Investments Abroad
- The general rule for investments held abroad is that they are taxed on the net income received, i.e. when they have materially entered the investor's assets.
income received, i.e. when they have materially entered the investor's equity.
As an example we can point out: dividends, withdrawals, interest paid, etc. - Profits obtained by a company or entity abroad are not deemed to be received,
while it does not distribute it to its partners or shareholders residing in Chile. - Notwithstanding the above, if that company or entity abroad is controlled by a taxpayer resident in Chile, it is considered a Controlled Entity abroad.
taxpayer resident in Chile, it is considered a Controlled Foreingn Company (CFC).
(Controlled Foreingn Company - CFC), and the passive income obtained by them is understood as received by the Chilean taxpayer.
the Chilean taxpayer, and the Chilean taxpayer is obliged to pay tax on such income. It is
is understood as controlled if it owns, directly or indirectly, 50% or more of the capital, right to profits, or voting rights.
profits, or voting rights over such entity. - In general, passive income is understood as mainly financial income, such as dividends, withdrawals, distributions and any other form of profit distribution.
dividends, withdrawals, distributions and any other form of distribution of profits, interest, royalties, capital gains or any other form of
from participations in other entities, interest, royalties, capital gains, or increases in value from the
capital gains from the disposal of assets or rights which in turn generate passive income, income from the
passive income, income from the lease or temporary assignment of real estate, and capital gains from the sale of assets or rights that in turn generate passive income.
and capital gains from the sale of real estate, among others.
When a Foreign Controlled Entity (FCE) is understood to mean
- When someone owns 50% or more of the capital, profits, or voting rights of the foreign entity; or
or when it has sufficient powers to elect or have elected the majority of the directors or administrators or has unilateral
majority of the directors or administrators or has unilateral powers to modify the bylaws, or to change or remove the majority of the directors or administrators.
bylaws, or to change or remove the majority of the directors or administrators. The foregoing, either directly or
directly or indirectly and jointly with related persons. - The new rules for this case modify the "concept of relationship" to have a broader meaning in number 17 of article 8 of the Tax Code.
in article 8, number 17 of the Tax Code, modifies the "concept of relationship" to a broader meaning in article 8, number 17 of the Tax Code.
The spouse, civil partner or ascendant or descendant relatives up to the second degree of consanguinity shall be presumed to be related.
descendants up to the second degree of consanguinity. The following shall also be presumed to be
relatives up to the second degree of consanguinity shall also be presumed to be related, unless there is proof to the contrary, when they participate in the same
consanguinity when they participate in the same entity or patrimony constituted in Chile through which an entity is controlled.
through which an entity without domicile or residence in Chile is controlled.
Income to be computed according to CFC with new reform
- At present, passive income up to 2,400 UF should not be considered as accrued and is therefore governed by the general rules of Article 12 of the LIR.
accrued, and are therefore governed by the general rules of Article 12 of the LIR (basis received).
(basis received). In the event of exceeding this limit of 2,400 UF, the totality of the income received must be considered as accrued.
accrued, the total passive income must be considered as accrued. - As of the reform, in order to determine this limit of 2,400 UF, the taxpayer's passive income and that of all related parties must be considered.
taxpayer's passive income and that of all related parties. If, upon aggregation, the result obtained exceeds the limit, both the taxpayer
the result obtained exceeds the limit, both the taxpayer and all its related parties must consider as accrued the totality of the income of the taxpayer and all its related parties.
related parties must consider all of their passive income as accrued.
Effective Date
- The amendments made to Article 41 G shall be effective as of January 1, 2025.
2025.
