SII updates the catalog of tax regimes to avoid tax avoidance

The Internal Revenue Service (SII) has updated its catalog of tax regimes as part of its anti-avoidance agenda, which will affect international operations, business groups, high-income taxpayers, among others.

The SII has announced that 10 new cases detected by the SII Inspection Department will be incorporated. These are:

  • Distribution of dividends as part of the purchase price of the shares and units, intended to reduce the tax base of the IDPC, which “is determined by the difference between the income received and the expenses paid in the period and/or the final taxes”.
  • Sale of property consisting of lots resulting from subdivision, which does not include the built-up road.
  • Promise contract for the purchase and sale of real estate which allows for the distribution of profits in favor of a shareholder.
  • Purchase of a property through an intermediary company in order to avoid the configuration of the conditions of a relationship between the parties in a purchase and sale agreement, and to benefit from part of the higher value that can be considered as non-rental income under the Tax Act income (LIR).
  • Corporate reorganization aimed at the transfer of assets avoiding the realization of a higher value and consequent payment of income tax.
  • Improper use of the tax exemption consisting in obtaining a refund of the remaining tax credit for investments in fixed assets by a group of companies.
  • Distribution or withdrawal of profits through a credit account the value of which increases significantly after the conclusion of an out-of-court transaction.
  • The active and passive accounts generated within a corporate-family group allow – in a reorganization process – to assign liabilities to the holding company, which decreases its asset value, and allows to determine an exchange ratio after its merger for the benefit of children.
  • Corporate reorganization in order to increase the value of the investment, so that, together with the conditions agreed in the subsequent sale of the shares, a tax loss is generated which allows the request for reimbursement of the PPUA.
  • Company reorganization in order to avoid the application of article 41 G of the LIR: “if you control, directly or indirectly, entities abroad, you must recognize in Chile the passive income of said entity, both received and accrued”.

According to the agency, its objective is “to anticipate defaults, providing greater tax certainty to taxpayers and, with this, avoiding operations or planning that could generate tax disputes”.

The agency commented that during the year six appeals were presented to the Tax and Customs Courts (TTA), in which the abuse of structures that seek to hide the generation of income deriving from intergenerational assets was discussed.

The director of the SII, Hernán Frigolett, referred to intergenerational heritage: “We are not against this, I think it is natural, it is what happens everywhere, what happens is that you have to respect the tax obligation that corresponds to that generational change, and that’s what we’re trying to protect.”

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