Attributed Tax Regime
In this system, the company will pay Corporate Income Tax (“CIT”) at a 25% rate. For their part, the partners are subject to a Surtax or Withholding Tax (“WHT”) on the profits that correspond to them in the company. In this sense, the utility is “attributed” to the partner without considering whether the profits are withdrawn or remain in the company. Likewise, the law grants the partner a credit for the total of the FCIT paid by the company. In this scheme, the tax payable by the partner will reach a maximum rate of 35%.
Only limited liability partnerships, companies by shares, individual limited liability companies, communities and individual entrepreneurs that are formed exclusively by natural persons or residents not domiciled in Chile may be eligible for this scheme.
It should be noted that individual entrepreneurs, individual limited liability companies, communities and partnerships described above will be covered by default under the income tax regime unless the partners agree to another tax regime.
Partially Integrated Regime
Under this scheme, the company will pay CIT at a 27% rate (25.5% for the 2017 trading year) and its partners or shareholders will only pay taxes for the amounts that the company distributes to them. The tax paid at the company level can only be used 65% against the Surtax or WHT to be paid by the partner.
This is the default scheme for all companies that do not meet the requirements to choose to tax under the previous regime.
In the case of public limited companies, these shall be subject to the partially integrated system.
The manner in which to exercise the option
The choice of one system or another must be made during 2016 and has important consequences for the taxes that the companies and their partners will pay as of the 2017 financial year.
For these purposes, the TR establishes the procedure that should be followed by companies that choose to opt for either system. The companies that currently operate and those that start operations have until December 31, 2016 to select the regime to which they will be subject.
To exercise this option companies must meet the following requirements:
i) Individual companies and agencies of foreign companies must submit a statement to the SII, which can be done through the SII’s website.
ii) Companies and public companies (not corporations) must submit a statement to the SII signed by the company’s representative. Additionally, they must have as support a public deed where the partners unanimously agree to the exercise of the option. This statement can also be exercised over the internet. In that case, the companies must have the referred deed for when the SII requests it from them.
Changes from one system to another can only be made after 5 consecutive years in a system.
It is therefore important that companies and their partners inform themselves about how to exercise the option and can choose the system that best suits their operations.