TAX REFORM

05 / 10 / 2012

On September 27th of this year, Law N° 20,630 was published in the Chilean Official Gazette. This Law, “Improves tax law and finances Educational Reform”. It’s objective is to obtain more resources to handle the higher public education budget involving an additional US$ 1,000 million per year, without affecting the economic system. Among other changes, it amends corporate taxation, establishing a permanent rate of 20% in the 1st category of the Income Tax Law, which applies to the tax year 2013, maintaining the increase in this rate which had already been increased to 20%, but only in a transitory basis, in order to finance the reconstruction due to the earthquake of February 2010.

Likewise, to favor the middle class, some 2nd category tax brackets and overall complements of the Income Tax Law are lowered, as from 2013. The law adopts rules on transactions between related companies following the OCDE criteria; establishing a credit for families for educational expenses, it also lowers the tax on loans and payments made abroad for the license to use standard computer programs are declared exemp.

It must be kept in mind that these changes do not affect the income tax for foreign companies which, for their investments, have executed a contract with the State of Chile, on fixed tax according to the DL. 600 according to the Foreign Investment Statute.

If you need additional information on this interesting news, please feel free to contact our associates Blas Bellolio R. at: b.bellolio@villaseca.cl.