Chile: Change of scenery: Chilean tax assistance and transparency

Sandra Benedetto	Ignacio Nunez

As the framework for the global exchange of information regarding investments abroad is being moulded, Chile – as the only South American member of the OECD – has been highly committed to applying such principles and, in order to promote tax assistance and transparency, has signed international conventions and reformed domestic legislation at a legal and administrative level.

Chile signed the Convention of Mutual Administrative Assistance in Tax Matters in October 24 2013. Even though the aforementioned convention is not yet enforceable in the country, it has been passed by the Chilean Congress and is just awaiting presidential promulgation.

Meanwhile, and on the understanding of creating a common framework, two instruments have been signed by Chile: the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA), signed in June 2015; and the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA), signed in January 2016.

Related to the CRS MCAA, Chile would be required to send financial information since September 2018 onwards regarding commercial year 2017.

Even though a specific date has not been provided in order to submit the CbC MCAA, it has been recommended by the final report on Action 13 of the BEPS Project, to provide the first country-by-country (CbC) report by December 31 2017 with the information pertaining to fiscal year 2016.

It is expected that once the convention becomes enforceable, the Chilean IRS will proceed to regulate the implementation of the convention. Independently of those modifications, Chile has already made some administrative and legal modifications in accordance with the OECD principles and the BEPS Project.

At an internal legislation level, since Tax Reform Act No. 20.780 of September 2014, Chile has implemented different procedures in order for taxpayers to inform their investments abroad. As an example, a tax amnesty programme was available during 2015, which received 7,832 declarations, increasing the available information for the Chilean IRS.

As part of these policies and in order to keep an updated register of investments abroad, in December 2016 the Chilean IRS issued a resolution extending the obligation to inform investments, insurances, assets and other operations abroad and related gains in Affidavit No. 1851, which applies to taxpayers whose yearly investments exceeded $100,000 (previously this obligation only applied to taxpayers whose incomes surpassed the amount of $1,000,000). The aforementioned affidavit must be submitted by taxpayers by June 30 2016 and is subject to a penalty which can ascend to approximately $800.

The Chilean IRS has made some adjustments related to the CbC MCAA by creating Affidavit No. 1913 (affidavit of global tax characterisation) on December 2016, which has to be filed yearly by certain companies (for the most part this applies to big companies and major taxpayers), indicating if they are part of a holding company and detailing international transactions conducted during the previous year (with a series of other obligations that goes beyond such information request).

Finally, from 2017 onwards and under the new taxation regime applicable in Chile, taxpayers under the attributed or semi-integrated regime must inform to the Chilean IRS, by June 30 of each year, of the investments made abroad during the previous year, indicating the amounts, the type of investments, the country in which the investments were made, the percentage of participation over those entities and its destination. The penalty in this case will consist of a fine and the possibility to consider those investments as withdrawals of profits, subject to a sole tax of 40%.

We must indicate that these are just some of the current requirements or newly-introduced procedures by Chilean tax legislation, as there are other multiple obligations that are directly and indirectly related to the adoption of these principles. Therefore, this is a matter that we expect to continue to evolve swiftly and therefore should be tracked closely by any taxpayer performing cross-border operations with Chile.

Sandra Benedetto Back (sandra.benedetto@cl.pwc.com) and Ignacio Nunez (ignacio.nunez@cl.pwc.com) 

PwC

Website: www.pwc.cl