|
|
| Astrid Schudeck |
Gregorio Martínez |
For a significant amount of years, Chilean taxpayers have
preferred life insurances with savings over other saving
mechanisms. Until now, it was always understood within the
market that no tax impact derived from this type of savings
tool.
A life insurance with savings corresponds to an insurance,
which offers a different benefit to the mere compensation
concept of the death of the insured person. Usually, these
kinds of insurances allow the contracting party (who usually is
the insured person), any the following:
- Choose where the savings are
invested;
- Perform withdrawals of the savings; and
also
- Receive all the saved amount with the
corresponding profitability if a certain time frame passes
without the insured risk being materialised.
As Article 17 No. 3 of Chilean Income Tax Law provides that
any amount received by the beneficiary and/or the insured
person as per a life insurance contract is non-taxable income,
it was reasonably concluded that no tax consequences derived
when any of them received a benefit from such a figure. As a
matter of fact, life insurance generally compensates a damage
that a certain person had suffered (i.e. the beneficiary of the
insurance), then, if such damage indeed occurred and such is
being compensated, it cannot be properly said that the
beneficiary had an increase in wealth.
Recently, the Chilean Internal Revenue Service issued a
ruling stating its criterion on the subject matter.
In the Chilean IRS's view, if a life insurance provides a
compensation to the beneficiary due to the materialisation of
the insured risk, it is actually covered by such non-taxable
income treatment. However, if the insurance provides an
equivalent to the savings and profitability at any event, then
it is not covered by such non-taxable income treatment.
Instead, such part may be treated as non-taxable income but
based on a different provision, as the reception of a gift. In
practice, this different qualification means that the savings
and profitability, when received by the beneficiary of the
insurance, is a gift, and as such, it is not subject to Chilean
income tax, but subject to gift tax (i.e. a 25% tax rate).
The Chilean IRS also indicated that when the profitability
is received by the same insured person, those are far from
being a non-taxable income, falling instead within the concept
of taxable income generated by a movable asset, and therefore
treated as a wealth increase.
The Chilean IRS conclusions expressed herein are not
expressly limited to insurances hired in Chile. Then, it could
be the case that such are also applicable to foreign
insurances.
It appears that the aforementioned criterion of the Chilean
IRS may impact the interest of the market in this kind of
saving products. However, in our opinion the analysis should be
performed in a case-by-case basis, depending on the particular
conditions of the insurance agreement, especially which the
events that permit the beneficiary to withdraw the relevant
insurance amounts are.
Astrid Schudeck (astrid.schudeck@cl.pwc.com)
and Gregorio Martínez (gregorio.martinez@cl.pwc.com)
PwC
Website: www.pwc.cl