Chilean IRS regulates the new treatment of stock options after the latest reform

Law 21,210, which modernizes tax legislation, modified the taxation of workers with respect to options on stocks, bonds or other securities –stock options– that employers can grant as labor compensation. Circular 43 of the Chilean IRS, of July 5th 2021, clarifies said taxation.

Essentially, the new taxation applicable to stock options is different in the event that said benefit has or has not been previously agreed in individual or collective employment contracts, establishing a more beneficial taxation in the first case.

Thus, for the case in which it has been previously agreed, the acquisition or the exercise of the options will not constitute taxable income, but the worker must pay taxes on the income obtained in a possible assignment of the options or in the sale of the shares, bonds or securities acquired with them. On the other hand, if the granting of options does not obey a contractual obligation previously agreed between the worker and the employer, only the granting of the options will be free of taxation, and the worker must pay taxes on the income generated, both in the exercise or assignment of the option itself, as in the sale of shares, bonds or securities acquired with it.

In this sense, there are clear incentives to formalize workers compensation plans that operate through the granting of stock options.

To read Circular 43 here


Antonia Menchaca, Associate.

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