International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Chile: New penalty tax

winter.jpg

lecaros.jpg

Rodrigo Winter


Pedro Lecaros

On September 27 2012 Law No. 20.630 was passed in the Chilean Official Gazette. Among other important tax amendments, the law replaced article 21 of the Chilean Income Tax Law, regarding sole penalty tax by a new provision. The instructions related to the application of this article were released on September 23 2013, by means of Circular Letter No. 45/2013 issued by the Chilean IRS. The former provision treated differently certain disallowed disbursements representing cash disbursements depending on the taxpayers' legal structure. In this sense, under the previous law, disallowed expenses in a Stock Corporation (Sociedad Anónima or SA) or sociedad por acciones (SpA) were taxed with a 35% sole penalty tax. On the other hand, disallowed expenses regarding other legal entities were treated as a deemed distribution to the quota holders, taxed accordingly with surtax or additional withholding tax.

New article 21 simplifies the system, equalising the taxation of the disallowed expenses irrespective of the corporate form of the entity of source.

In this sense, new article 21 establishes a 35% tax rate, applicable to disallowed cash disbursements and other kind of disbursements applicable as a sole tax to the entity of source of the disallowed expense. That is to say, after article 21 operates, no further taxation is applied.

Nonetheless, in certain cases, for example in certain disbursements that can be directly linked to a specific share/quotaholder, benefits obtained by the use of the company's assets, among others, such disbursement will be treated as a deemed distribution subject to surtax or additional withholding tax, plus an additional 10% penalty. Therefore, if the owner is a foreign company, 35% additional withholding tax will be triggered plus the additional 10% penalty. On the other hand, if the owner is an individual resident in Chile, he will be subject to surtax, plus the 10% additional penalty.

Rodrigo Winter (rodrigo.winter@cl.pwc.com) and Pedro Lecaros (pedro.lecaros@cl.pwc.com)
PwC

Tel: +56 2 29400588

more across site & bottom lb ros

More from across our site

The European Commission wanted to make an example of US companies like Apple, but its crusade against ‘sweetheart’ tax rulings may be derailed at the CJEU.
The OECD has announced that a TP training programme is about to conclude in West Africa, a region that has been plagued by mispricing activities for a number of years.
Richard Murphy and Andrew Baker make the case for tax transparency as a public good and how key principles should lead to a better tax system.
‘Go on leave, effective immediately’, PwC has told nine partners in the latest development in the firm’s ongoing tax scandal.
The forum heard that VAT professionals are struggling under new pressures to validate transactions and catch fraud, responsibilities that they say should lie with governments.
The working paper suggested a new framework for boosting effective carbon rates and reducing the inconsistency of climate policy.
UAE firm Virtuzone launches ‘TaxGPT’, claiming it is the first AI-powered tax tool, while the Australian police faces claims of a conflict of interest over its PwC audit contract.
The US technology company is defending its past Irish tax arrangements at the CJEU in a final showdown that could have major political repercussions.
ITR’s Indirect Tax Forum heard that Italy’s VAT investigation into Meta has the potential to set new and expensive tax principles that would likely be adopted around the world
Police are now investigating the leak of confidential tax information by a former PwC partner at the request of the Australian government.