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Chile: New provisional withholding regarding capital gains in the sale of shares and quotas of Chilean companies



Rodrigo Winter

Loreto Pelegrí

In case a non-resident holds shares or quotas of a Chilean stock corporation (SA) or limited liability company (SRL), Chilean law provides for a mechanism for the payer to make a provisional withholding on account of the capital gains tax to be paid by the transferor. In this sense, since the capital gains tax applicable to the exchange or transfer of quotas of an SRL was previously subject to the general tax regime, the law provided that the payer should withhold 20% over the sales proceeds, regardless of any gain or loss in the transaction. If, at year end, there was no gain, then the transferor could request the refund of the amounts provisionally withheld.

In the case of the capital gains tax applicable to the exchange or transfer of SA shares, and if the gain was subject to the general tax regime, the law provided that the provisional withholding was 20% over the sales proceeds. However, if the gain was subject to the sole tax regime, then a 20% provisional withholding would have to be applied over the gain, and in case a gain could not be determined, then a 5% provisional withholding would have to be applied over the sales proceeds.

On September 27, 2012 Law N° 20.630 was published in the Official Gazette, amending certain tax provisions. Among other changes, such regulation modified the capital gains regime by extending the sole tax regime (which before was only applicable to the sale of shares of SAs) to the capital gains applicable to sale of SRL quotas.

Moreover, the provisional withholding rules were also amended, establishing that withholding on gross amounts will only be applicable in case a gain cannot be determined. In all other cases, the provisional withholding will have to be applied on a net basis (only over the effective gain).

Finally, pursuant to the new provisional withholding rule, the transferor can request to make an advance payment of capital gains taxes by means of a special procedure. On the other hand, the payer cannot withhold in case the transferor proves that all taxes have already been duly paid. Moreover, there can be cases where no withholding could apply, or where it could be applied at reduced rates in case (i) the capital gain is characterised as exempt income; (ii) there is a tax loss in the transaction; or (iii) if a reduced rate is applicable because of the existence of a tax treaty.

Further regulations are still pending to make all these new provisional withholding rules fully applicable.

Rodrigo Winter ( and Loreto Pelegrí (

Tel: +56 2 29400155

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