First Category Tax determination and filing rules
- First Category Tax rate: 25%.
- SME’s requirements:
- Ordinary perceived or accrued gross income lower than UF 50,000, based on the average in the last 3 years (such gross income average should be maintained during the year), considering related parties income;
- Adjusted-tax equity lower than UF 60,000 when starting activities;
- At least 65% of the income corresponds to non-passive activities (revenue obtained by the possession or exploitation of agricultural real estate is not considered as passive income).
- Instantaneous depreciation on any kind of fixed assets.
- Option of filing and paying taxes based on an IRS proposal (net taxable income levied with First Category Tax).
- IRS’ proposal based on the business sector average profit margins.
- Incentives for the financing or participation in SME whose purpose is technological entrepreneurship and innovation. The contributing or financing companies shall be certified by the Production Development Corporation (CORFO).
Incentive for saving
- Savings incentive for companies with an annual gross income of less than 100,000 UF (exceeds application to SMEs).
- Deduction of up to 50% of the taxable income that remains invested in the company (capped at UF 4,000).
- This provision will not apply to companies whose passive income (from investment fund shares, mutual funds, fixed income instruments, shares, among others) exceeds 20% of their gross income.
Tax transparency option
- The company is not subject to the First Category Tax. The final tax is directly applicable over the proportion that corresponds to each owner in the profits of the company.
- Only for companies that have full accounting records and whose average gross income is less than UF 50,000.
- The owners of the company must be exclusively taxpayers subject to Complementary Global Tax.
- Does not apply to open stock corporations.
- The option must be exercised and maintained for at least two consecutive business years.