The aim of this new regulation is to provide a plain field for Chilean online services, which are subject to VAT payments. So now online services provided from abroad must also pay VAT, which is currently 19%.

1.- Which services are taxed?

a.- Mediation of services provided in Chile or sales that creates an import and the intermediation services should be paid in Chile.

b.- Entertainment providers, such as music, games and similar products through streaming, downloading or any other technology, including newspapers, books and magazines.

c.- Software, iClouds or platforms providers

d.- Advertising services (e.g. Google Ads)

2.- When are those online services taxed?

The tax will be levied if the service is rendered in Chile. It does not matter if the payment is paid or received in Chile or abroad.

To simplify how to establish if a service is used in Chile and therefore subject to VAT payment, the law determines some situations where the service is deemed to be rendered in Chile, which are as follows:

a.- The IP address of the user is located in Chile

b.- The credit card, bank account, or any payment method is located in Chile.

c.- The address provided by the user for issuing the invoice or any kind of receipt is located in Chile

d.- The sim card of the mobile phone corresponds to a Chilean number

To levy the tax at least two of the aforementioned cases should occur.

For the law, the user is the owner of the credit card, but not necessarily the one who uses the service, e.g. a restaurant will be the user and not the person who uses the app to get his / her meal delivered.

Even if the aforementioned case may apply, the Chilean user or the service provider can prove that the service was not rendered in Chile, e.g. a Chilean books in Europe a hotel through an app. In this case, no tax should be levied.

3.- How to pay the taxes for online services

The foreign company needs to register in a special record. The registration will not mean, that the company will have a permanent establishment in Chile. This record is only and solely for the payment of the taxes.

This is a pay-only system, and the company will not need to issue an invoice that complies with the Chilean regulation.

The foreign company can pay monthly or quarterly in a foreign currency (US-Dollars or Euro)

4.- Exemptions

There are 2 cases where this tax is not applicable:

a) If the person that receives the services is a VAT taxpayer and informs this situation to the foreign company and the Chilean will pay the VAT directly.

b) If the services are not subject to VAT but to Additional Tax.

5.- Sanctions

If the foreign company does not register and / or pay the taxes, then the Chilean IRS can ask the debit or credit cards providers to retain the amount equivalent to the VAT that must be paid.

La entrada Taxation of foreign online services in Chile se publicó primero en Brokering Abogados.

Any kind of goods can enter the Customs-Free Zones, except for weapons and related goods and other items that go against public decency, public health, animal and vegetal health, and the Country’s security.

1. Regulation of items entered into Iquique’s Customs-Free Zone

Items entered into customs-free zones do not pay any customs fees, taxes or any other levy, as long as they remain on them. They can also be re-exported to other countries, on which case they must pay those countries’ customs fees and applicable taxes; be imported to Chile, in which case they are levied with the usual customs fee and taxed for items imported into the country; be sold in the same territory or be transformed, packed, labeled, divided, among other licit operations.

However, goods imported from abroad are levied with a unique tax rate of 0,52% , calculated on the CIF price of the goods. This tax can then be used as credit when the goods are imported into the country and is retained by the users of the Customs-Free Zone. This tax does not apply to goods assembled, made or manufactured on the Customs-Free Zone with foreign raw materials or parts, for which the taxes and levies regarding their import will only apply to the bits and pieces used that come from abroad, except when they have been nationalized.

However, to avoid misuse of the benefits conferred to the goods entered into customs-free zones, there is a complex administrative procedure, defined by the Chilean Customs Service, that differs depending on the intended destination of the items entered. The goods can be commercialized on the Industrial Zone or on the Exhibition and Sale modules of the Customs Free-Zone, transferred to the extended customs-free zone, imported to the rest of the country, or re-exported, and each operation has its own Customs procedure, regulated by the “Customs-Free Zones Manual”. To enter goods to any Customs-Free Zone, they must be guaranteed, either by a one-time payment that covers the fees, taxes and other levies generated by each import or a global guarantee that applies to every operation within the Customs office, which by the time this document was drafted rose up to US$100,000.

2. Tax benefits for companies operating on a Customs-Free Zone

The main benefits conferred to companies that operate on this Zones are:

i. Income Tax Exemption

Companies that operate on a Customs-Free Zone are exempt from paying income tax for the revenue generated on them. However, they must still keep complete accounting records.

Additionally, foreign shareholders will only pay 22,5% income tax instead of the usual 35%.

ii. VAT Tax Exemption

Transactions made inside the Zones don’t pay Value-Added Tax. The sale of national or nationalized goods to the Customs-Free Zone is considered an export, and as such are exempt from the VAT, and the seller can request a refund of the tax paid for this items.

iii. Bonus for local workforce

Until 2025, companies operating on the extreme regions of Chile (which include Iquique, Arica and Punta Arenas, the three of which have a Customs-Free Zone) will receive a bonus from the Government in an amount of 17% of the workers’ salary. This amount paid cannot exceed CLP$182,000 for each worker’s salary. The workers must live and work in the extreme regions covered by this bonus, and the salary must be higher than at least 20% the minimum salary, but should not be higher than 60 UF (approx. $1,320,000).

The payment of this bonus is done by the Chilean Treasury, via direct deposit on the employer’s bank account or check.
 

3. How to become an Iquique’s Zona Franca Operator

In order to be able to operate from Iquique’s Zona Franca, the company will have to sign an agreement with the administrator of Iquique’s Zona Franca. The company shall have a paid capital of at least 5,000,000 CLP, i.e. about USD 9,000, to be able to sign the agreement. The company has to deliver previously a series of documents including a description of the project the company wants to develop at Zona Franca, a certificate about the origin of the capital of the company and police record of the legal representative and shareholders of the company. The company has to also register at www.uaf.cl to inform about its operations to avoid money laundering.

The signing in fee is about USD 300 and also a monthly fee of about USD 40 has to be paid as well as a guarantee in an amount of about USD 2,000.

The company will sign an agreement with Zona Franca, that will allow him to use that address for the purposes of opening a branch in Iquique and paying the county taxes.

Afterward, the company has to register the valid signature at the Customs Authorities and give them the guarantee of USD100,000 mentioned before.

The company also has to hire the services of the online system used by Zona Franca to control the entrance and exit of the goods in Zona Franca.

All the process takes about 40 days.

La entrada Iquique Customs-Free Zone in Chile and its Regulation se publicó primero en Brokering Abogados.

a) Cigars: The tax for Cigars is 52,6% on its consumer sale price, taxes included, of each package, box or envelope, considering every fraction of the tax inferior to a Chilean peso as a whole number.

b) Manufactured Tobacco: Manufactured tobacco, in strand, tablet, pastes or ropes, granulated, sting or powdered, pays a tax of 59,7% over the consumer sale price, tax included, for every package, box or envelope that is expended, considering every fraction of the tax inferior to a Chilean peso as a whole number.

c) Cigarettes: Packages, boxes or envelopes of cigarettes pay a specific tax, that is divided into two components:

a. Fixed component: A tax of 0.0010304240 UTM per cigarette contained on the package. The UTM is calculated monthly, and must be taken in consideration at the moment the tax is determined.

b. Variable component: A tax rate of 30% over the final consumer sale price, including VAT (19%), over every package, box or envelope sold, considering every fraction to a Chilean Peso as a whole number.

How the Tobacco taxation is it calculated?

a) Cigar’s tax

In accordance with article 3 of the Decree Law 828, the cigar’s tax is 52.6%. This tax is applied to the consumer sale price, taxes included (the tax applied to manufactured tobaccos and VAT).

On the other hand, considering the regulation of article 15 of the Decree Law 825, the taxes included in the Decree Law 828 must be also considered in the taxable base of the VAT.

1. Determination of the variable component of the specific tax on the cigar’s sales:

Specific tax = SPC x Cigar’s tax
Where: SPC = Sale Price to the Consumer (taxes included)

2. Determination of the VAT
VAT = SPC
——- x 0.19
1.19

Where:
SPC = Sale Price to the Consumer (taxes included)

Example:
Net Price per package: $1,854
VAT: 19%
Specific Tax Rate: 52,6%
Sale Price to the Consumer: CLP$ 5,900 (including VAT and specific tax)

Specific tax
Specific tax = CLP$ 5,900 [Consumer Sale price] x 52.6%
Specific tax = CLP$ 3,104*

(*) Every fraction inferior to one Chilean peso is considered as a whole number.

VAT
VAT = Consumer Sale Price/1.19 [To reduce the VAT already applied] x 0,19 [VAT Rate]
VAT = (CLP$ 5900/1.19)*0.19
VAT = CLP$ 942

Composition of the price by package of cigars:

b) Manufactured tobacco’s tax

In accordance to article 5 of the Decree Law 828, the specific tax applied to manufactured tobacco is 59.7%

1. Determination of the variable component of the specific tax on sales of manufactured tobacco

Specific tax = SPC x Tax of manufactured tobacco

2. Determination of the VAT
VAT = Consumer Sale Price/1.19 [To reduce the VAT already applied] x 0,19 [VAT Rate]

Example
Consumer sale price for each package: CLP$ 2,990
Specific tax rate: 59.7%

Specific tax
Net Price per package: CLP$ 727
Specific tax = CLP$ 2,990 x 59.7%
Specific tax = CLP$ 1,785.03 -> CLP$ 1,786*
(*) Every fraction inferior to one Chilean peso is considered as a whole number.

VAT
VAT = Consumer Sale Price/1.19 [To reduce the VAT already applied] x 0,19 [VAT Rate]
VAT = (CLP$ 2900/1.19)*0.19
VAT = CLP$ 477

VAT = CLP$ 477

Composition of the price by package of tobacco

c) Cigarettes’ tax
The tax applied to cigarettes is based on a specific tax of 0.0010304240 UTM per cigarette and a tax of 30% over the sale price to the consumer, tax included, per package.

1. Determination of the fixed component of the specific tax on the sales of cigarettes:
Fixed component of the specific tax = 0.0010304240 UTM x cigarette

2. Determination of the variable component of the specific tax on cigarettes sales:
Variable component of the specific tax = SPC x cigarettes tax

Where:
SPC = Sale Price to the Consumer (taxes included)

3. Determination of the VAT

VAT = Consumer Sale Price/1.19 [To reduce the VAT already applied] x 0,19 [VAT Rate]

Example:

Sale price to the consumer per package of 20 cigarettes: CLP$ 2,000
Net Price per package: CLP$ 120
UTM as of May 2017: CLP$ 46.647
Specific tax to the variable component: 30%
Specific tax to the fixed component: 0.0010304240 UTM

Fixed component of the specific tax
Specific tax = 0.0010304240 x 46,646 [UTM] x 20 [Number of cigarettes]
Specific tax = CLP$ 961

Variable component of the specific tax
Specific tax = CLP$ 2,000 x 30%
Specific tax = CLP$ 600

VAT

VAT = Consumer Sale Price/1.19 [To reduce the VAT already applied] x 0.19 [VAT Rate]
VAT = (2000/1.19) x 0.19
VAT = CLP$ 319

Composition of the price per cigarettes package

1. Determination of the fixed component of the specific tax on the sales of cigarettes:
Fixed component of the specific tax = 0.0010304240 UTM x cigarette

2. Determination of the variable component of the specific tax on cigarettes sales:
Variable component of the specific tax = SPC x cigarettes tax

Where:
SPC = Sale Price to the Consumer (taxes included)

3. Determination of the VAT

VAT = Consumer Sale Price/1.19 [To reduce the VAT already applied] x 0,19 [VAT Rate]

Example:

Sale price to the consumer per package of 20 cigarettes: CLP$ 2,000
Net Price per package: CLP$ 120
UTM as of May 2017: CLP$ 46.647
Specific tax to the variable component: 30%
Specific tax to the fixed component: 0.0010304240 UTM

Fixed component of the specific tax
Specific tax = 0.0010304240 x 46,646 [UTM] x 20 [Number of cigarettes]
Specific tax = CLP$ 961

Variable component of the specific tax
Specific tax = CLP$ 2,000 x 30%
Specific tax = CLP$ 600

VAT

VAT = Consumer Sale Price/1.19 [To reduce the VAT already applied] x 0.19 [VAT Rate]
VAT = (2000/1.19) x 0.19
VAT = CLP$ 319

Composition of the price per cigarettes package

La entrada Tobacco taxation in Chile se publicó primero en Brokering Abogados.

Payment made to any company with residency outside of Chile are subject to the unique Additional Tax of 15%, as it would be technical advice. However, for the engineering services to qualify as a technical advisory, it must exist as a document, which can be a guidance, report or a plan.

However, this rate is higher (20%) if the foreign company that is providing the services is related to the company that requests or pays for these services.

The services wouldn’t be levied the value-added tax.

Also, according to article 74 Nº 4 of the Income Tax Law, the taxpayers that remit incomes affected to Additional Tax must withhold this tax at the moment of payment, hand it to or deposit it on the account of the service provider or interested party. This rate is applied to the full remittal amount with no deductions whatsoever. The amounts withheld must be paid to the Internal Revenue Service within the 12th day of the month following the payment of the services via Form 1850 (Article 79 of the Income Tax Law). This form is filled and paid online

If the services are rendered from a country that does have a double tax agreement (DTA) with Chile different rules apply and in some cases, these services will only be taxed in the country the services are rendered. For more information about the DTA Chile has with different countries, check this link http://www.sii.cl/normativa_legislacion/convenios_internacionales.html

La entrada Taxation of foreign engineering services in Chile se publicó primero en Brokering Abogados.

The intermediation activity is classified as a service, and on this regard, the DL N° 825 from 1974 (VAT Law) burdens with VAT the sales and services. The DL N° 825 defines as services “any action or rendering of one person to another, for which he receives an interest, premium, commission or any other kind of retribution, for activities contained in numbers 3 and 4 of the §20 of the Income Law (Ley de la Renta)” For DL 825 any services contained in the activities defined in numbers 3 and 4 of the Income Law are subject to VAT payments.

For the commission agents (for this purpose a commission agent is any person who acts as an intermediary receiving a commission for his services with no need to act on behalf of another person) with a fixed place of business, this kind of services are considered among the activities defined by §20 number 4 of the Income Law and therefore subject to pay taxes in accordance with the first category of Income Law and also subject to VAT payments in accordance with the statements made above. Therefore, by application of the general rules contained in the laws above mentioned, commission agents and any person who buys or sells on behalf of third party sellers [1] are subject to VAT payments, unless they fall under one of the exemptions made by law [2].

Therefore, to begin with, commission agents are subject to VAT payments notwithstanding the quality or classification of the principal. Nonetheless, it has to be distinguished between the services provided by the commission agent and the buy or sale that is done through his activity. In deed, we refer here only to the qualification of the service rendered by the commission agent or an agent who performs a commercial activity [3], which is a service generally subject to VAT unless it qualifies for exemption.

Summed up, it is the activity of the commission agent, which determines if is it burden by VAT. Therefore, commission payments received from abroad are subject to VAT, if the commission agent is a taxpayer classified in the first category of the Income tax. The only exemption in this regard is the commission agent if it is a natural person who is a taxpayer classified in the second category [4] because taxpayers classified in this category are not subject to VAT.

[1] Circular 126 de 1977 number 20

[2] §12 e num. 8 of the DL 825. Exemptions are natural persons (not legal entities) who receive income by means of §42 and 48 of the Income, classified as second category taxpayers in accordance with the Income Law. Among the requirements to be classified as such, it has to be a natural person and the origin of his income can be his paid job as a worker or through his personal actions.

[3] The reimbursement of expenses shall not be subject to VAT because they do not form part of the commission agent’s payment.

[4] Oficio num. 854 del año 2008 del SII. Requirements to be considered a commission agent classified as second category taxpayer: a) being a natural person; b) no fixed place of business; c) does not use capital in his activities, for financing own or third party operations; d) activity is done by himself without use of employers or third parties.

Author: Rodrigo Schönherr

La entrada Commission Agent Subject to VAT Payments in the Chilean Law se publicó primero en Brokering Abogados.

This article will discuss Chile’s current regulations regarding transfer pricing. Transfer pricing applies when, for any reason, a natural person or a company transfers goods, intangible goods or provides services to a related entity domiciled abroad.

We will examine Law 20.630, published on September 27, 2012, which introduced the current regulation, and was based mainly on the OECD rules, with several changes made to adjust it to the local requirements, and specific applicable administrative rules.

II. Scope of the transfer pricing regulation

According to Circular Nº29 of the Chilean Internal Revenue Service (IRS), transfer pricing is relevant, and can be established or contested, when the following conditions are met:

• Presence of cross-border operations
• The cross-border operations are executed between related entities
• The prices or value of the cross-border operations do not adjust to market pricing, understood as the values that independent parties would have agreed to

Thus, it is required that a person or an entity carry out one or more cross-border operations that involve the transfer of tangible or intangible goods or the provision of services, that these operations are executed between related entities, and, for the transfer pricing to be contested or established by the IRS, it must not follow market pricing, as explained above.

It should be noted that, according to article 41E of the Income Tax Law, the potential contest of transfer pricing also applies to corporate or business restructuring or reorganization, when, due to them, tangible or intangible goods or activities that can generate taxable income are transferred from Chile to a country or territory included on Article 41D (mainly tax havens), when, if this was done by independent parties, they would have set or determined a different price, value or profit.

III.Related entities

The applicable regulations determine that the entities that intervene in an operation are within the following categories:

General Rule

a) One of the entities, directly or indirectly, participates in the management, control, equity, profits or income of the other.

b) The same person or persons directly or indirectly participate in the management, control, equity, profits or income of both parties. In this case, all of them are considered related entities.

This general rule correlates to the OECD standards regarding related entities and is included on similar terms on most Double Taxation Agreements signed by Chile to date.

Permanent establishments

An agency, branch or any other form of permanent establishment with the parent company; with other permanent establishments of the same parent company; with related parties of the parent company and its permanent establishments are considered related parties.

Operations with entities resident, domiciled or created on tax havens

 It is presumed that operations with entities that reside, are domiciled or were created on countries or territories incorporated on the list of tax havens referred to by article 41D of the Income Tax Law are with related parties.

However, this presumption is not applied when the country or territory signs a treaty with Chile that includes the exchange of relevant information with the objective of applying tax regulations, and this treaty is in effect at the time of the operation.

Physical persons

Physical persons are understood to be related when they are married, or if they are related, by blood or affinity, up to the fourth degree inclusive.
 

Indirect connection (back to back structures)

It is presumed that there is a connection between the intervening parties when one of them executes one or more operations with a third party that, in turn, directly or indirectly executes one or more operations with a related party that are similar or identical with a related party of the first, no matter the standing of the third party and the original parties on those operations.

IV. “Market” Prices, value and profits

Market prices, value or profits are understood to be those that third parties agreed upon or would’ve agreed upon or be obtained by independent parties on comparable operations and circumstances, considering several variables, such as the functions assumed by each party, the characteristics of the goods or services, among others.

In case the aforementioned operations are not executed following the market prices, value or profits, the IRS can contest or establish them, with a substantiated resolution.

V. Transfer Pricing Methods

Article 41E of the Income Tax Law defines the methods with which to calculate transfer pricing, which are based on the ones established by the OECD, without an established priority for their application. Taxpayers must choose a method and justify its application on a case-by-case basis. A detailed explanation of each method exceeds the scope of this article, so they will only be listed. For more details, please refer to Article 41E and Circular Nº 29 of the IRS.

a) CUP Method
b) Resale Price Method
c) Cost Plus Method
d) Transactional Net Margin Method
e) Transactional Profit Split Method
f) Residual Methods (used when it is not possible to apply any of the listed methods)

The choice of the method applied must be made by the taxpayer, who must consider diverse factors, such as the advantages and disadvantages of the method, availability of relevant information, among others. OECD guidelines[1] regarding transfer pricing are useful in this regard.

It is likely that time will allow standardization, which will create legal certainty for choosing transfer pricing methods.

Studies or price reports regarding transfer pricing are not mandatory, but regulations provide the option to present them. However, it must be noted that taxpayers must be able to describe the way the pricing of goods and services was determined in operations with related entities. Additionally, the taxpayer must keep available to the IRS the records that justify the applied pricing methods.

VI. Price adjustment and right to appeal

If the taxpayer cannot show that the operations with related entities were executed with market prices, value or profit, or if these were not defined, the IRS, through an audit, will determine or recalculate the transfer pricing, based on the information delivered by the taxpayer and any other at its disposal, applying the aforementioned methods.

Once transfer pricing is determined or recalculated, the IRS will liquidate the tax owed or the respective adjustments and will calculate the applicable interest and fines. When transfer pricing differences are detected, they will affect the corresponding tax year, and the flat tax regulated on article 21 of the Income Tax Law will apply. In addition, a fine equivalent to the 5% of the amount of the difference detected will be applied, unless the taxpayer delivered the information required by the IRS in due course.

The taxpayer can appeal the established transfer pricing before a court of law, following the general procedure contained on the Tax Code.

VII. Mandatory information submission

Taxpayers that execute the operations listed above must draft and submit a yearly sworn statement, through Form 1907[2]. This statement must be submitted before the last business day of June of each year, referring to the operations executed the year prior.

The existing term for submission can be extended just once, for up to 3 months, and will also extend the term for the IRS’ audit.

If the sworn statement is not submitted, if it is submitted after the deadline or if it contains errors, the following fines, listed on Circular 31, apply:

Sworn statement not submitted

Overdue submission

Incomplete or faulty submission, if a rectifying statement is presented[3]

Submitted Statement is maliciously false

In this case, a fine of the 50% to 300% of the tax avoided is applied to the taxpayer who is also subject to criminal penalties.

VIII. Advance pricing agreements (APAs)[4]

New regulations contemplate the possibility for taxpayers to propose to the IRS advance pricing agreements regarding transfer pricing of the operations that are executed between related parties. These agreements can involve foreign tax authorities, and, if the operations include the import of goods, Customs can also participate.

The request must be made in writing, including the description of the operations involved, their market pricing, value or profit and the proposed duration of the agreement. It must include several other records, which are listed on number 2º of Exempt Resolution 68/2013. The IRS must decide within six months, and if it doesn’t the request is understood to be denied.

If an APA is signed, it will apply for the operations carried out by the petitioner on the same year of the request and for the next 3 years. This term can be extended by an agreement signed by all the participating parties.

The IRS can terminate the APA if the request was based on erroneous or maliciously false information, or if the essential records or special circumstances that were examined significantly vary. The termination of the agreement is done via a reasoned decision, explaining the reason for the termination and its justification, detailing the records on which it is based.

IX. Final conclusions

1. The new regulation regarding transfer pricing contained on article 41E of the income tax law, adjusts the rules to the recommendations and guidelines of the OECD, also including regulations that help adjust them to Chile’s circumstances. Some changes are extensions of the existing system, and others are new for the country, such as advance pricing agreements.

2. As transfer pricing studies are not mandatory, costs for the taxpayer have not gone up significantly, and the analysis is flexible. However, taxpayers must fill and send the newly established sworn statements when they operate with related entities. Fines for not sending these statements and for filing them after their due date can be significant.

3. There is an exhaustive administrative regulation regarding transfer pricing and APAs, through Orders and memorandums of the IRS. This creates legal certainty for affected taxpayers.

[1] Available in English at https://www.oecd.org/tax/oecd-transfer-pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm

[2] According to Exempt Resolution 14/2013, of the IRS.

[3] If a rectifiying statement is presented prior to the expiration of the term to present the original statement, no fine is applied.

[4] Several administrative rules have been issued regarding APAs, including Res. Ex. 64/2016 (IRS), regarding requests related to the import of goods, Res. Ex. 54/2016 (IRS and Customs), regarding the procedure and opportunity for requests related to the import of goods, and Res. Ex. 68/2013 (IRS), which establishes the general procedure for APAs.

La entrada Transfer pricing in Chile se publicó primero en Brokering Abogados.

First, a loan agreement has to be informed to the Chilean Central Bank when the money arrives. It is important to inform the loan to avoid to be seen as a covered distribution of profit when they start to service the loan.

Second, loans are subject to the “impuesto de timbres y estampillas” (stamp tax). In general, the stamp tax is a tax levied upon credit transactions contained in documents. Usually, the stamp tax is levied when the loan agreement is signed. As an exemption, credits coming from abroad do not need to be contained in a document to be levied by such tax. In these cases, where no document states the credits agreements that are the source of the money coming from abroad, the tax is levied when the loan enters the country or is registered in the account books in Chile. In case the loan agreement refers to a credit being awarded abroad, then the stamp tax is levied when the money arrives in Chile. The amount of the tax is o,6% of the credit. So, this tax is levied only once, either when the loan agreement is signed or when the money arrives.

Third, when the service of the loan starts, the interest is subject to a 35% tax rate for “impuesto adicional”. The Income tax law establishes a rate of 35% on interests and a special rate of 4% on loans given by a credit institution or bank when certain requirements are fulfilled. Therefore, the interest to be paid totally or partially in bank accounts of persons or entities without domicile or residence in Chile, are burden by Additional tax with a rate of 35% and such amount should be retained in Chile. There are some countries, that have double taxation agreements with Chile, like Spain and in those cases, the tax rate varies from 5 to 15%.

La entrada Loan from abroad & taxes se publicó primero en Brokering Abogados.

If someone wishes to bring equipment for less than 6 months, then temporary entrance of the equipment is advisable, because you pay only a percentage of the duty and taxes you paid in a normal entrance. The downside of the temporary entrance is that if you for whatever reason want to leave the equipment in Chile definitely, the custom duties and taxes paid cannot be credited to the payment due for the definitive entrance of the equipment and also if the equipment remains for longer than 6 months there is no reduction in the number of custom duties and taxes and the company is obliged to return the articles within the period it was declared when the equipment entered the country,

It is also advisable to look if the country of origin of these devices has a Free Trade Agreement with Chile, because in this case most probably the assets that are going to enter the country will be not subject to any customs duties, provided that a certificate of origin is provided.

The taxes that are levied when equipment enters Chile are VAT in the amount of 19% and customs duties, which are on average 6% of the CIF – price. Chile has free trade agreements with a lot of countries including the USA. So, if the equipment is from a country having a Free Trade Agreement with Chile usually custom duties will be 0%, if the equipment complies with the rules of origin agreed in the respective Free Trade Agreement.

In accordance with the Free Trade Agreement with the USA, if the equipment must be sent back to the US to be repaired when it returns to Chile no taxes are levied.

A wise way to import the equipment is via a lease agreement. The advantage of a lease agreement is that the payments can be credited as expenses and deducted from incomes.

Payments of international leasing, however, are subject to a tax levied on every rate paid an amount of 1.8% (Impuesto adicional). These agreements must be informed to the Chilean IRS previously.

La entrada Import from Chile and taxes se publicó primero en Brokering Abogados.

Importation of goods

The importation of goods is levied a tax in amount of 2.8%. This amount paid can be used as a credit when the goods are taken outside the Region and the 1,7% can be used as credit for the VAT payments.

Hiring local work force in Punta Arenas

Until 2025 companies will receive a bonus from the State in amount of 17% of the workers’ salary. This amount should not exceed $182,000 for each worker’s salary. The workers should live and work in the Punta Arenas Region and the salary should exceed at least 20% the minimum salary, but should not be higher than 60 UF (approx. $1,320,000)

Tax credit for corporate tax

Companies rendering services in the Punta Arena’s Region shall have a tax credit on the chattels belonging to the fix assets of the company, including equipment, machinery and/or buildings.

If the price of the chattels is no more than 200,000 UTM (approx. $8,000,000,000) then the credit is 32%. Between 200,000 and 2,500,000 UTM is 15% and higher is 10%. Also the monthly provisional tax payment can be suspended, if they exceed the amount of the tax paid last year.

To be able to use these benefits the company must summit to the Chilean IRS a technical description of the investment project, explaining the dates the project will start and finish, goods that will be acquired and the total amount of the investment. The investment project must be at least 500 UTM (about $20,000,000). They must also summit a plan with their salaries, qualification and social security policies towards their employees. If the equipment or machinery is taken outside the Region, then the credits must be paid back, unless the equipment is send for repair.

La entrada Tax incentives for companies rendering services in the Punta Arenas Region se publicó primero en Brokering Abogados.

In Chile, unlike in Europe, a company cannot buy any car. Vehicles recognized as company cars are trucks, pickups, and jeeps unless the company’s object is car rental.

Therefore, if a company buys a vehicle which does not fall under the aforementioned list, the Chilean IRS will not recognize it as a company’s vehicle and it will be seen as a company’s investment, which can be depreciated within 7 years.

The VAT paid for that car cannot be recovered as well as the expenses related to the car.

If this car is assigned to some CEO and he uses it beyond the business, hours it will be seen as part of the CEO’s income and must be taxed accordingly.

On the other hand, in Chile, it is forbidden to import used cars. There are some exemptions related to Chileans returning to the country and collectible cars. Vehicles have to comply with some security measures like ABS brakes and electronic stability programs (ESP)

We, therefore, advise our clients to buy those vehicles recognized as company cars by the Chilean IRS.

La entrada Cars and Taxes in Chile se publicó primero en Brokering Abogados.