On June 30th, 2022, Law No. 21,453 (hereinafter the “Law”) was published in the Official Gazette, amending the Chilean Tax Code, obliging banks and other financial institutions to submit information to our local Tax Administration, concerning transactions that exceed certain amounts.

After its publication and now being enforceable, our Tax Code establishes a number of information duties, among which we highlight the following:

I. Taxpayers:

(1) Outbound Investments

According to the Law and its amendments, taxpayers subject to Article 14 of our Income Tax Law (General Regime and SMEs) must report until June 30th each year their investments abroad, indicating amount, type of investment and jurisdiction.

In turn, incomplete or false information will be sanctioned with a fine of fifty percent to three hundred percent of the value of the evaded tax, which may also include minor imprisonment in its medium to maximum degrees, pursuant Article 97 N°4 of the Tax Code.

Additionally, the delay and/or omission of the filing is punished with a fine of 10 UTA*, increased by an additional UTA for each month of delay, with a maximum of 100 UTA.

(2) Passive Income

Further, companies which are domiciled, resident, established and/or incorporated in Chile that obtain passive income (i.e dividends, interest, real estate income, among others), may not be used in an abusive manner, to defer or reduce Final Taxes (Global Complementary Tax and Withholding Tax) of their owners, partners or shareholders.

In such manner, provided abuse and/or simulation of legal acts is determined to exist pursuant local General Anti Avoidance Rules (‘GAAR’), applicable taxes and their respective penalties will be applied to such investments. Additionally, if it is determined that the respective acts, contracts and operations have been carried out intentionally with the purpose of avoiding, reducing or postponing the application of the final taxes, fines of fifty percent to three hundred percent of the value of evaded taxes may be applied, risking minor imprisonment in its medium to maximum degrees, according to Article 97 N°4 of our Tax Code.  

Further, the delay and/or omission of the filing is punished with a fine of 10 UTA, increased by an additional UTA for each month of delay, with a maximum of 100 UTA.

(3) Trusts

Taxpayers or entities domiciled, resident, established or incorporated in Chile, who become settlors, beneficiaries, trustees or administrator of a Trust created in accordance with foreign provisions, must report such information annually to our local Tax Administration.

In case of not submitting such declaration and unless presumed otherwise, our legislation will consider the constitution of a Trust as an act of abuse and/or simulation according to domestic GAAR provisions, therefore applying all taxes accordingly. As before, incomplete or false information will be sanctioned with a fine of fifty percent to three hundred percent of evaded taxes, risking minor imprisonment in its medium to maximum degrees, according to Article 97 N°4 of our Tax Code. Delay or omission in filing the corresponding form is punished with a fine of 10 UTA, increased by an additional UTA for each month of delay, with a maximum of 100 UTA.

II. Financial Institutions

Banks and other financial institutions supervised by the Financial Market Commission and Ministry of Economy must provide our Tax Administration annual reports containing a balance of all financial and custody instruments subscribed either by individuals or companies who are residents and/or domiciled in Chile. This information includes checking accounts, savings accounts, insurance contracts, amongst others, private annuity contracts, among others.  

However, it should be noted that banks and other financial institutions must comply with reporting information only when the balance of instruments or the sum of payments made, either considered individually or as whole, are equal to or greater than 1.500 Unidades de Fomento.**

Failure to provide timely and complete information is be sanctioned with a fine of one UTA for each product or instrument to be reported, with a CAP of 500 UTA.

* Unidad Tributaria Anual (UTA) is a unit of account used in Chile. Currently, 1 UTA is app. CLP 700.000, equivalent to app. USD 753.

** Unidad de Fomento(UF) is a unit of account used in Chile. Currently, 1 UF is app. CLP 33,300, equivalent to app. USD 35.5.

This article is written by David Ancelovici, Tax Director of Albagli Zaliasnik.  For more information please visit www.az.cl.