On May 2, 2019, the Chilean government announced the second draft labor reform to modernize its labor system and address certain tax and regulatory issues. The new project focuses on the following topics:
- Working hours
- Identification of service exporters
- Application for export tax refund
- Tax on dividends on foreign income
Working Time Regulations
Regarding the working time regulations, there are the following changes that employers must consider:
- 180 working hours per month, which can be distributed differently each week
- The working week is spread over no less than 4 and no more than 6 days (previously: no less than 5 and no more than 6 days)
- Contracts for semi-annual or annual conferences with the union
- Introduction of an overtime account with a weekly or monthly limit (previously: daily limit)
- Compensation of overtime with additional leave days. This measure could increase up to 5 holidays per year.
Identification of Service Exporters
Taxpayers providing services abroad must now identify themselves as such by means of an administrative request via the SII website. The prerequisite for this is that their economic activity must trigger the levying of value added tax.
Application for Refund of Export Tax
Suppliers of export services that are fully supplied and used abroad may apply for a VAT refund. They have to meet the following requirements:
- Export invoice must have been issued before
- Reimbursement will only be made in respect of the tax paid on export activities for the services provided and used abroad
- In the country where the service is provided and used, a tax of the same or similar kind must be levied on VAT
Additional Tax on Dividends derived from foreign Income
Companies subject to the semi-integrated system may pay out dividends to a shareholder residing abroad. If this is the case and the distribution was partly financed by income from abroad, there is a right to a tax credit. However, according to the reform, under certain conditions it is no longer permissible to grant the credit for the final tax in advance. Due to the complexity of this scheme, affected companies should consult a tax lawyer in this regard.
These regulatory changes could affect your business with view to customizing or support of your ERP/SAP system. Please contact us to learn about possible necessary reactions to the changes – we are happy to assist you!