On August 21st Chilean president Sebastián Piñera announced a new tax reform aimed at simplifying and modernizing the Chilean tax system in order to boost the economy.
The following details of the reform have been publicized:
- Replacement of the dual corporate tax system by a single integrated one
- Higher expensing of investments in capital assets
- Regulation of the digital economy
- Changes on international taxation to attract FDI
Potential consequences for foreign businesses and investors
Through the single integrated corporate tax system double taxation of profits will be eliminated. Thus, taxes that have been paid by a business can be credited against those payable by owners and shareholders.
Additionally, the reform reduces the tax burden on non-resident investors from currently up to 444,45% to effectively only 35% respectively 25% for SME, whose profits are not reinvested in the business.
Tax payers will be able to expense 50% of their investments in capital assets within a two year period. Even better conditions are available for investors in the Araucania region.
Digital services will be taxed with a flat 10>% if the service providers are non-resident in Chile.
In order to mainatin the revenue-neutral status of the tax reform, a repatriation tax of 10% and a taxy on undistributed profits of 30% have been announced.