Chilean tax reform set to finance new pension law

Wednesday, 16 February 2022
Chile’s Law No. 21.240, enacted on February 4, 2022, has reduced or eliminated certain tax exemptions and created new taxable events. The revenue generated by the Law will finance the new pension law, Law No. 21.419.
Tax reform sign

The reform eliminates the previous exemption on capital gains realised on the sale of shares of publicly held corporations, mutual funds, investment fund shares or other financial instruments with a stock market presence, replacing it with a 10 percent capital gains tax to apply from September 2022. Institutional investors will maintain this exemption.

Unless specifically exempted, all services, including technical and professional advice and consultancy services, will be subject to VAT from January 1, 2023.

With immediate effect, luxury goods will be taxed at 2 percent. This will apply to yachts, helicopters and manned aircraft with a market value of more than USD95,000 and automobiles and similar vehicles with a market value of more than USD48,000.

There will also be an increase in the maximum progressive rate of the property surtax on real estate valued at more than USD500,000 from January 1, 2023. From the same date, the tax benefits previously applicable to housing to a maximum size of 140 square metres acquired before 2010 will be limited to first and second home acquisitions, regardless of the date of purchase. These benefits included deductions to inheritance tax (IHT) and land taxes and a rental revenue income tax exemption.

Also from February 4, 2022, IHT will be applied to life insurance payments, with insurance companies obliged to see proof of payment of IHT before paying out life insurance to the beneficiaries.

The tax changes aim to finance the country’s universal guaranteed pension (pensión garantizada universal), in a move that has been under discussion since October 2021 to increase basic pension rates and grow the number of people eligible to claim pensions in Chile.

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