Until last September 1st, there was a tax exemption for income obtained from the sale of shares and quotas of mutual and investment funds with a stock market presence (article 107 of the LIR). This consisted of classifying them as non-income income, that is, they were not taxed with the first category, global complementary or additional taxes. Its objective was to encourage investment in this type of instrument and benefit the capital market.
However, the franchise was modified by Law 21,420, enacted on January 27th, 2022, which is also known as the Law that eliminates or reduces tax exemptions, to finance the Universal Guaranteed Pension. This change was relevant, given that it mainly consisted of substituting the taxation of the higher value generated in said operations, going from “income not income”, to indicating that “it will be affected by a tax with a rate of 10%, which will constitute tax”. Although the law was published on February 4th, 2022, the modification did not enter into force until September 2nd, 2022 (second transitory article).
It must be borne in mind that, although the income obtained from the sale of certain instruments with a stock market presence is levied with a single tax, not all sellers will be forced to pay this new tax, since it was established with a new number 9 of the article 107, which indicates that, if the higher value is obtained by institutional investors, Chilean or foreign, it will be considered income not rent.
What tax obligations arise?
The alienators who sell instruments included in article 107 must pay the single tax of 10% on the highest value obtained, being able to compensate for losses or lower values. The moment of declaration and payment of the tax is through the F22 in April of the year following the income obtained.
However, in the case of alienators not domiciled or resident in Chile, a withholding obligation is established by the purchaser or stockbroker or securities agent acting in Chile on behalf of the foreign alienator, which must be declared and paid in the F50 (until the 12th day of the following month in which the rent was paid, distributed, withdrawn, remitted, credited to the account or made available to the interested party). If, with the withholdings made, the alienator who is not domiciled or resident in Chile has fully paid the single tax, he is released from filing the F22 in April of the following year.
In the case of institutional investors, for the higher amounts they obtain to be considered non-constitutive of income, they must inform the Chilean IRS of their status as an institutional investor through their responsible agents for tax purposes.
Finally, if the person disposing is a first category taxpayer, he must make Monthly Provisional Payments (“PPM”) for the gross income of these operations, to the extent that he is subject to the PPM system, or he may choose to make Payments Voluntary Provisionals on account of the 10% single tax.
Regulations and instructions:
Ley 21.420 – Reduces or Eliminates Tax Exemptions
Circular 39 del 2022 – Gives instructions on modifications introduced by Law 21,420 to article 107 of the LIR.
Resolución 78 del 2022 – Incorporates to the F50 codes for declaration of withholding the single tax of article 107.
Resolución 79 del 2022 – Instructs the way to inform the IRS of the quality of Institutional Investor.