The Circular 12 regarding amendments to the thin capitalization rules introduced by Law 20,780 of the tax administration has released in the Official Gazette of 5th February 2015. From 1st January 2015, thin capitalization rules are directed by article 41F of the Income Tax Law and in accordance with paragraph 4 of article 59(4) of the LIR is repealed. This circular states that article 41F of the LIR gives the important characteristics of the previous provision and adds some new criteria. Thin capitalization rules offer 35% outbound interest rate paid for extra debt whereas normal outbound interest rate is 4% and tax payer is responsible for this tax.
A debt is considered to be excessive regarding this part that exceeds a debt/equity ratio of 3:1. Here, outbound interest includes interest, commissions, service fees and any other contractual charges and surcharges that come from loans, debt instruments and other contracts or transactions and affect the resident tax base, or the permanent establishment in Chile of a non-resident. It also contains the repayment of expenses acquired by the creditor or a related person that directly or indirectly benefits other foreign-related persons. For this reason, related persons contain beneficiaries established or resident in territories or jurisdictions listed as tax havens or regarded as having a preferential tax regime.
