Chilean Tax Law: Key Concepts and Regulations
Key Concepts in Chilean Tax Law
This document addresses fundamental aspects of Chilean tax law, clarifying common misconceptions and providing accurate information on various tax-related topics.
Control of Tax Evasion and Legal Procedures
- True. The control of the power of the Internal Revenue Service (SII), which is related to the review of current accounts, is given to the ordinary courts and the national director of the SII, by reasoned decision, when the SII research involves tax law violations punishable by imprisonment.
- True. When a taxpayer is cited by the SII, according to Article 63 of the Tax Code, they have one month to comply with the procedure. This period can be extended once for another month, and even further if requested by the concerned officer.
- True. Regarding the application of fines in the Simplified Sanctions Plan, in general, 2/3 of the fine will be applied, except in cases where a different percentage is specifically established.
- False. The authority overseeing the SII, when calling to testify certain third parties who have had business relations with the taxpayer, does not include their relatives and advisors.
Taxable Events and Income Definition
- True. The convention that serves to transfer, for consideration, the domain of tangible movable property is a sale.
- True. The definition of income in our Income Tax Law is broad because any increase in income or assets constitutes income and becomes taxable.
- False. The tax imposed on withdrawals, profit sharing, and distribution of sole proprietorships, partnerships, and limited liability companies, respectively, is not exclusively First Category Tax. It can also include Global Complementary Tax or Additional Tax, depending on the recipient’s residency and the nature of the income.
Tax Jurisdiction and Procedures
- False. According to Article 115 of the Tax Code, claims and complaints for violations of tax provisions are heard by the Tax and Customs Courts, not by a single judge at first instance.
- True. The First Category Tax falls on earned or received income, while the Global Complementary and Additional Taxes generally apply to received income.
- False. The possibility of using the simplified sanctions scheme does not arise at the moment the taxpayer decides to file a claim. It depends on the specific circumstances and the nature of the infraction.
- False. The concepts of “tax year” and “calendar year” are not equivalent. The tax year can be different from the calendar year, depending on the taxpayer’s choice and the SII’s authorization.
- True. The Treasury’s right to require payment of a tax arises when the taxable event occurs.
Tax Exemptions and Imputed Income
- False. The exemptions provided for certain subjects of tax liability regulated in Article 13 are personal or subjective, not real or objective.
- True. Imputed income seeks to prevent tax evasion by establishing the principle that there must be a congruence between living expenses and declared income.
Global Complementary Tax and Net Income Calculation
- False. The Global Complementary Tax is not a replacement for the Additional Tax on people who obtain Chilean-source income and are domiciled or resident abroad. Both taxes can apply depending on the specific circumstances.
- False. To arrive at net income, one must deduct from gross income all direct and indirect costs and expenses necessary to produce it, i.e., disbursements that were necessary to generate the income in the exercise.
Administrative Measures and Tax Litigation
- True. An administrative order is a court order issued by a court of the Republic that prohibits a person from fleeing the country.
- False. According to tax law, the court that takes cognizance of these causes is the Tax and Customs Court, not the Supreme Court.
- False. The document that must be issued at the time of actual or symbolic delivery of goods is the invoice or sales receipt, not the debit note. A debit note is issued to correct errors or increase the value of a previously issued invoice.
- False. Direct costs are not part of the costs necessary to produce income within a production process. Direct costs are directly attributable to the production of goods or services, while necessary expenses are broader and include both direct and indirect costs.