In the context of the Valparaíso fires that occurred in February 2024, on July 1st, 2024, Law No. 21,681 was published in the Official Gazette, which creates the Temporary Emergency Fund for fires. It includes a new substitute tax for the final “ISIF” taxes in articles 10, 11 and the first transitional tax.
As a general concept, this substitute and optional tax allows, through the payment of a single tax, to comply with the tax obligation of the profits accumulated in companies and, therefore, when these are withdrawn, remitted or distributed, they will not be affected with final taxes (complementary global tax or additional tax).
On July 30th, 2024, the Chilean Internal Revenue Service (“SII” for its initials in Spanish) issued circular No. 34 and Resolution No. 76. The first gives instructions on the aforementioned ISIF, optionally applicable by first category tax taxpayers “IDPC”, who declare their taxes based on effective income determined according to complete accounting, that is, taxpayers covered by the regime of article 14 letter A) and 14 D) No. 3 of the Law on income tax “LIR”. The circular also includes practical cases with examples.
For its part, Resolution No. 76 establishes a form to declare and pay the ISIF, indicating that, by complying with the indicated requirements, the option can be exercised and paid through Form 50, on the SII website.
The rules apply from July 1st, 2024, and the option can be exercised until January 31st, 2025.
This tax applies to a part or the total of the balance of Income subject to “RAI” taxes determined as of December 31st, 2023, pending withdrawal, remittance or distribution on the date the option becomes effective. The above, for accumulated profits as of January 1st, 2017, which may include accumulated taxable profits as of December 31st, 2016 from the “FUT” taxable profits fund.
For taxpayers under the regime of article 14 letter A), this tax will apply at a rate of 12%, on the total or a part of the RAI accumulated as of 12/31/2023. It should be taken into account that in this case, the first category tax credit accumulated in the company cannot be used against this tax. Furthermore, the credit mentioned and associated with the profits that qualify for the substitute tax is lost and cannot be used in the future.
On the other hand, for taxpayers under the general SME regime 14 D) N°3, the tax will be at a rate of 30% and may be applied to the total or a part of the RAI accumulated as of 12/31/2023. In this case, the credit for first category tax accumulated in the company or society may be used against this tax, with the rate in force in the application period.
Finally, this substitute tax will not benefit everyone equally and may not even be convenient for some. It would be advisable to carry out an analysis that will have very different variables between one company and another.
It will be necessary to verify factors such as: amount of credits that you maintain in your business income tax record “RTRE”; comparison of the historical effective rate of the partners, associated with the habitual withdrawals of each of them, when for example they do not fall into the highest progressive rates of the IGC or perhaps a special project, among other variables.
