The concept of tax sustainability, introduced in the latest tax reform, refers to the set of measures implemented by a taxpayer with the aim of promoting mutual cooperation with the Chilean Tax Authority (SII, for its initials in Spanish) and transparency in complying with tax obligations. 

Recently, the SII has issued resolutions (70, 71, and 72) regarding the process for obtaining the annual tax sustainability certification, as well as the regulation of Independent Certifying Companies (“ECIs”, for its initials in Spanish) and their registration with the SII. 

Although the certification process can be lengthy and exhaustive -and does not prevent the taxpayer from being subject to random reviews during the certification period- it is beneficial for those seeking closer cooperation with the SII in their operations, as it facilitates tax compliance and potential reviews. 

Certification process 

The procedure to obtain the annual certification begins with a formal application, which may be submitted by an individual taxpayer or by a group of taxpayers belonging to the same business group (“GE”), acting in a coordinated and centralized manner. 

The requirements include: 

(a) Implementation of international standards of transparency or disclosure of their tax policies or strategies for compliance purposes; 

(b) Demonstrating a good tax compliance record; 

(c) Maintaining a level of tax contribution that can be objectively explained; 

(d) Implementation of tax governance, a tax control framework, and a risk matrix identifying tax policies approved by the board of directors or equivalent governing body; 

(e) Maintaining a reputation aligned with the institutional interests of the SII; and 

(f) Having a duly registered representative before the SII to ensure communication and coordination for collaborative measures. 

The regulation also establishes criteria that prevent certification. Among others, taxpayers involved in criminal proceedings or convicted of tax offenses, those under audit due to the General Anti-Avoidance Rule, or who have received monetary sanctions by the Director or have pending tax documentation or background to justify, are excluded. 

As part of the process, various documents must be submitted, and on-site visits are required by the ECI. The ECI must then prepare a report with the results of its analysis of the company’s tax policies and supporting documentation, in order to issue the tax sustainability certificate. After the certificate is issued, the ECI must submit various documents to the SII, including the report, the certificate, and a copy of the documents containing the company’s (or group’s) Tax Governance and Tax Control Framework. These documents will be reviewed by the SII, which will issue a resolution either approving or rejecting the taxpayer or group’s inclusion in the Tax Transparency Registry. 

The certification is valid for one year and can be extended for up to two additional tax periods. After the maximum three-year term, the taxpayer or business group must undergo a new comprehensive review to renew the certification. However, during the certification period, the SII may carry out ongoing reviews to ensure continued compliance with the required standards and may exclude a taxpayer from the Registry if non-compliance is detected. 

Procedure for entering into and executing Cooperation Agreements with Business Groups
 
Alternatively, taxpayers may enter into Cooperation Agreements with the SII aimed at promoting tax sustainability. These agreements produce the same effects as the annual certification issued by an ECI and are subject to the same requirements and exclusions. 

To sign a Cooperation Agreement, business groups may submit a request through their representative. The SII also has the authority to invite a taxpayer to enter into such an agreement. 

The process begins with an assessment of whether the taxpayer meets the established requirements and conditions. If the evaluation is favorable, the SII’s Audit Subdirectorate will send an invitation to sign the Agreement, which is formalized through an executive meeting with the group’s representative and the subsequent signing of the Agreement. 

Once the Cooperation Agreement is signed, the taxpayer must fulfill the agreed commitments through the definition, implementation, and assessment of a Tax Compliance Plan. The taxpayer is then granted the Tax Sustainability Certification, which is valid for one year and may be extended for up to two additional tax periods. Upon expiration of this period, the agreement must be renewed, and a new Tax Compliance Plan must be defined and implemented for the next term. 

Minimum content for implementing Tax Governance and a Tax Control Framework 

According to the issued guidelines, to achieve tax sustainability a business group must demonstrate: 

(a) An appropriate Tax Governance Policy: This means that the policy, strategy, and procedures related to relevant tax matters must be defined, approved, and supported by the board of directors or its equivalent. 

(b) The existence of a Tax Control Framework: That is, the internal control and tax risk management system of a business group, which must be consistent with the tax governance policy and strategy, and integrated into the company’s strategic planning and decision-making processes. 

The resolutions issued outline the minimum content that both documents must include in order to meet the expected standards.