Until 2019, the tax legislation of Chile provided for four tax regimes for those companies generating income from first category income, as indicated by the Income Tax Law.
These were the presumptive income regime, the simplified taxation regime, the attributed income regime, and the semi-integrated income regime.
Nevertheless, tax reform was established at the beginning of 2020 through Law No. 21,210 or the “Tax Modernization Law,” whereby two of these regimes were repealed, and three additional regimes were incorporated.
Thus, the tax regimes established in Chile as of the fiscal year 2020 are comprised of five types: the General Pro SME regime, the Transparent Pro SME regime, the general semi-integrated regime, a presumptive income regime, and a regime for taxpayers not subject to Article 14 of the Income Tax Law.
This article informs taxpayers of certain aspects and benefits of each regime, for which the most important points of each of these will be developed.
1. Who are these regimes for?
Each of the aforementioned tax regimes is aimed at different types of taxpayers of first category income, as indicated below:
General Pro SME Regime
This regime focuses on micro, small, and medium-sized taxpayers.
Transparent Pro SME Regime
This tax regime aims at small and medium-sized enterprises (SMEs), provided that their shareholders are taxpayers of final taxes, such as the Global Complementary Tax and the Additional Tax.
The General Semi-integrated Regime
All taxpayers whose income does not allow them to be classified as SMEs are eligible for this regime.
Presumptive Income Regime
It applies to those taxpayers who carry out agricultural, transportation, and mining activities, as long as their income does not exceed the limits established by law for each activity.
Regime for Taxayers Not Subject to Article 14 of the Income Tax Law
This tax regime aims at those taxpayers obliged to keep full accounting records and whose shareholders are not taxed with the previously mentioned final taxes.
Companies entirely belonging to the State may be included in this regime.
2. What are the benefits of each of the tax regimes?
Each of these regimes provides the taxpayers incorporated to these different tax benefits, as detailed below:
General Pro SME Regime
Among the main benefits and characteristics of the companies included in the regime are the following:
- The company’s inventories or supplies existing at the end of the fiscal year may be recognized as an expense.
- Regarding the depreciation of fixed assets, this will be applied instantaneously.
- The taxable income may be determined in a simplified manner, except when transactions are carried out with related companies.
- They are not obliged to keep the RRE (Registros de Rentas Empresariales – Corporate Income Records) records as long as they do not generate or receive income to be controlled in the REX (Registro Rentas Exentas – Exempt Income Records) records.
- Determination of Tax Equity in a simplified manner.
- It may reduce the taxable base of the IDPC (First Category Tax).
- It may apply the 25% rate for first category income tax.
Transparent Pro SME Regime
Under this regime, the taxpayer may have the following benefits:
- The inventories or supplies of the company existing at the end of the fiscal year may be recognized as an expense.
- Depreciation of fixed assets will be applied instantaneously.
- Fixed PPM rates may be used.
- It determines in a simplified manner its Own Taxable Capital when the income of the taxpayer exceeds UF 50,000.
- The owner of the SME will be able to apply against his final tax the credit of Article 33 bis of the Income Tax Law and those associated with the withdrawals and dividends received.
General Regime
In this tax regime, taxpayers may enjoy the following benefits:
- They will not be obliged to have records when they do not generate or receive income to be controlled with the REX record.
- They will be able to determine the tax status of withdrawals, remittances, or distributions at the end of the fiscal year.
- A reduction may be applied to the taxable base of the IDPC.
- The first category tax credit may be advanced to the shareholders.
- The first category income tax rate is 27%.
Presumptive Income Regime
Taxpayers will have the benefit of paying their tax according to the percentages established for each activity and keeping simplified accounting records.
3. What are the requirements to incorporate in these regimes?
Taxpayers must comply with the following requirements to incorporate into one of these tax regimes:
|
General Pro SME regime |
Transparent Pro SME regime | General Regime | presumptive Income regime | Regime for Taxpayers not subject to Article 14 of the Income Tax Law |
| The average gross income in the last 3 years cannot exceed 75,000 UF. |
To comply with all the conditions of the Pro SME Regime. |
All taxpayers are eligible. |
To perform any of the following activities:
Agricultural, Mining, and Transportation. |
Those taxpayers whose partners are not subject to any final tax. |
| The gross income may not exceed 85,000 UF in any fiscal year. |
Shareholders or owners must be individuals, whether domiciled or not, in Chile. |
The company’s capital must not exceed 18,000 UF for agricultural activities, mining activities, 34,000 UF, and transportation activities, a maximum of 10,000 UF. |
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| The effective capital may not exceed 85,000 UF at the beginning of the activities. | The owner may be a legal entity if not domiciled in Chile. |
4. Date to request the change to one of the regimes indicated by the Tax Modernization Law
The rule established a deadline until April 30, 2020, for taxpayers to change their tax regime by 2021.
However, this deadline was extended until September 30, 2020.
The request to change the tax regime must be through the SII (Servicio de Impuestos Internos – Internal Revenue Service) website.
