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Chile To Reform Corporate Tax

by Mike Godfrey, Tax-News.com, Washington

20 March 2018


Chilean President Sebastian Pinera, who began his second stint as the country's leader on March 11, has indicated that the Government will reform corporate taxation.

It is expected that the changes will focus on the simplification of Chile's complex two-tier corporate tax system. Pinera has also pledged to reduce corporate tax, which was raised numerous times under his predecessor Michelle Bachelet.

Under reforms implemented during the Bachelet administration, companies in Chile can be taxed under two alternative corporate tax (First Category Tax) regimes: the standard attribution regime (AIS); and the partially integrated regime (PIS).

Under the AIS, company income is subject to FCT of 25 percent, with shareholders also subject to a withholding tax of 35 percent (regardless of whether or not income is distributed). However, shareholders can credit the full amount of FTC against the final withholding tax.

Under the PIS regime, a company is subject to FCT of 27 percent (2018 - 25.5 percent in 2017). However, the additional withholding tax does not apply until income is distributed to final shareholders. While FTC can also be credited against additional withholding tax under the PIiS regime, the credit is effectively restricted to 65 percent of FTC paid, as taxpayers subject to additional tax under this system must repay 35 percent of the FTC credit.

TAGS: tax | Chile | corporation tax | withholding tax | dividends | tax reform | Tax

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