Recently introduced legislation reduces tax and administrative burdens for small- and medium-sized enterprises (SMEs) in Chile. The ‘PROPYME’ tax measures announced this month include benefits related to interest rates, tax, commercial licenses, and payment agreements for SMEs in Chile.
SMEs are known as PYMEs in Spanish (the acronym for the phrase “pequeña y mediana empresa”), hence the name of the new measures.
For anyone currently operating an SME in the market, or interested in starting a business in Chile, the new law will be of interest.
How are SMEs in Chile classified?
An SME in Chile is essentially classified based on its annual sales, which should be between 2,400 development units (‘unidades de fomento’ — UF) and 100,000 UF. At time of publication, that corresponded to between approximately US$94,000 and US$3.63 million.
Under Chile’s Income Tax Law, such entities are taxed under a special system, which has now been modified, following the publication of Law 21.353 earlier this month.
The new law is intended to assist SMEs in Chile to manage ongoing financial and administrative complications related to the coronavirus pandemic, which has caused significant economic distress since March 2020.
4 new measures to support SMEs in Chile
Law 21.353 includes four articles, each establishing a new measure in support of SMEs in Chile. They are as follows:
- Temporary reduction of the penal interest rates for SMEs in Chile to 0%
This benefit applies for every month or fraction of a month, in the case of delayed payment of any kind of taxes and/or contributions to Chilean Tax Authorities, in relation to Tax Payment Orders issued starting July 1st 2021, until December 31st 2021.
- Refund of outstanding VAT credits due to SMEs in Chile
For July, August and September 2021 — corresponding to the tax periods of June, July and August 2021 — excess VAT credit established in tax returns submitted by SMEs in Chile will be refunded by the Chilean National Treasury.
In order to be eligible for this benefit, SMEs in Chile must meet the following requirements:
- To have obtained income from sales and services of their line of commercial business during at least two months (continuous or discontinuous) between January 1st, 2020 and May 31st, 2021.
- To register an excess VAT credit in the VAT return for the month of June 2021. This credit must originate from the acquisition of goods or the use of services between March 1st, 2020 and May 31st, 2021.
- Not have incurred in reiterated tax infractions nor to be charged with tax-related offenses.
- To have filed all VAT returns during the last 36 periods.
- To have properly registered all the operations that give rise to the VAT credit.
- Extension of the validity of provisional commercial licenses for SMEs in Chile
The new law extends the validity of provisional commercial licences issued to SMEs in Chile for one year, starting from the day after the end of the national sanitary alert (Ministry of Health Decree Law 2020), which currently runs until September 30, 2021, but may be extended.
- Flexibility for the granting of payment agreements for SMEs in Chile
From the date of publication of the new law until December 31, 2021, the National Treasury of Chile must grant delayed periodic tax payments for up to four years, without the SME incurring additional interest or other penalties for late payment of taxes.
Biz Latin Hub can assist you doing business in Chile
At Biz Latin Hub, our multilingual team of corporate support specialists is available to assist you doing business in Chile. With our complete portfolio of back-office solutions, including accounting & taxation, company formation, corporate law, and recruitment services, we can be your single point of contact for entering and doing business in the Chilean market, or any of the other 17 markets around Latin America and the Caribbean where we have teams in place.
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