• Service: Tax, Global Indirect Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 4/4/2014

Chile - Legislative proposals included CFC rule, thin capitalization changes 

April 4:  A tax bill (submitted to the Chilean Congress on 1 April 2014) proposes to overhaul the Chilean tax system, with provisions to broaden the tax base and to increase tax revenue collection.

If enacted, the proposals generally would be effective in tax year 2018 (with certain transition rules available).

Among the proposals are provisions that could affect foreign investors with operations or a presence in Chile. Read a separate report of those proposals in this edition of TaxNewsFlash-Americas.

Changes to the income tax system

Several changes being considered would aim to broaden the tax base and increase tax collection. Among these changes are proposals to:

  • Introduce CFC rules for passive income earned through controlled foreign corporations
  • Introduce stricter thin capitalization rules
  • Limit and / or disallow certain deductions, including limits on the use of tax losses, and with respect to interest on debt used to fund business acquisitions and on payments made to non-resident related parties
  • Repeal and / or limit the preferential capital gains tax regime for shares and corporate interest (as well as for real estate involving individual resident taxpayers)
  • Increase to 40%, the tax penalty applicable for certain non-deductible expenses, transfer pricing adjustments, and other tax adjustments
  • Make changes to employee stock option taxation

Introduction of general anti-avoidance rules

The proposal contains what is viewed as a very broad general anti-avoidance rule. The tax administration would be given the authority to recharacterize any transaction that is deemed to be abusive, artificial or inconsistent with its substance.

Attorneys, accountants, and other tax advisors would be subject to penalties for participating in elusive tax planning. The penalty could may as high as 100% of the amount of the taxes avoided.

Stamp tax rate increase

The maximum stamp tax rate would be increased from 0.4% to 0.8% beginning in 2016. The stamp tax applies on the principal amount of debt instruments or documents containing a credit operation.

Other tax measures

The individual income tax rate for resident individuals would be reduced from 40% to 35%.

The individual income tax rate reduction would be paid for with several changes aimed at expanding the tax basis—such as a limitation on the tax exemption available for real estate dispositions, repeal of the reduced tax rate for capital gains, and limit or repeal of presumptive income tax systems.

Other changes proposed provide:

  • “Decree 600 treatment” would be repealed for new investment projects after 1 January 2016
  • The rules governing mutual funds and investment funds would be modified to limit the preferential capital gains treatment and tax-free investment regimes currently available for collective investment vehicles.
  • A value added tax (VAT) system would be introduced for for real estate sales made by traders and there would be a limit on the special VAT credit for construction companies.
  • Carbon taxes would be introduced to target fixed sources of polluting emissions.

Read an April 2014 report (Spanish) [PDF 134 KB] prepared by the KPMG member firm in Chile.

For more information, contact a tax professional with KPMG in Chile:

Rodrigo Stein

+56 227 981 341

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now