Corporate - Taxes on corporate income

Last reviewed - 08 February 2024

First Category Tax (FCT)

The basic tax on income of a legal entity domiciled or resident in Chile and engaged in commerce, mining, fishing, or industrial activities is the FCT, which is assessed at a 25% rate for SMEs and 27% rate for entities subject to the partially integrated system (PIS) on the entity's worldwide income.

Final taxation (i.e. at the Chilean final owner's level or at the foreign owner's level) is triggered on a cash basis.

FCT is totally creditable against final tax in the SME regime but only partially in the PIS (only 65% is creditable). However, foreign owners of a PIS entity that are resident in a DTT jurisdiction are entitled to full credit as well.

FCT reduction for SMEs

Due to the global pandemic, the Chilean government developed an Emergency Plan for Economic and Employment Reactivation.

One of the most relevant measures adopted was to establish a temporary reduction of the FCT for SMEs.

In this way, those taxpayers who are covered by the SME regime established in Article 14 Letter D of the Income Tax Law (micro, small, and medium-sized companies) will pay a reduced FCT for the 2020, 2021, and 2022 business years.

Thus, the government, through a new law, established a temporarily reduction of the rate of this tax from 25% to 10% during three business years, subject to measures to focus the incentive and prevent misuse.

Likewise, the taxpayers who benefit from this reduction will have their monthly provisional payment (PPM) rate that corresponds to them paid in fiscal years 2020, 2021, and 2022 halved. This reduction in PPMs will apply with respect to the filing and payment that must be made in the following month from the publication of the law in the Official Gazette.

Income taxation systems in force

The attribution regime of taxation is repealed as of 2020.

A full integration regime is introduced for SMEs (i.e. with sales not exceeding approximately USD 2.8 million annually) so that the corporate level tax should be fully creditable against final taxes.

For large enterprises, the current PIS regime of taxation is applicable (i.e. 27% CIT rate and shareholder’s taxation on a cash basis with full or partial CIT credit depending on whether the non-resident shareholder is resident or not in countries with which Chile has a DTT in force).

Accordingly, in a PIS non-tax treaty scenario, the overall taxation in Chile should be 44.45% (27% + (35% - (65% x 27%))). See the Withholding taxes section for more information.

For non-resident shareholders who are resident in a tax treaty jurisdiction and beneficiaries of dividend income under the respective tax treaty, the overall taxation under the PIS regime should be capped to 35% (27% + (35% - (100% x 27%))). See the Withholding taxes section for more information.

Please note that non-resident shareholders in jurisdictions that have signed a DTT with Chile prior to 1 January 2020 that are not yet in force (currently the United States and the United Arab Emirates) are entitled to full tax credit for FCT paid until 31 December 2026.

Taxpayers will need to keep a registry regarding the 'accumulated tax credit balance' in order to control the available FCT credit.

Local income taxes

Chilean legislation does not establish any provincial or local income taxes.