Chile: Tax implications of asset transfers in corporate dissolutions

Chile: Tax implications of asset transfers

There are tax implications concerning the dissolution of a company reflected in two recent cases.

  • The first case involved a company that owned 100% of the shares of a stock company (acquired from the purchase from a third party). The company agreed to dissolve the stock company, receiving all of its assets and liabilities. The company that was dissolved did not register non-taxable income, but did register tax credits. The transfer of assets to the owners on the occasion of the liquidation or dissolution of a company typically corresponds to a non-income income, to the extent that the sum of the tax values of the total of the assets does not exceed the equity contributed, plus the income or amounts considered at the end of the business. The tax authority (Servicio de Impuestos Internos—SII) found that the acquisition value of the transferred assets, for tax purposes, corresponded to the value the company recorded in its balance sheet on the date when the businesses ended, regardless of the value that the owners had assigned to the assets at the time of transfer.
  • In a second matter, the taxpayer requested a ruling regarding some tax aspects related to the transfer of assets from a foreign company—which was subject to dissolution and liquidation—to a Chilean company (sole shareholder). In determining and treating the greater or lesser value with the dissolution and liquidation of the foreign company, the following items were considered:
    • The tax value of the investment in the dissolved company was to be compared to the tax value of the investments of the dissolved company.
    • Given that the surviving entity was authorized to maintain accounting records in U.S. dollar, it was not appropriate to adjust for inflation. However, the tax value of the investments that the dissolving company had on the date of transfer had to be converted to the U.S. dollar.

Read an April 2021 report (Spanish and English) [PDF 873 KB] prepared by the KPMG member firm in Chile

This report also includes indirect tax developments:

  • Value added tax (VAT) on comprehensive training services for pilots and facility lease
  • A consultation on the treatment of VAT regarding software purchases from abroad
  • VAT on leasing of equipment to be used abroad
  • Exemption of VAT for exports
  • VAT and withholding tax on IP telephone services provided by a company located abroad
  • Reporting taxpayers without domicile or residence in Chile and that breached the VAT declaration and payment obligations regarding digital services

Other topics addressed in this report concern:

  • Current regulations to make the annual income tax declaration corresponding to tax year 2021
  • Procedures for obtaining online password and electronic representatives
  • Valuation of assets and liabilities of a private investment fund that is considered to be a corporation
  • Work-accident insurance in the determination of the amount of business salary
  • Tax treatment of activities conducted by “influencers”
  • Accreditation of tax loss
  • Surplus situation pending imputation on which voluntary IDPC (Impuesto de Primera Categoría) was applied
  • Depreciation of assets that are constructed on the land of another
  • Tax treatment applicable to the loss generated by the extinction of shares
  • Effects of a merger of a foreign company into a Chilean one, when the former maintained accumulated profits
  • Income obtained by person domiciled in Chile while outside the country

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