INCOME TAXES ON CORPORATIONS
1. Rates
The income of corporations, limited partnerships, and branches of foreign corporations is taxed in two stages: first, when income is accrued by the company; second, when profits are distributed to shareholders (or partners) or remitted abroad in the case of a branch.
The income tax rate on accrued but undistributed income is 15%.
When income is withdrawn or distributed to nonresident partners or shareholders or when remitted abroad, the income is subject to a 35% additional tax. The taxpayer liable to the additional tax is entitled to a tax credit equivalent to the first category tax rate assessed on the income withdrawn, distributed, or remitted abroad. This credit must be added to the basis upon which the additional tax is calculated.
The overall approximate effective tax rate resulting from the above rules, assuming no income is retained, is:
Taxable income $ 100
Taxation on accrued income
15% first category tax 15
Distributable income $ 85
Additional tax on distributed income
Distribution $ 85
Plus: Credit 15
$ 100
35% tax $ 35
Less: Credit 15
Additional tax payable $ 20
Overall tax burden $ 35
A foreign investor may elect to apply an overall income tax rate of 42% instead of the above normal rates. The 42% rate breaks down as a 15% first category tax, which is paid annually on accrued income, and the balance of 27%, which is paid as additional tax on dividends, distributions, or remittances. To assess the taxable basis of the additional tax, the first category tax is added.
The overall approximate effective tax rate resulting from the above rules, assuming no income is retained, is:
Taxable income $ 100
Taxation on accrued income
15% first category tax 15
Distributable income $ 85
Additional tax on distributed income
Distribution $ 85
Plus first category tax 15
$ 100
27% additional tax $ 27
Overall tax burden $ 42
This rate is guaranteed to remain unchanged for ten years, but the investor may waive this special regime at any time and become subject to the general regime. If so, the investor will be subject to changes in the general tax legislation with the same rights, options, and obligations pertaining to domestic investors. The waiver of the special regime is irrevocable.
2. Local Income Taxes
None.
3. Capital Gains Taxes
There is no specific tax dealing with capital gains. Under certain conditions, however, capital gains arising from the sale of shares, mining property, debentures, and certain other assets are subject to only the first category tax. There is no taxation upon the distribution or remittance abroad of the corresponding profits.
4. Branch Profits Taxes
As indicated above, branches are subject to the 15% first category tax on accrued income as are limited partnerships and stock corporations. Income from the business activities of the branch, plus all other Chilean-source income, is subject to the 35% additional tax when remitted abroad. The branch is entitled to the credit against the additional tax, which is equivalent to the rate of the first category tax assessed on the remitted income. This credit must be added to the basis upon which the said tax is calculated.
Branches are also eligible for the 42%
[1] [2] [3] [4] 下一页
