New general deductibility requirements focused in the development of a business
- To be directly or indirectly connected with the development of the company’s line of business (i.e., must be made for the development of the company’s operations or businesses, or in the interest of the latter, including ordinary, extraordinary, exceptional, voluntary and mandatory expenses);
- To be reasonable in its amount according to the particular circumstances;
- Not have been previously deducted as a cost;
- To be paid or accrued during the corresponding business year;
- To have a lawful purpose and not have been originated in malicious behaviors; and
- To be duly evidenced or justified before the IRS in the event of an audit, by means of the material proof that corresponds according to the nature of the expense.
Regulations of certain particular expenses
- Expenses incurred in supermarkets and similar stores.
Eliminates existing restrictions for the deductibility of expenses incurred in supermarkets and similar stores.
- Expenses related to vehicles.
The prior qualification by the National Director of the Chilean IRS as deductible expenses of certain disbursements related to vehicles will require a well-founded resolution.
- Evidence of expenses incurred abroad.
In absence of supporting documents for expenses incurred abroad, such expenses may be evidenced by any legal means of proof.
- Interest expenses destined to the acquisition, maintenance or exploitation of assets that do not produce income subject to Corporate Tax.
Eliminates the prohibition for the deductibility of this type of expenses.
- Donation of inventory not destined to commercialization, to non-profit organizations.
Allows deducting the tax cost basis of certain merchandise of unviable commercialization, to the extent that the merchandise is freely delivered to non-profit institutions registered with the Chilean IRS, for the free distribution, consumption or use among low-income individuals or other non-profit institutions.
- Bad debt write-off.
New conditions for bad debt write-off, determined according to uncollectibility indicators applicable to the relevant sector or market.
- Accelerated depreciation for taxpayers with average annual income equal or lower than UF 100,000 (app. US$ 4,116,000).
A special accelerated depreciation regime is established for the benefit of the referred taxpayers, applicable to fixed assets, whether new or used, by virtue of which the assets may be depreciated considering a useful life equivalent to 1/10 of the normal useful life determined by the Chilean IRS. Instantaneous depreciation is eliminated (i.e., that which considers a useful life of one year).
- Work-related assignments.
Modifies the deductibility requirements for voluntary payments of work allowances and severances, eliminating the generality and uniformity criterion currently applicable. Expressly authorizes the deductibility of mobilization, food, travel and other similar allowances allowances, provided they are directly related to the nature of the employee’s activity.
- Salaries paid to the company’s owners in compliance with reasonability standards.
Modifies the requirements and eliminates the limits for the deductibility of salaries paid to company’s owners, which will be accepted to the extent they are reasonably proportionate to the importance of the company, the declared income, the services rendered and the capital profitability.
- Labor remunerations for services rendered abroad.
Modifies the deductibility requirements for labor remunerations paid in consideration for services rendered abroad, which must be directly or indirectly related to the business development.
- Severance payments paid in the context of business and corporate reorganizations.
Regulation of seniority acknowledgments made in the context of business and corporate reorganizations.
- Expenses incurred in instruction programs.
Extends the deductibility of expenses incurred in training programs to those cases in which the programs are carried out through entities other than the one that receives the endowment.
- Royalty payments abroad.
Eliminates the existing deductibility limit for royalty payments abroad, equivalent to 4% of the taxpayer’s income derived sales and services.
- Expenses incurred in environmental requirements in the development of projects.
Authorizes and establishes requirements for the deductibility of expenses incurred by virtue of environmental requirements imposed for the execution of a project or activity, or by virtue of voluntary environmental commitments made in the environmental impact assessments or statements.
- Compensations paid to clients that are not caused by negligence.
Authorizes and establishes requirements for the deductibility of disbursements or discounts destined to the compensation of patrimonial damages to clients or users, ordered by supervising authorities in compliance with legal obligations that do not require proving the negligence of the taxpayer.
- Payments made by virtue of judicial or extrajudicial transactions or in compliance with penalty clauses.
Authorizes the deductibility of disbursements agreed between unrelated parties, by virtue of judicial or extrajudicial transactions or in compliance with penalty clauses.
- New regulations to proportionate general expenses.
Three methods are established to proportionate expenses and disbursements attributable both to taxable income and to non-taxable income or income exempt from final taxes.
- Special tax treatment of certain expenses incurred by non-profit organizations.
In certain cases, expenses incurred by Chilean corporations are not subject to the 40% penalty tax.
- Amounts destined to the repurchase of own-issuance stock.
Eliminates the application of the 40% penalty tax to amounts destined to the repurchase of own-issuance stock.