Anti-avoidance related measures

  • The GAAR will be applied administratively by the Chilean IRS. For such purposes, the taxpayer must be formally required, requesting background information for the review of the events, acts, or business allegedly elusive.  The Chilean IRS will have a term of 9 months from the response to the request or from the expiration of the term to respond to it, to issue a liquidation, charge, or resolution.
  • The assessment or charge may be challenged before the Tax and Customs Courts, under the general claims’ procedure. However, it will not be susceptible to administrative claims before the Chilean IRS.
  • The revelation of new information in an audit procedure, which may give rise to the application of the GAAR, allows the Chilean IRS to reopen an audit procedure that has already been concluded.
  • The eventual application of the GAAR gives rise to a longer audit period of 18 months, which may be extended by means of a justified resolution for an additional 6 months.
  • Together with the assessment of the corresponding tax for the elusive act, a fine equivalent to 100% of the tax differences determined is applicable to the taxpayer, up to a maximum of 250 UTA (US$ 172,000 approx.). In case the taxpayer is a legal entity, the directors, representatives and/or administrators will be jointly and severally liable for the fine, under certain hypotheses.
  • The hypothesis of tax avoidance through complex acts (a set of events, acts or businesses that together qualify as tax avoidance) is incorporated. Consequently, the GAAR is applicable even when one of the events, acts or businesses individually considered may be subject to a special anti-avoidance rule. In addition, it is established that, in the event of tax avoidance by means of complex acts, the statute of limitations period will begin to run as from the last of the individual acts that make up the complex acts.

A numeral 20 is added to Article 8 of the Tax Code, with a definition of “catalog of tax schemes“, meaning the document that the Chilean IRS periodically prepares and publishes in order to inform taxpayers of risky conduct.

  • The appraisal rule will take place when the Chilean IRS considers that the price or value of a transaction that will serve as the basis for the determination of a tax differs significantly from the fair market value.
  • The obligation to formally require the taxpayer prior to the appraisal is established, with the exception of those cases in which it is intended to determine the price or value of a real estate property, in which case the Chilean IRS may immediately appraise and charge the determined tax. The taxpayer may provide the background information to prove that the value of the transaction has been made under fair market value, being able to use the valuation methods incorporated in the law. The Chilean IRS will take into consideration the background information provided, without prejudice to the possibility of making its own determination if insufficient background information has been provided, applying any of the legal methods for such purposes. 
  • Once the Chilean IRS has determined the value, it will proceed to the tax assessment or settling for the difference determined, which will be affected with the penalty tax of article 21 of the Income Tax Law. If the taxpayer rectifies his return before the Chilean IRS requires him to do so, he will be taxed with the corresponding general tax.
  • The exception to the power of assessment will be applicable to any type of business reorganization, celebrated through mergers, spin-offs, or contributions of assets, among other modalities, provided that the assets have been disposed of or assigned within the national territory and to the extent that such reorganizations obey a legitimate business reason. In cases of mergers, spin-offs or contributions of assets, the tax cost must be maintained in the nascent, absorbing or receiving company.
  • Taxpayers’ consultations on the application of this article shall be processed in accordance with the procedure of article 26 bis.
  • Effective cooperation in the procedure of gathering information that leads to the clarification of tax offences or allows the identification of the perpetrators is considered a qualifying cause for consideration of the application of only a financial penalty (and not a corporal one). If effective cooperation is verified during the investigation by the Prosecutor’s Office, the penalty may be reduced by up to 2 degrees.
  • Police protection is guaranteed for informants and witnesses of tax offences, allowing for the eventual safeguard of their identity.
  • If, based on the information provided, the defendant or offender is judicially sanctioned with a fine of not below the minimum, the informant is entitled to 10% of the fine.
  • The provision of maliciously false information is sanctioned with a fine of 100 Annual Tax Units (UTA).
  • New relation hypotheses are introduced, including family relations (spouse, civil partner and relatives, ascendants, or descendants, up to the second degree of consanguinity or affinity) and hypotheses of relation assessment by Chilean IRS by virtue of the presumption of the existence of joint action or economic unity.
  • The definition of: (i) agent of a business group; (ii) tax liability; and (iii) catalogue of tax schemes is introduced.
  • If a taxpayer belonging to a business group, or with income from business activities exceeding 25,000 Unidades de Fomento (inflation-based unit) (in the business year of non-compliance or the previous year), fails to comply with its reporting obligations (detailed in Article No. 68 of the Tax Code), the periods of prescription will be increased or renewed for 12 months with respect to all parties involved. The period of prescription would be counted from the date on which the modification is reported to the Chilean IRS or the authority identifies the non-compliance. The maximum prescription period may not exceed 10 years.
  • Information obtained by the Chilean IRS from public sources is considered a valid modification of the taxpayer’s information.
  • An obligation is established for certain entities to require proof of commencement of activities.
  • The default notification method is modified to e-mail, based on the information contained in the taxpayer’s personal website, except in the cases expressly established by law.
  • The possibility of granting a power of attorney to a third party to carry out tax procedures through the Tax Authority website is introduced. The agent may act in all electronic administrative procedures before the Chilean IRS and the General Treasury of the Republic of Chile.

The possibility for the Chilean IRS to carry out a single audit procedure that includes all members of a business group, when the transactions have been carried out by members of the same business group that are being audited in different jurisdictional territories, has been introduced.

  • The rule that establishes that, in the absence of the taxpayer’s authorization, the bank cannot comply with the Chilean IRS’ request for information on banking operations (except for judicial authorization) is eliminated.
  • It is established that the taxpayer must oppose the provision of information by means of a claim. If the bank is not informed of the opposition, or it fails to comply with certain formal requirements, the bank must provide the requested information.
  • The information must be provided if the opposition is rejected by the competent court, or if the Chilean IRS’ and the taxpayer reach an agreement on the matter.

The termination of activities is to be certified only after verification of the payment of the corresponding taxes.

  • The minimum penalties associated with the use of malicious procedures aimed at concealing or misrepresenting the true amount of the transactions carried out or evading taxes are increased.
  • Malice is eliminated as a requirement for the offence of providing tax documents for the purpose of committing tax offences. It is replaced by acting with knowledge that the offence will be committed or that it will be enabled. In addition, the penalties associated with the offence are increased.
  • A special fine is established for taxpayers with business income of more than 25,000 Unidades de Fomento who do not exhibit or provide information specifically requested in an audit procedure.
  • The trading of goods that do not comply with the requirements relating to the declaration and payment of the taxes levied on them will be sanctioned in all cases, regardless of whether or not the infringement was committed with knowledge of the offence. In addition, the fine is modified to a percentage of the taxes “that could have been avoided” (no longer to those actually avoided).
  • A penalty is introduced, applicable to those who, knowing of the non-compliance with the requirements relating to the goods, store or transport them with the purpose of selling or distributing them.
  • Failure to send electronic information to the Chilean IRS with respect to tax documents is included as an offence.
  • With regard to the infringements of no. 10 of Article 97, the channels or means susceptible to closure are extended. The inability to issue tax documents, and the suspension of the web domain or the access to payment providers or similar, are added as a penalty.
  • The following offences are incorporated: (i) the use of means of transport, machinery or the like; (ii) the use of the virtual platform through which the activity is carried out; and (iii) the issuance of tax documents, all in violation of a closure.
  • Penalties are increased for maliciously providing false information in the declaration of commencement of activities, its modifications, or the declarations to obtain authorization of tax documentation. In addition, taking advantage of the described conduct or products thereof, or facilitating the means for its commission, is incorporated as an offence.

The special period of prescription of 6 years shall apply when the taxable events have been avoided by means of abuse of legal forms or simulation. The period is counted from the execution of the act, and in the case of a set or series of acts, from the execution or completion of the last one.

Waiver rules should always consider that the final penalty to be applied to the taxpayer, after deducting the waived amount, should be in line with the type of tax non-compliance in question and be higher than the financing cost that the taxpayer could have obtained from the financial or private sector.

  • The Regional Directors of the Chilean IRS are granted jurisdiction to audit throughout the national territory, on instruction of the Director or Deputy Director.
  • The special investment information rules applicable to Chilean settlors, trustees, or administrators of trusts are extended to Chilean persons and entities that have the quality of controllers with respect to a foreign settlor, trustee, or administrator of a trust.
  • A reduction in the penalty interest applicable to taxpayers subject to the simplified regime for micro, small and medium-sized enterprises is established.
  • A presumption of certification is established, by virtue of which, if after 10 days from the receipt of information, the Chilean IRS does not certify that all the information requested by means of a request for information has been made available to it, the calculation of the period within which the Chilean IRS may carry out its audit powers must begin.
  • Once an audit procedure has been initiated, the Chilean IRS will have a period of 9 months to carry out the audit (under the current rule, once this period has elapsed, the Chilean IRS must issue a Summons (citación), a Tax Assessment (liquidación) or a Tax, or the document allowing the tax to be collected (giro)).
  • The rule by which additional information, requested in connection with the supplement to the response to a summons and not provided within the deadline, is inadmissible as evidence in court is eliminated.
  • The time limits for the review by the Chilean IRS’ audit teams are extended depending on the type of operation being audited and the applicable legal provisions.
  • The Chilean IRS’ auditing powers are extended with respect to a year already audited, if certain requirements are met.