The tax reform introduced by Law 20,780 (published in the Official Gazette on September 29 2014) and later amended by Law 20,899 (published in the Official Gazette on February 8 2016) came into effect on January 1 2017.

The reform introduced two alternative tax regimes:

  • the attributed regime addressed in Article 14(A) of the Income Tax Act; and
  • the partially integrated regime addressed in Article 14(B).

The attributed regime applies to:

  • individual entrepreneurs;
  • individual limited liability companies;
  • communities;
  • joint stock companies; and
  • limited liability companies whose members are individuals and non-resident foreign taxpayers (companies or individuals) that have chosen this regime.

If individual entrepreneurs, individual limited liability companies, communities or limited liability companies do not choose a tax regime, the attributed regime will apply. If non-resident foreign taxpayers or joint stock companies do not choose a tax regime, the default regime will be the partially integrated regime.

The partially integrated regime is obligatory for corporations and companies whose members and shareholders are other companies (resident or non-resident).

Under guidelines issued by the Tax Department, companies that started business activities (ie, registered with the tax department) before June 1 2016 must have chosen their regime through a declaration of shareholders or members, which must have been filed before December 31 2016. For companies that started business activities after June 1 2016, this term will expire in February 2017. Companies starting business activities after January 1 2017 must choose their regime within two months of starting business activities.

If no selection is made, the aforementioned default rules will apply. The selected regime cannot be changed for five years.

For further information on this topic please contact Omar Morales at Montt y Cia SA by telephone (+56 22 233 8266) or email (omorales@monttcia.cl). The Montt y Cia SA website can be accessed at www.monttcia.cl.

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