Written by León Lanis, Paralegal
This week, Chilean President Gabriel Boric’s Administration presented to Congress a new bill proposing amendments to the Chilean Income Tax Law (DL 824). The objective of the amendments is to push forward the social changes the new President is seeking to implement in the country — key among these is the ambitious goal to raise the GDP by 4 points.
In this post, we’ll outline the principal changes introduced by the bill.
1. Income Tax Amendments:
The key change introduced to company income taxes is the disintegration system, which seeks to separate the taxes from the company to those of the owners. In other words, under the proposed bill, there will be no more tax credits to 1st category taxes for company owners by discounting a percentage of the taxes paid by the company.
In addition, this bill proposes a new tax for dividends distributed to final contributors, with a rate of 22%.
Finally, there will be a reduction of 1st category taxes (company taxes) from 27% to 25%, while adding a new tax named “development tax”. This will be paid through the accreditation of expenses destined to improve a company’s productivity, with a 2% rate.
2. Wealth Tax:
The Wealth Tax continues to be a very controversial aspect, which President Boric has been pushing since his presidential campaign.
This bill seeks to tax natural persons in Chile with a high net worth. The tax goes as following:
- Up to $5 million USD is exempt
- From $6 to $15 million USD has a rate of 1%
- $16 million USD upwards has a rate of 1.8%
3. Mining Royalty:
This will tax every mining company processing over 50 thousand metric tonnes of copper annually. It has two components:
(i) Ad Valorem: a rate of 1-4% in accordance with the volume of production and the price of copper;
(ii) Profitability: 2-32% of a company’s operating income, depending on the price of copper.
These are just some of the key changes proposed by the Tax Reform Bill, still to be discussed in Congress. It is important to understand and be prepared for reforms in company and personal taxes. If you have questions, contact our experienced tax team to discuss your tax situation and how the changes could impact you.