Chile: FUT substitute election payments due 30 April | KPMG | GLOBAL
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Chile: FUT substitute election payments due 30 April

Chile: FUT substitute election payments due 30 April

Taxpayers have until 30 April 2017 to elect and remit the substitute tax available under the “taxable earnings fund” (FUT) regime.


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Chile's tax system has included a “taxable profits fund” mechanism (Fondo de Utilidades Tributables or FUT). The FUT is a mechanism that is intended to encourage the reinvestment of profits in Chile, by deferring shareholder-level taxation (effectively 15% to 18%) when the profits are reinvested in Chile—rather than being distributed to shareholders. A company's taxable profits are subject to corporate income tax at 20% (17% for years prior to 2011). When profits are distributed, shareholders pay tax at 35% on the distribution, subject to a credit for underlying corporate taxes. Thus, shareholders generally have only been subject to tax at an effective rate of 15% or 18%, depending on whether the underlying profits were subject to tax at 20% or 17%. None of the income tax treaties in Chile’s treaty network allows a reduction of the shareholder-level tax. The FUT is a “special ledger” that tracks retained profits and the corresponding tax credit.

Legislation in 2016 broadened a substitute tax regime for the balance of the taxable earning ledger (“historic FUT”). Taxpayers could opt to pay a substitute tax of 32% on the total or a part of the “historic FUT,” subject to final taxes, provided that the taxpayers were subject to corporate tax on the bases of general balance and complete accounting. 

The time period in which the substitute tax could be declared and/or paid was extended from 2016 through April 2017 (before it could only be declared and/or paid during 2015). Thus, the deadline to declare and pay the substitute tax expires on 30 April 2017.


Read an April 2017 report (Spanish) prepared by the KPMG member firm in Chile 

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