Chilean tax reforms have brought changes to the top marginal income tax rate of the Second Category Tax and the top marginal income tax rate of the Complementary Global Tax. In addition, a new tax has been created for individual taxpayers who own real estate property located in Chile, and the definition of tax residence has been modified. The tax reform has already entered into force for certain matters starting January 1, 2020.
Chilean tax reforms have brought changes to the top marginal income tax rate of the Second Category Tax and the top marginal income tax rate of the Complementary Global Tax. In addition, a new tax has been created for individual taxpayers who own real estate property located in Chile, and the definition of tax residence has been modified.
Following the Chilean legislature’s ratification of the tax reform project (Law 21,210),1 it was published in the Chilean Official Gazette on February 24, 2020.
Below we summarize the main changes applicable to the taxation of individual taxpayers in Chile that may have an impact on Chilean and foreign employees.
The new marginal tax rates may increase the tax burden on assignees who are subject to Chilean tax law and augment employers’ tax-related costs for assignments to/from Chile. However, the impact of these changes on taxpayers should be determined considering their particular facts and circumstances.
International assignment cost projections and budgeting for assignees being sent to Chile and for assignees outside Chile but still subject to Chilean taxation should take into account the changes described in this newsletter. Moreover, employers should take note of the changes and address their payroll requirements and update, where appropriate, hypothetical tax calculations for tax-equalized assignees.
As follows, we highlight the modifications introduced in Law 21,210 relating to individual income tax:
This tax will be added to the ordinary real estate tax that is payable on a quarterly basis and applies from January 1, 2020 on.
As this change may affect some of our taxpayers, the KPMG International member firm in Chile is in the process of obtaining further information from the Chilean IRS regarding this revision.
Finally, we want to emphasize that this tax reform has already entered into force for certain matters starting January 1, 2020; therefore, in the case of the new top marginal income tax rate of the Second Category Tax this change is retroactive to January 2020. Furthermore, it is understood that any short-fall in tax due as a result of the application of the new top marginal income tax rate will be paid through the 2020 Chilean Annual Income Tax Return which will be filed in April 2021.
1 Ley Núm. 21.210 (Ley de Modernización Tributaria) published in the Diario Oficial Núm. 42.587 (24 de Febrero de 2020).
CLP 1 = USD 0.0012
CLP 1 = EUR 0.00108
CLP 1 = GBP 0.00096
CLP 1 = ARS 0.0753
The information contained in this newsletter was submitted by the KPMG International member firm in Chile.
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