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Treasury proposes Law on tax credits, development rate and exemptions 

March 4, 2024

Last week the Ministry of Finance presented to the political parties, prior to its parliamentary discussion, the proposal on the Law on tax credits, development rates and exemptions. Its main components are: 

1) Tax credits for investment and sustainable development: 

A system for assigning credits (reductions) against the First Category Tax (“IDPC”, for its initials in Spanish) is proposed for investment projects with an impact on the economy. 

These credits would be assigned through a competitive, open mechanism based on objective criteria, until the total amount of credits defined for each year has been awarded. Taxpayers who are awarded the requested credit amount may allocate it to the payment of taxes for an unlimited number of years, until the total credit is allocated. 

As a limit, no investment project may be awarded more than 20% of the total amount of the credit assigned to a given year, nor will any taxpayer or its related parties be able to access more than 20% of the credits assigned for a given year. 

Two different routes will be established to apply; one regarding consolidated sectors, and another relating to emerging sectors. The beneficiaries of this Law must report annually on compliance with the conditions committed in the investment projects. 

• The benefit will be managed by an independent Committee of Experts, composed of members designated by the Ministry of Finance, one directly and another at the proposal of the National Evaluation and Productivity Commission, the Ministry of Economy at the proposal of Corfo, the Council of Rectors of the Chilean Universities (Cruch) and the Consortium of Universities of the State of Chile (Cuech). 

2. Development Rate: 

Associated with a reduction in the IDPC rate, from 27 to 25%, a new tax is created, called the “Development Rate” of 1% of Taxable Net Income (RLI, for its initials in Spanish). This rate may be fully deducted if expenses that benefit the productivity and competitiveness of companies and the economy are accredited. 

Among the disbursements creditable against the Development Rate are: 

• Investment in private R&D, for the part that is not a credit against IDPC via the Private R&D Incentives Law. 

• Preparation, presentation and defense of industrial patents. 

• Acquisition of goods or services developed by companies with support from Corfo. 

• ISO certifications. 

• Variant of the Romer Tax, in line with the agreements acquired at the Tax Pact table. 

3. Reduction of exemptions: 

Seeking greater revenue, the following modifications are proposed: 

i. Raise the single tax on listed capital gains (article 107 of the LIR), from the current 10%, to the rate to which all capital income is subject. The exemption regarding institutional investors would be maintained. 

ii. Tax with IDPC the profits generated by Private Investment Funds, with the exception of those that prove that their investment policy is in risk capital. 

iii. Eliminate the permanent deferral of the IDPC on dividends from Public Investment Funds to legal entities. Likewise, eliminate the single 10% tax on distributions to foreign institutional investors, becoming taxed according to the general rules. 

iv. Reduce the presumed income ceilings in all sectors to 2,400 UF of sales. 

v. Limit the benefit to the deduction of interest for mortgage loans to a single loan. 

vi. Focus the income exemption for rental of DFL2 homes on the middle sectors, excluding people with higher incomes. 

vii. Eliminate the exemption of 10 UTA on income in the disposal of certain assets. 

Matías Alonso