Chile – Newly Issued Tax Measures

On September 2^nd, 2020 the Chilean Official Gazette published Law No. 21.256, which included several tax measures as part of the Economic Reactivation Emergency Program.

From all the tax measures, we highlight the following:

1. Temporary Tax Rate – OF Article 20 of the Income Tax Law – Reduction down to 10% for income gained or accrued during 2020, 2021 and 2020 tax periods, applicable to entities adhered to the Pro Pyme Regime. Taxpayers benefited with said reduction shall also be granted a 50% reduction on monthly provisional payments that correspond to such tax periods (letter D) of article 14).

2. Entities that comply with the requirements for adhering to the Pro Pyme Regime and that are subject to the registry provided by article 59 of the Sales and Services Tax, shall be entitled to request a refund of the Value Added Tax credit accumulated excess determined in the relevant tax return made during July, August and September 2020, and up to an amount equivalent to the remains determined in line with letter b) of the subsequent subsection, adjusted in line with the provisions of article 27 of the Sales and Services Tax Law. Only said taxpayers that by the time the refund application is filed jointly meet these requirements:

a) During the January 1st – May 31^st 2020 period, the average taxable, exempt and non-taxable income decreased in at least 30% with respect to the income earned during the same period in 2019.

b) The tax return made in June 2020 result in a Value Added Tax credit excess determined in line with article 23 of such Law, generated by the acquisition of goods or use of services between January 1^st and May 31^st, 2020.

c) They are not included in any of the situation listed in article 59 of the Tax Code.

d) Value Added Tax returns of the last 36 months must have been timely filed.

e) Transactions triggering the refund occurrence must be recorded in the purchases and sales registry.

f) Lack of tax debts, but for those taxpayers subject to taxpayment plans.

3. Amendments to Law 22.210 which modernized the Chilean tax legislation, as follows:Introduces the article temporary 22^nd bis after the temporary 22^nd, related to depreciation possibilities applicable for taxpayers who determine their First Category Tax based on effective income and complete accounting that acquire physical and/or intangible assets of new or imported immobilized assets during June 1^st, 2020 – December 31^st, 2022 period.

Replaces the expression “six months after the publication of this Law in the Official Gazette” of subsection 1° of article temporary 29, with “ten months after the commencement validity date of this Law”.

a) Introduces article temporary 38bis related to fiscal resources applicable to the contribution of article 32 of the Law (investment projects).

b) Replaces the expression “six months after the publication of this Law in the Official Gazette” of subsection 1° of article temporary 29, with “ten months after the commencement validity date of this Law”.

c) Introduces article temporary 38bis related to fiscal resources applicable to the contribution of article 32 of the Law (investment projects).

4. Introduction of the following provision: “Unless the provisions of number (iii) above or other situations provided by law, credits that enter the SAC services established by this letter d), including those of numeral (i) and (ii) above, shall have the restitution obligation provided by articles 56 number 3 y 63” to the first paragraph of letter d) of N°2 of letter A) of article 14 of the Income Tax Law.

5. Temporary replacement of the words “two months” with “three months” in subsection 3 of article 64 of the Sales and Services Tax Law, as of the following month of the publication month of this Law and until December 31^st, 2021.