Taxes

TAXES – Fiscal year The fiscal year on which tax returns are based is the calendar year, ending December 31, valid for both fiscal and financial purposes. Income taxes are paid annually at the time of filing. In some cases, estimated partial payments must be paid monthly. Overpayments, if any, on the final tax debt are normally repaid within one month of filing the tax return. General structure Persons resident or domiciled in Chile are subject to tax on their income worldwide. However, an individual who takes up residence or domicile in Chile is taxed only on income earned in Chile during the first 3 years, the application can be extended. Individuals without domicile or residence in Chile are taxed on their Chilean source income. A person is considered domiciled or resident in Chile if It can be assumed from the activities that he/she wishes to remain in the country permanently (domicile). If he/she spends more than six months in the country in a given calendar year or during a period of two years (residents). Chilean source income is defined as a result arising from: – Goods or assets located in Chilean territory – Activities carried out in Chilean territory Persons resident or domiciled in Chile are subject to tax on their income worldwide. However, an individual who takes up residence or domicile in Chile is only taxed on income earned in Chile during the first 3 years, the application can be extended. Individuals without domicile or residence in Chile are taxed on their Chilean source income. A person is considered domiciled or resident in Chile if It can be assumed from the activities that he/she wishes to remain in the country permanently (domicile). If he/she spends more than six months in the country in a given calendar year or during a period of two years (residents). Chilean source income is defined as a result arising from: – Goods or assets located in Chilean territory – Activities carried out in Chilean territory All companies in Chile must determine the tax result as of December 31 of each year, based on the tax regime applicable to them, in accordance with the Tax Law as last amended, starting in 2017. The Chilean Tax Law in force establishes the following tax regimes according to the recent 2010 Tax Reform, in the Income Tax Law in force since April 2020 1. Corporate Tax System – Companies with revenues of more than 75,000 UF per year maintain the semi integrated regime (first category 27% rate and limit of 65% of the credit for said tax against the Global Complementary or Additional Tax). The 27% tax then behaves as a credit to the Global Complementary Tax of the natural person who owns such income, with the limit indicated above. – A new “Prome” system is created (Art. 14 D) for companies with sales of less than 75,000 UF per year (25% and 100% use of the credit against the Global Complementary or Additional Tax). – An option is created for Promeme companies to pay directly the Global Complementary Tax to the owners (without paying corporate tax). – Prome companies, in certain cases, are exempted from the surcharge for contributions. 2. Tax system for individuals. – A new section of the Global Complementary Tax (40%) is created. – A power is created for the SII to review “disproportionate withdrawals”. If it is determined that there was a disproportionate withdrawal of capital, a 40% penalty is applied to the “excess”. 3. Law on Value Added Tax (VAT) – There will be no customary sale of real estate before the first year after the acquisition of the property. – Time limits (to 2 months) for returns are shortened by Article 27a. – Application of VAT to digital services (“Netflix/Spotify Tax”). Includes intermediation of services, entertainment content, use of software, storage and platforms. Also applies to advertising. 4. Tax Code – A definition of “Business Group” and “Relationship” (in line with the provisions of the Securities Market Law) is incorporated. 5. Others – New Substitute Tax to the FUT. Similar to the benefit established in the 2014 Reform. Rate of 30 % is applied for the resolution of differences in own tax capital. – Mechanisms are established to resolve all differences (typically historical) in the determination of tax equity. – It is expressly established that investment companies pay Municipal Patent.

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