updated. The use of commercial value will be the general rule, except for exceptions such as real estate acquired more than three years ago, which will continue to be valued at the tax appraisal value.
• Real estate taxation: Tributación bienes raíces:
  • The exemption of 8,000 UF for foreigners, individuals without domicile or residence in Chile, is eliminated.