On Tuesday evening, the President of the Republic of Chile made the first official announcement about the much-anticipated tax reform, which he described as “modernization”.
The President announced the main principles, objectives, and content of this reform. The aim is to simplify the currently complex taxation system, incorporate new rules to provide incentives to invest in Chile, combat against circumvention and evasion while strengthening the tax benefits for SMEs.
The following 12 major changes were announced:
- Establish a simpler, balanced and fully integrated tax system, and allow for the ability to use 100% of the taxes paid by companies as credit against the Supplementary Global Tax.
- Create a more favorable and specialized system for SMEs, by creating a lower tax burden for them.
- Encourage investment through an accelerated and even instantaneous depreciation system. This will be much more beneficial for the Araucanía region of Chile.
- Combat evasion and avoidance by strengthening and clarifying the rules that they are classified by.
- Extending the tax allowance for the hiring of labor in remote areas until the year 2035. The current tax allowance was set to end on December 31st, 2025.
- Encourage more purchases of residential subsidized housing by extending the subsidy benefit range from 2,000 UF to 4,000 UF. This is the maximum value of the properties that may be eligible for or benefit from the subsidy benefit. It was not clear if this refers to the VAT exemption rule for the buyer or to the special credit that is received by construction companies who are selling the properties.
- Create a “Taxpayers Advocate Council” with the aim of dealing with all arbitrary or abusive acts of the administration.
- Encourage donation by for-profit companies to NGO’s by allowing them to deduct the donation as an expense.
- Enforce the mandatory use of the electronic tax filing system. Keeping in mind, that the part of the filing that corresponds to the value of sold products and the VAT that corresponds to it must be filed separately within the electronic system.
- Modernize and simplify the international taxation standards, in order to encourage investment from abroad.
- Balance the tax burden of companies that sell goods and/or services in a traditional way from those who do so in a digital way.
- Modernize and improve green taxes on polluting activities and violations.
The details of the sent to the House of Representatives will be known within the next few days.
Below is a table summary with the main points that were announced about the coming tax modernization:
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Tax Group Director