Chile Considers Flat Tax Incentive On Repatriated Funds

by Mike Godfrey, Tax-News.com, Washington

23 July 2010

Support is growing for a bill to encourage repatriation of untaxed funds held by Chileans abroad. If passed the bill would allow funds to be regularized through a payment of a flat tax.

Estimates of the amount of funds held abroad by Chileans range up to USD35bn, and, although a rate has not yet been set, advocates for the bill have suggested that it would need to be set at around 5-6% in order to attract a response. Given a good response, such a rate could generate tax revenues of hundreds of millions of dollars in addition to boosting investment in Chile to help with reconstruction after the earthquake, say commentators.

When interviewed by La Tercera, the Chilean finance minister, Felipe Larraín, confirmed that the proposal was under consideration, but some of the detail needed to be worked out, including safeguards against money-laundering, and the effects on exchange rates. Larrain also confirmed that, with growing international co-operation on exchange of tax information in which Chile was an active participant, it was a good time for Chileans to repatriate funds.

Members of Congress’ Finance Committee were also reported to be in support of the idea , but with reservations, and there is talk of early legislation.

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