a The 5% rate applies if the interest is derived from loans granted by banks or insurance companies; or is derived from bonds or securities that are regularly and substantially traded on recognized securities market or with respect to sales by suppliers of machinery and equipment. The 15% rate applies to other interest.
aa The 5% rate applies if the interest is derived from loans granted by banks or insurance companies.
b The 10% rate applies if the interest is derived from bonds or securities that are regularly and substantially traded on recognized securities market or with respect to sales by suppliers of machinery and equipment. The 15% rate applies to other interest.
c The 5% rate applies to royalties for the use of, or the right to use, industrial, commercial, or scientific equipment.
1.1. General Aspects
1.1.1. Income Tax Rate
The general statutory corporate income tax (First Category Tax) rate for Chilean entities including Chilean branches of foreign companies is 17%.
1.1.2. Taxable Basis
Taxable basis is determined according to the generally accepted accounting principles, including all profits. Dividends received by resident companies from other resident companies are exempt from corporate tax.
As a general rule all costs and expenses are deductible provided that they are related, proportional and necessary to the income producing activity. Any costs or expenses related to Excluded and/or Exempted Items of Income are not deductible.
However, automobile expenses are not deductible.
Depreciation of fixed assets is allowed according to the useful life determined by the Chilean IRS. Accelerated depreciation may be elected by the taxpayer with respect to new or imported assets, applying one third of the regular period of depreciation.
1.1.5. Transfer Pricing
Chile has special transfer pricing rules applicable to all transactions between a Chilean party and a foreign related party. Under such transfer pricing rules, the Chilean party must keep and file supporting documentation with the tax authorities. Parties
in tax havens are deemed as related parties for these purposes. The Chilean transfer pricing regime has a list of situations where two parties are deemed related which is complex and its application should require a more detailed analysis on case-by-case basis.
1.1.6. Inflation Adjustments
Chile has an inflation adjustment or monetary correction system applicable to certain assets and liabilities annually, based on changes in the consumer price index (CPI) and foreign exchange rates. The difference between the taxable income and the expenses originated in the yearly inflation adjustments should result either in a net item of taxable income or a net loss for inflation (this loss is deductible).
1.1.7. Tax Loss Carry-forward / Carry-back
A Chilean taxpayer can carry-forward indefinitely. Losses must be carried-back offsetting undistributed profits from prior years.
Tax losses cannot be transferred to other taxpayers (not even to the shareholders). Keep in mind that in all cases, inflation adjustments are applicable to update the tax loss amounts and deduction is computed on the adjusted amounts.
1.1.8. Tax-Free Reorganizations
A Chilean group of companies may implement statutory mergers and spin-offs, stock-for-stock and assets-for-stock reorganizations tax free, including Income Tax and VAT taxes.
1.2. Payment and Filing
For any given taxable year the corresponding income tax return and tax liability must be filed and paid on the first date of the next year, according to the filing and payment dates set out by the tax authorities in the corresponding schedules (e.g., the filing corresponding to the 2010 taxable year must be verified in 2011).
All entities including corporations must file their income tax return and pay the corresponding...