It is important for business owners and their respective accountants to understand the taxation structure within Chile in order to ensure that they are operating legally, and maximizing their taxation advantages. Specifically, the attributed Income tax regime within Chile is based on complete accounting with total attribution of the First Category Tax credit to business owners. Any segment can adhere to this regime and there is no income limit. This regime will be valid as of January 2017. To adhere this regime, taxpayers must inform the Internal Tax Service (SII, for its Spanish acronym) between 01 June and 31 December, 2016 or at the start of the activities.
The type of legal companies that are eligible to be part of the Attributed Income Regime are:
- Individual Enterprises
- Limited Liability Individual Enterprise
- Joint-stock Companies, incorporated by natural persons
Note: It is important to highlight that any of the aforementioned legal entities that do not choose a regime will automatically be classified under the Attributed Income tax regime.
Businesses under this regime must keep complete accounting ledgers, which include:
- Cash Flow Ledger
- Daily Ledger
- General Ledger
- Inventory Ledger
- Financial Statements
As well as complementary bookkeeping, which include:
- Daily Sales Ledger
- Wages Ledger
- Withheld Tax Ledger
In addition to records of:
- Own Attributed Income
- Exempt Income or Unearned Income
- Financial Profit Fund (difference between accelerated depreciation and normal depreciation)
- Income subject to Global Complementary Tax or Additional Tax
- Cumulative Balance of Loans
Businesses that report under this regime pay the First Category Tax based on the company’s Taxable Liquid Income. The First Category Tax rate is at 25%. Business owners residing in Chile must pay the Global Complementary Tax between 0% and 35%. If business owners reside abroad, they must pay the Additional tax of 35%. In other words, company owners pay taxes according to their total revenues, independently of whether profits are withdrawn. In addition, taxpayers are entitled to attribute as credit 100% of the First Category Tax paid for such earnings.
Those belonging to this regime must remain in it for five consecutive commercial years. Additionally, taxpayers who have an average annual income equal to or below 100,000 Chilean Units of Account (UF, for its Spanish acronym) during the last three consecutive commercial years, can deduct from the Taxable Liquid Income that is encumbered with the First Category Tax, an amount equivalent to up to 50% of the taxable liquid income that remains invested in the company. The maximum deductible amount is of 4,000 UF. Articles 29 to 33 of Chile’s Income Tax Law stipulates the provisions to be followed in order for taxpayers to determine their taxable liquid income.
If you are unsure of whether your company should be in this regime or would like to learn more, both in terms of compliance and advantages, do not hesitate to contact Biz Latin Hub. We will help you with all of your back office and accounting processes. Instead of pulling an all-nighter trying to understand this regime, the bookkeeping requirements, and the legal implications, among others, you should call Biz Latin Hub, which already understands and knows Chilean tax and accounting laws and understands how to do business in Chile.
With offices in Colombia, Peru, Mexico, Chile, Argentina and Panama at Biz Latin Hub we have an unparalleled reach across the region and are well positioned to help companies to enter and operate within the Latin American market-place, through providing multi-lingual services that are Reliable, Economic and Tailored to meet the client’s needs. Contact us firstname.lastname@example.org