As required by Chile's Constitution, the Tax Law Bill must firstly be discussed in the Chambers of Deputies. As a result, upon its filing it was assigned to the Finance Commission, where the Commission approved it on April 10 to move forward with its legislative discussion. Accordingly, it will now be discussed in detail in the Chamber of Deputies.
In order to facilitate the legislative discussion and further approval, the government, after several meetings and taking into account some concerns raised by opposing parties, announced that some amendments would be integrated into the Bill.
Although the government has not made public the way such amendments will be reflected in the Tax Bill, the principal guidelines for those modifications as per information available as of today are as follows:
- To eliminate some VAT exemptions, increase the digital services tax rate (from 10% to 19%, and to increase the tax on carbon emissions, among others). The aforementioned as informed by the Chilean government, seek to compensate for the lower tax revenue that would be expected from the total integration of the income tax regime;
- To improve the special tax regime for small and medium companies, broadening the number of taxpayers that could qualify;
- A new Tax Bill would be introduced to propose new forms of regional government financing;
- To modernise and strengthen Chile's Internal Revenue Service (IRS) and general anti-abuse rules (GAAR) provisions;
- To incorporate new measures in order to increase long-term investment and growth. In this regard, Chile's government is considering implementing modifications to asset depreciation rules;
- To lower the VAT special construction credit; and
- To lower the territorial tax for the elderly of low and medium classes.
In order for the Tax Bill to become a law, it should first be approved by the Chambers of Deputies and then by the Senate.
With this process, it is likely that new changes and amendments are discussed, and therefore, a completely different outcome could emerge from this.
Therefore, this is a matter that should be closely monitored in order for companies to prepare for the tax modifications to be enacted.