New Tax Regimes in Chile

New Tax Regimes in Chile

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Until 2019, Chilean tax legislation provided for up to four tax regimes for those companies, which will generate income from first category income, as indicated by the Income Tax Law.

These were, the presumed income regime, the simplified taxation regime, the attributed income regime and the semi integrated income regime.

However, in early 2020 a tax reform was established through Law No. 21,210 or “Tax Modernization Law” by which two of these regimes were repealed and three additional ones were incorporated.

Thus, as of the year 2020, the tax regimes established in Chile are comprised of five types: the Pro Pyme General regime, the Pro Pyme Transparente regime, the general semi integrated regime, a presumed income regime and a regime for taxpayers not subject to article 14 of the Income Tax Law.

The purpose of this article is to allow taxpayers to know certain aspects and benefits of each regime, for which the most important points of each regime will be developed.

What type of taxpayers is each of these regimes aimed at?

Each of the above mentioned tax regimes is addressed to different types of taxpayers of the first category, as indicated below:

General Pro-SME Regime

This regime is focused on micro, small and medium sized taxpayers (SMEs).

Transparent Pro SME Regime

This tax regime is aimed at micro, small and medium enterprises (SMEs), provided that their shareholders are taxpayers of final taxes, such as the Global Complementary Tax and Additional Tax.

Integral regime (semi integrated)

All taxpayers whose income does not allow them to be classified as SMEs are eligible.

Presumed income

It is aimed at those taxpayers who carry out agricultural, transport and mining activities, as long as their income does not exceed the limits established by law for each activity.

Taxpayers not subject to Article 14 of the LIR

This tax regime is intended for those taxpayers who are obliged to keep complete accounting records and whose shareholders are not subject to the final taxes already indicated.

Those companies, which are fully owned by the State, may be included in this regime.

What are the benefits of each of the tax regimes?

Each of these regimes provides the taxpayers incorporated to these different tax benefits, as detailed below:

General Pro-SMEs Regime

Among the main benefits and characteristics of the companies under the regime are the following:

  • The company’s inventories or supplies that are in existence at the end of the fiscal year may be recognized as an expense.
  • As for the depreciation of fixed assets, this will be applied instantaneously.
  • A determination of the taxable base may be made in a simplified manner, except for transactions with related companies.
  • They are not obliged to maintain RRE records, to the extent that they do not generate or receive income to be controlled in the REX register.
  • Determination of Own Taxable Capital in a simplified manner.
  • A reduction may be applied to the IDPC taxable base.
  • May apply the rate of 25% for first category income tax.

Transparent Pro Pyme Regime

In this regime the taxpayer may have the following benefits:

  • The company’s inventories or supplies that are in existence at the end of the fiscal year may be recognized as an expense.
  • Depreciation of fixed assets will be applied instantaneously.
  • Fixed PPM rates may be used.
  • It determines in a simplified manner its own tax capital, this when the taxpayer exceeds UF 50,000 in income.
  • The owner of the SME may apply against his final tax the credit of the article of art. 33 bis of the LIR and those associated with withdrawals and dividends received.

General Regime

Under this tax regime, the taxpayer may enjoy the following benefits:

  • They will not be obliged to have records when they do not generate or receive income that must be controlled with the REX register.
  • They will be able to determine the tax situation of withdrawal, remittances, or distributions at the end of the fiscal year.
  • A reduction may be applied to the IDPC tax base.
  • The credit for first category tax may be advanced to the shareholders.
  • A 27% rate will be applied to the first category income tax.

Presumptive income regime

In the case of this regime, taxpayers will have the benefit of being able to pay their tax according to the percentages established for each activity and it allows to keep a simplified accounting.

What are the requirements for incorporation into these regimes?

Taxpayers must comply with the following requirements in order to be incorporated into one of these tax regimes:

 

Pro-PME General

Pro-PME transparent Geral Regime Expected rate Taxpayers not subject to Article 14 of the LIR
The average gross income in the last 3 years cannot exceed 75,000 UF

Comply with all the conditions of the Pro-SME Scheme.

All taxpayers can participate.

Perform one of the following activities:

Agriculture, mining and transportation.

Those taxpayers whose partners are not subject to any final tax.
In no year may gross income exceed UF 85,000

Shareholders or owners must be individuals, domiciled or not in Chile.

The capital of the company must not exceed 18,000 UF for agricultural activities, in the case of mining it must not exceed 34,000 UF and for the transport activity it must be a maximum of 10,000 UF.

The effective capital, at the beginning of the activities, cannot exceed UF 85,000 The owner can be a legal entity, as long as it is not domiciled in Chile.

Since when can one request a change to one of the regimes indicated by the Tax Modernization Law?

The rule established a deadline of April 30, 2020, so that taxpayers can make the change of tax regime by 2021.

However, this deadline was extended until September 30, 2020.

The request for the change of tax regime must be made through the website of the Internal Revenue Service (SII).

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