Chile is embarking on a tax reform that will affect both direct and indirect taxes. A Bill is under discussion in the National Congress and this covers important changes to the existing tax laws. The Bill aims to raise the corporate tax rate from 20% to 25% gradually over a period of four years, reaching 25% in 2017. The penalty charged in respect of expenses ruled nondeductible and in respect of transfer pricing adjustments would increase to 40% from the current 35%. The top rate of individual income tax would decrease to 35%. The capital gains exemption currently applying to most transfers of real estate would be scrapped although it would remain applicable for sales of the primary residence of an individual subject to certain conditions.
The Bill also modifies the application of VAT to immovable property. The special tax credit available to construction firms in relation to houses whose price is 2,000 UF or below would be restricted. The top rate of stamp tax would increase to 0.8%, calculated as 0.66% for each month or part month.
