Chile

Reporting on investments in Chile and abroad

Chilean foreign investment

Taxpayers must file an annual affidavit informing all the investments performed during the previous year, pointing out the amount, kind of investment, country, purpose, and any other additional information the SII may require.

Low-tax jurisdictions

Law No. 21,713 modified the requirements to qualify as a low-tax jurisdiction or preferential tax regime. In this sense, a jurisdiction will be deemed to have a preferential tax regime if it meets the following cumulative requirements:

• It has not entered into an agreement with Chile allowing for the exchange of information, or if such an agreement has not entered into force, or, if in force, contains limitations that prevent effective exchange of information.
• It does not meet the conditions to be considered compliant or substantially compliant in matters of transparency or exchange of information for tax purposes.

Finally, the reference to the non-application of this article to OECD member countries is removed.

Foreign Account Tax Compliance Act (FATCA) agreement

On 5 March 2014, Chile entered into a bilateral intergovernmental agreement (IGA) with the United States (US) in order to comply with FATCA.

Chile signed a Model 2 IGA, which is a non-reciprocal exchange of information agreement. The execution of this agreement will imply that Chilean financial institutions with US account holders, in order to avoid paying the 30% rate WHT that FATCA establishes, will have to register with the US Treasury and US IRS and sign a Foreign Financial Institutions Agreement with them in order to be FATCA compliant.

In this context, each Chilean financial institution that enters into these agreements with the US tax authorities will be required to report to the US IRS directly the individual US account holder’s information.

In accordance with the Chilean Bank Secrecy Law, Chilean financial institutions, in respect to those account holders that do not authorise them to disclose their account information to the US IRS, will only be able to disclose their information in aggregate. This will mean that the US IRS, in order to obtain the specific information of those US account holders, will need to request it directly from the SII, under the terms of the treaty between both countries.

Bank secrecy

Law No. 21,713 of 2024 modified the provisions regarding bank secrecy. Now there are two different procedures for lifting the banking secrecy: (i) a general procedure, subject to judicial oversight, similar to the one currently in place but with shorter timeframes and greater protections for the taxpayer; and (ii) an exceptional procedure for qualified cases that would be more aligned with the lifting of banking secrecy as outlined in the Economic Intelligence Bill.

Each procedure has specific cases where it can apply and different requirements and deadlines.

Taxation applicable to funds

Public investment funds, private investment funds, and mutual funds are not considered as FCT payers, but their managing entities need to keep a number of registries in order to determine the taxation applicable to their quota holders regarding the amounts distributed by the fund.

Taxation of funds is similar to taxation of shares of a stock corporation. In this sense, dividends distribution would be treated as a distribution from a stock corporation subject to PIS. In case of capital gains, it would be considered as an alienation of shares of a stock corporation, in this sense, alienation could be tax exempted if funds are regularly traded or 90% or more of their portfolio is invested in regularly traded securities.

Please bear in mind that quota holders that are not domiciled or resident in Chile are just subject to a sole tax rated 10% or tax exempted in case they invest in public investments funds that have 80% of their assets located abroad.

Duty of information and start-up activities

Law No. 21,713 of 2024, as part of measures against tax evasion, includes modifications to the duties of information disclosure and adds the obligation for various public and private entities to require a declaration of start-up of activities from their users.

The statute of limitations is extended by 12 months if the omission of the reporting duties regulated by Article 68 is detected in cases where the non-compliance is intended to avoid tax payment, conceal the taxpayer, or avoid the application of a special or general anti-avoidance rule

The obligation is introduced for banking and financial entities to provide information to the SII when the account holder has verified that, within a single day, week, or month, more than 50 credits have been made from 50 or more different individuals or entities, or that, within a six-month period, at least 100 credits from 100 different individuals or entities have been made. All of the account holder's accounts must be considered for counting the credits, and this information may serve as the basis for an audit process.

Business reorganisations

Law No. 21,713 modified some rules regarding business reorganisations. The new article redefines the cases in which business reorganisations (national or international) will be considered tax-neutral (with the power to assess being inhibited).

The SII may assess an act, agreement, or operation that serves as the basis or is one of the elements to determine a tax when the price or value in these cases differs significantly from normal market values. The SII must issue a summons for the taxpayer to provide all evidence that can verify whether the act, agreement, or operation was carried out at normal market values.

It is established that the power to assess will not apply to any type of business reorganisation, such as the conversion of an individual business owner or the contribution of assets of any kind, carried out by natural or legal persons, assigned within the national territory, as long as these reorganisations are due to a legitimate business purpose.

It is important to highlight that the power to assess will also not apply to mergers and demergers, whether national or international, as long as the tax basis of the assets is maintained in the absorbing or newly created company from a merger, in the company or companies created as a result of a demerger, or in the one receiving the contribution of one or more assets, and no actual cash flows arise for the contributor. Therefore, the requirement for a legitimate business purpose in the case of mergers and demergers, as contemplated in the original bill, was eliminated.