The Semi-Integrated Tax Regime: Chile, Latin American center of finance and international trade, has proposed two new tax systems. These will impact the financial information of companies operating in Chile. The new systems are as follows:
- On the one hand, an attribution regime with a tax rate of 25%, which will be imputed immediately and automatically to its shareholders (“Regime A”), with a final tax of 35% on the upper threshold.
- On the other hand, a partial integrated regime will have a rate of 27% of corporation tax (“Regime B”), with a final tax of 44.45% on the upper threshold.
The semi-integrated tax regime is based on full accounting with partial attribution of the credit of the first category of taxes to business owners. Any segment can adhere to this scheme and there is no income limit. This regime will enter into force from January 2017. To join this regime, taxpayers must inform the Internal Revenue Service (SII) between June 1 and December 31, 2016 or at the beginning of the activities.
The type of legal persons eligible to form part of the semi-integrated regime are:
- Open companies
- Closed companies
- Anonymous Societies
- Limited partnerships with share capital
The Semi-Integrated Tax Regime: Tax Requirements in Chile
To simplify the interaction of tax systems, the general tax system is the Partially Integrated Tax System, and exceptionally the Attributed Tax System. The companies that can apply to regime A are only those that are composed of natural persons under the aegis of a limited liability company or as a permanent establishment.
Companies under this scheme must keep complete accounting records, which include:
- Cash ledger
- Diary ledger
- General Accounting
- Inventory ledger
- Financial statements
In addition to the supplementary accounting, which includes:
- Daily sales ledger
- Wages ledger
- Tax Ledger Withholding
In addition to the records of:
- Own attributed income
- Exempt or Non-Earned Income
- Financial benefit fund (difference between accelerated depreciation and normal depreciation)
- Income subject to Global Supplemental Tax or Additional Tax
- Accumulated Loan Balance
Benefits, Shareholders and Cash Income Taxes
Under this tax regime, business owners must pay taxes based on their withdrawals. The First Category Tax for companies under this regime is 24% in 2016, it will be 25.5% in 2017 and 27% in 2018 and beyond. As for business owners, residents in Chile must pay the Global Supplemental Tax between 0% and 35%. If business owners reside abroad, or live less than 6 months in Chile – if they are, they are considered residents for tax purposes – they must pay the Additional Tax, which is 35%.
In this integrated partial regime, shareholders will be allowed to defer personal and withholding taxes until such benefits are effectively distributed. On the other hand, it only allows investors to use 65% of the credit for taxes paid at the company level, so the final tax increases up to 44.45%. It is important to note that there is an exemption, the remaining 35% will remain for foreign companies that come from a country that Chile has a current double taxation agreement with. Persons who belong to this regime must remain in it for five consecutive business years.
In addition, taxpayers who have an annual average income equal to or less than 100,000 Chilean Account Units (UF) during the last three consecutive business years, may deduct from the Income Tax Income an amount equivalent to up to 50%. Remains invested in the company. The maximum deductible amount is 4,000 UF. Articles 29 to 33 of the Chilean Income Tax Law stipulate the provisions to be followed for taxpayers to determine their taxable net income. Also, as of September 1, 2016, one UF is equivalent to 26,210.79 Chilean pesos.
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