Companies taxation

• The corporate income tax rate is reduced from 27% to 25%.
• A new tax is created, called “Development Tax”, of 2%, applicable to companies under the general tax regime. This tax corresponds to the difference between the 2% of the net taxable income and the sum of the taxpayer’s disbursements that qualify as investment in productivity.
• Within these disbursements we find, among others: (i) investment under the R&D Law, in that part that is not considered as a credit against the corporate income tax; (ii) acquisition of manufacturing and services of high technological content developed in Chile; and (iii) disbursements for the preparation and filing of applications for industrial property protection.
• The development tax will be considered an increase in the corporate income tax.
• In case the difference is negative, or the taxpayer registers a tax loss, this tax will not be applicable.
• Entry into force: January 1^st, 2025.

• The taxation of the company is separated from that of its partners. The owners of entities subject to the general regime (not SMEs) that are final taxpayers are taxed with the new capital income tax (“IRC”), without the right to credit for the corporate income tax.
• The IRC, at a 22% rate, applies to all amounts distributed to such taxpayers by companies subject to the new general regime. Amounts consisting of non-taxable income, income exempt from final taxes, income with taxation completed or returns of capital are exempt from this tax.
• The amounts taxed with the IRC must mandatorily pay the corporate income tax.
• Regarding taxpayers with domicile or residence in Chile:
  • Amounts taxed with IRC will be considered exempt from the personal income tax, without prejudice of being considered within the taxpayer’s income for purposes of determining in which bracket of such tax is located.
  • Alternatively, they may choose to tax the amounts subject to IRC with the personal income tax, in which case they may deduct the former as a credit of the latter. In the event of a remaining credit, a refund may be requested.
• Companies distributing or remitting these amounts will be obliged to withhold IRC.
• Entry into force: applicable to income received or accrued on or after January 1, 2025.

• Domiciled in countries with which Chile has signed a Double Taxation Treaty in force including those treaties signed prior to January 1, 2020, which are not in force (in which case the taxation would apply until December 31, 2026):
  • IRC does not apply.
  • The withholding tax is applicable, at a rate of 35%, with the right to a credit for the corporate income tax.
• Resident in countries with which Chile has not signed a Double Taxation Treaty in force:
  • IRC applies.

• The “tax on the deferral of final taxes” is established, consisting of a rate of 1.8% 2.5% applied to the amount resulting from the application of 22% on undistributed taxable income, applicable to those companies under the general regime whose annual income comes, at least in a 50%, from passive income.
• The following, among others, are considered passive income: dividends; income qualified as passive income according to article 41 G) of the Income Tax Law coming from controlled entities domiciled in preferential regimes; interest from money credit operations; assignment of the use, enjoyment or exploitation of intangibles; and income from leasing or temporary assignment of real estate.
• Entry into force: January 1^st, 2025, without prejudice to its application at a 1% rate for the business year 2024.

• The deduction of losses from previous years is limited to 50% of the net income determined in the year in which the deduction is applied.
• The possibility of carrying forward such losses to future years is maintained.
• Entry into force: January 1^st, 2024 2025. However, during the business year 2024 the business years 2025 and 2026, the limit for the deduction of losses will be 75% 80% and 65% of the net income determined for such year such years, respectively.

• The deduction of expenses related to the generation of income in several years must be made in correlation to the periods in which the income is generated.
• The distribution of goodwill among non-monetary assets that are fully depreciated is prohibited.
• The assessment by the IRS of the value of the assets determined for the distribution of goodwill is facilitated.
• Entry into force: 1st day of the month following the publication of the law in the Official Gazette.

The exception to the Chilean IRS appraisal powers will be applicable to any type of business reorganization, such as mergers, divisions or contribution of assets, provided that the assets have been disposed of or assigned within Chilean territory, and to the extent that such reorganizations are due to a legitimate business reason. In the case of mergers, divisions or contribution of assets, the tax cost must be maintained in the nascent, absorbing or receiving company.

Corporate reorganizations or restructurings that originate abroad and produce effects in Chile or vice versa must comply with transfer pricing rules (i.e., be carried out at market price) in order not to be subject to the Chilean IRS’s appraisal powers.

• Taxpayers subject to the SME regime are included as beneficiaries of this law.
• The maximum amount of the credit against the corporate income tax increases from 15,000 monthly tax units (US$ 870,000 approx.) to 45,000 monthly tax units (US$ 2,610,000 approx.) per year.
• R&D projects that have a direct positive environmental impact will benefit from a 50% credit, instead of the general rule of 35%.
• The law is established as a permanent law, which is currently in force until December 31, 2025.
• Entry into force: January 1^st, 2023, without prejudice to its application to research and development contracts or projects certified prior to the effective date of the regulation.

• Cease of activities
  • The rules for the cease of activities are adapted to the disintegration of the tax system.
  • The applicable regulation will depend both on the entity that is subject to the cease of activities and the type of taxpayer that its partners or shareholders are (subject to the general regime, SMEs, transparent SMEs or residents in countries that have entered into a Double Taxation Treaty with Chile).
• Professional Companies:
  • The following copulative requirements are required to qualify as a professional company:
    • Conformed by individuals who effectively work in the company.
    • Engaged in rendering professional services or advice, through their partners or associates.
    • Their income does not derive more than 10% from certain activities (the proposed definition does not allow to clearly determine this point).
• Leases with purchase option:
  • All leases with an option to purchase tangible property will constitute an asset for the lessee and a receivable for the lessor, whose value will correspond to the value of the capital of the operation. Interest and other charges will be recognized in the net taxable income of each party.
  • The specific regulation of leases with purchase option in relation to their tax registration and determination of net taxable income is eliminated.