Estate and gift tax

General aspects
  • Definition of donation: concept of article 1386 of the Civil Code.
  • All acts or contracts celebrated abroad that comply with the aforementioned definition (independently of the formalities of the respective country) will be considered as a donation for the application of the Inheritances and Donations Tax (“IDT”).
  • Regulation of the connection factors for the application of the IDT on donations (i.e. domicile or residence in Chile of the donor, and location or registry of the goods in Chile).
  • The tax paid for a donation abroad is recognized as a tax credit against the IDT applicable in Chile.
New exemptions of IDT
  • On assignments of the spouse or civil partner who has already been subject to IDT
    1. Once the assignment to the civil spouse or partner has been deferred and the tax has been paid, the value of the part of the assets corresponding to its statutory heirs that is levied with the IDT will be exempt.
    2. The original tax must be paid effectively, either within the legal term or once it is expired.
    3. It only applies to those who are statutory heirs of both the first deceased and the spouse or civil partner.
  • Donations made by legal persons with resources that have complied with their taxation according to the Income Tax Law
    1. Capped at a 20% of the overall net income or dependent labor income.
    2. Annual limit of 500 UTM. Donations made to statutory heirs will be considered for a period of 10 years in order to determine this amount.
    3. The donations must be informed to the IRS in order to use the benefit.
Reduction in the IDT for people with disabilities
  • People with disabilities will be entitled to a 30% reduction of the determined IDT, with a cap of UF 8,000 per year.
  • Applicable for both hereditary assignments and donations.
  • Grantees or assignees must be registered in the National Registry of Disability.
Modification of the IDT applicable on assignments or donations subject to fiduciary arrangements
  • In the event that the condition fails and the property is consolidated in the trustee, the corresponding IDT must be paid for the total value of the good, deducting the taxes already paid.
  • If the condition is met and the restitution to the beneficiary takes place, the latter must pay the IDT for the total value of the good, deducting what has already been paid for taxes.
Other amendments
  • Certain exempt donations are also exempted of the judicial permit procedure.
  • Donations made by open stock companies to unrelated entities agreed upon at a shareholders’ meeting, are exempt from the judicial permit procedure.
  • Application of Article 64 of the Tax Code in order to determine the market value of goods without a special valuation rule. Order of tax payment must be issued immediately.
  • In the event of a tax return filling, the IDT payment order must be immediately issued (notwithstanding subsequent audit faculties).
  • Possibility to pay the IDT in annual installments within a timeframe of three years. Installments are subject to readjustment and monthly interest.
  • Express regulation of the possibility of requesting a refund of the IDT when the donation is not executed or authorized.

Jaime Carey
Managing Partner
+56 2 2928 2224
jacarey@carey.cl
Jessica Power
Partner
+56 2 2928 2214
jpower@carey.cl
Manuel José Garcés
Partner
+56 2 2928 2226
mgarces@carey.cl

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