On 10 April 2024, Chile’s Chamber of Deputies passed the Tax Compliance Bill, which includes numerous tax measures aimed at improving tax compliance in Chile. The newly approved Bill also changes the Chilean tax code. The Senate must approve the bill before implementation.

The main tax measures include:

1. Changes to the General Anti-Avoidance Rule (GAAR), which includes:

    • Updating the definition of “abuse” to clarify that ‘abuse’ refers to obtaining tax benefits through ‘improper’ means;
    • the abolition of the existing judicial process to facilitate the implementation of the GAAR via full administrative procedure. This can be facilitated through the establishment of the Anti-Avoidance Committee and the GAAR Advisory Panel.

2. Amending the “normal market value” definition to denote the value that third parties would agree upon in comparable transactions and circumstances considering relevant characteristics of the various industries, sectors, assets, risks, and more.

3. Introducing new regulations specifying the valuation methods taxpayers must use to ensure that a transaction is at a normal market value when subject to scrutiny. This includes:

  • The multiples method;
  • The discounted cash flow method;
  • The adjusted book value method.

4. Changing the tax-neutral business reorganization regime with separate regulations for domestic and international reorganizations:

  • In the case of a domestic reorganization (including divisions, mergers, and contributions of assets within Chile), the process will be tax-neutral provided it has justifiable business reasons.
  • In case of an international reorganization, it will be classified as tax-neutral in Chile if it involves assets, shares, or quota rights within the country. It should also meet the following conditions such as:
    • It has a justifiable business reason;
    • It occurs within the same business group;
    • In asset contributions, the contributing entity must not receive cash;
    • The tax basis of the assigned, transferred, or contributed assets is transferred to the acquiring entity;
    • The transaction fulfills all the legal requirements of other jurisdictions;
    • It does not impact Chile’s taxing rights.
  1. The introduction of two tax amnesty programs:
  • a scheme for disclosing unreported foreign income and assets, subject to a 12% substitute tax on the assets and income’s value;
  • a scheme enabling taxpayers to choose an early termination of ongoing tax disputes with reduced accrued interest and fines, excluding cases related to tax crimes.