On September 29, 2014, the Chilean Congress passed a significant tax reform. The enacted law includes substantial changes to the Chilean tax system. Among the main changes, the new law contains two alternative corporate tax regimes. The main changes should bring:
- Increase of the corporate tax rate
- Changes on capital gain taxation
- Restrictions for tax goodwill amortization and relevant amendments to the thin capitalization rules
- Increase of the stamp tax rates
- General anti-avoidance rules, as well as new requirements for the tax deductibility of related-party payments abroad
Regarding the alternative tax regimes, taxpayers will be allowed to choose between an Attribution Tax Regime that levies with a 25% tax rate income obtained by companies during the fiscal year that will be immediately allocated to their shareholders (“Regime A”), and a Partial Integrated Tax Regime that levies with a 27% tax rate income obtained by companies (“Regime B”). Under Regime B, shareholders are allowed to defer personal and withholding taxes until such profits are effectively distributed. However, it only allows using a 65% credit of the corporate taxes paid by the company (unless the shareholder is a resident in a tax-treaty country). Depending on the chosen alternative, the final tax burden of a non-Chilean investor may be 35% or 44.45%.
The approved tax reform will enter into force gradually, starting this year 2014 and finishing the full application in 2017.
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