Under section 18 of the Chilean Tax Code, a company might keep its accounting records in foreign currency as long as it fulfils one of the following:
the company's capital contribution has been paid in foreign currency; or
most of the company's transactions are carried out in foreign currency.
If the company fulfills any of these two requirements, it could file an application before the regional director of the Chilean IRS, who would analyze whether or not keeping the accounting records in foreign currency might diminish or alter the basis used for the determination of the taxes to pay.
In case the regional director of the Chilean IRS decides that the company can keep its account records in foreign currency, all of them must be kept in such foreign currency; therefore it would not be admissible to carry some records in Chilean Pesos and some in foreign currency.
If the company were authorized to keep the accounting records in foreign currency, the rules of monetary correction, contained in Article 41 of the Chilean Income Tax Law (ITL), would not apply, since it is deemed that the variations of the exchange rate reflect accurately any change in the company's equity value.
Pursuant to Resolution 44 (2006) and Ruling 24 (2006) of the Chilean IRS, any company that has been authorized by the regional director to keep its accounting records in foreign currency might pay its taxes in that currency. For these purposes, the company should send a written communication to the Chilean IRS informing that it will pay its taxes in the currency its account records are kept from that date on.
Such a payment can only be received by the Chilean General Treasury; no other entity is authorized to receive it.
When a company decides to pay its taxes in foreign currency, following the procedure referred above, it will become obligated to pay all its taxes in such foreign currency, therefore a tax payment in the Chilean Pesos would not be admitted.
If the company chooses to go back to the general regime (paying them in Chilean Pesos), it must send a renounce letter to the Chilean IRS informing about this decision at least three months before the deadline for paying its taxes.
Finally, companies keeping their accounting records in foreign currency, but paying their taxes in local currency, must use the observed exchange rate informed by the Central Bank of Chile for the day the correspondent tax is due.
Julio Pereira (j.pereira@cl.pwc.com) and Sandra Benedetto (sandra.benedetto@cl.pwc.com), Santiago
