Wealth Tax

General issues

• A wealth tax is proposed for individuals domiciled or resident in Chile whose net worth exceeds 6,000 Annual Tax Units (UTA – Spanish acronym for Unidades Tributarias Anuales) (US$ 4.2 million approx.), based on its equivalent value in Chilean pesos as of December 31 of each year.
• The tax is levied on the value of the total wealth of the taxpayer, consisting of all its assets, whether in Chile or abroad, and even if they are administered through trusts or foundations, minus the liabilities whose deduction is allowed. For these purposes, the taxpayer must consider the assets of its unemancipated children (under 18 years of age) with respect to whom it exercises legal custody.
• A special regime is established for expatriate employees or executives (i.e., foreign individuals who acquire residence in Chile by virtue of an employment contract), who, during the first 3 years after their entry to Chile, will only be subject to wealth tax on the portion of their wealth that has been acquired with Chilean source income. As from the fourth year of fiscal residence in Chile, the totality of their wealth will be considered. This will not apply to foreigners who have lost their Chilean nationality within the 5 years prior to their entry into the country.
• Wealth subject to tax is taxed at a progressive rate by brackets starting at 6,000 UTAs (approximately US$ 4.2 million), as shown in the chart below:

Tranche	Wealth Tax Rate
Wealth up to 6,000 UTA (US$ 4.2 million approx.)	Exempt
Part of the wealth exceeding 6,000 UTA and not exceeding 18,000 UTA (US$ 12.7 million approx.).	1%
Part of the wealth exceeding 18,000 UTA.	1.8%

However, the maximum tax burden of a taxpayer, considering the income and wealth tax, shall not exceed 50% of the taxpayer’s return on equity. Thus, the wealth tax payable will be the lesser of:

• The wealth tax according to the brackets just mentioned; or.
• 50% of the taxpayer’s return on equity, net of the Corporate Income Tax. From this amount it shall be deducted, in turn, the amounts that the taxpayer would have had to pay in the respective year for Capital Income Tax or Personal Income Tax (the latter, reduced in the proportion represented by the income of Article 42 of the Income Tax Law). For these purposes, it is presumed that the annual return on equity is 6% of the wealth at the end of the year, and it is presumed that it was affected with Corporate Income Tax. The profitability to be considered for these purposes cannot be less than 2.5% of the taxpayer’s wealth.

Although not subject to wealth tax, individuals whose wealth exceeds 4,000 UTA (approximately US$ 2.8 million) will be obliged to declare it.

• Wealth tax must be filed and paid in June of each year, with respect to the wealth of the previous calendar year. However, that payment of wealth tax may be deferred for up to three months.
• The general rule for the valuation of assets is fair market value (the one that would have been agreed between unrelated parties). Valuation criteria are provided for the different kinds of assets (e.g., shares of companies according to the value of tax equity or financial equity or the average stock market price, as the case may be, real estate according to its tax appraisal “avalúo fiscal”, etc.).
• Chilean IRS may challenge the valuation method or formula, when it is not the most appropriate to determine the economic value, and assess the corresponding tax differences, or appraise the assets according to the general rules when an asset is valuated through an appraisal report and such value differs notoriously from its usual market value.
• The deduction of liabilities is allowed, provided that they do not have a related party as a creditor, and (i) have been incurred to finance all or part of the acquisition of one or more assets included in the net worth statement for wealth tax purposes; or (ii) are used in the expansion or repair of such assets, provided that they generate an increase in their value and the information of the expansions or repairs, and liabilities is kept available to the Chilean IRS. Liabilities maintained with banks or financial institutions may also be deducted.
• The following taxes may be used as a credit against the wealth tax: (i) the real estate tax and the real estate tax surcharge; and (ii) the tax on luxury vehicles; and (iii) the final tax deferral tax (1.8% on retained earnings, incorporated by the tax reform bill) paid in the same year.
• Taxpayers who lose their tax domicile in Chile shall pay the proportional wealth tax corresponding to the period between January 1 of the year in which they leave the country and the last day of the month prior to their exit, being applicable the tax burden limit of 50% with respect to the return on equity.

Entry into force: January 1, 2024, on the portion of the net worth determined as of December 31, 2023. During the first year of effectiveness, the wealth tax will be applied only on the portion of the net worth exceeding 18,000 UTA at a rate of 1.8%.

• An exit tax with a fixed rate of 5% is proposed, applicable on the portion of the wealth that exceeds 6,000 UTA (US$ 4.2 million approx.), with respect to those persons who have lost their domicile and tax residence and have requested certification of this circumstance to the Chilean IRS, being required to include in this request the determination and valuation of the wealth as of the last day of the month prior to the presentation, and the proof of payment of the corresponding exit tax.
• The exit tax does not replace the wealth tax for the period prior to the declaration and payment of the exit tax.
• Once Chilean IRS has certified the loss of tax residence and the exit tax has been paid, the taxpayer will be released from the wealth tax.
• Chilean IRS is empowered to review the determination of the net worth for exit tax purposes (60 days), being able to assess and collect differences. Likewise, Chilean IRS may deny the loss of residence or domicile, triggering in that case the obligation to return the exit tax.
• If a person loses his domicile or tax residence in Chile without filing the application for a certificate, he/she must continue to pay wealth tax for 3 years from the date the Chilean IRS acknowledges of the loss of domicile or residence.