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Legal Alert:
Bill proposes the amendment and repeal of certain tax exemptions

On September 20, 2021, the President of the Republic presented Bill 14.588-13 that proposes to expand and strengthen the public pension system created by Law 20.255 (2008) through financing to be obtained by reducing or repealing certain tax exemptions.

Here we outline the main amendments to tax exemptions proposed in the Bill, which is to be discussed in Congress by the House of Representatives.

I. Capital Market Exemptions

The Bill proposes the amendment of Section 107 of Income Tax Law by levying capital gains obtained for the sale of stock market presence securities with a 5% Single Tax, provided the sale is executed at least six months from the first day of the month the Bill is enacted as law. Capital gains obtained by institutional investors, domiciled in Chile or abroad, will remain eligible for current Section 107 treatment.

II. Real Estate Exemptions

The Bill proposes (a) the elimination of DL No. 910/75 – Special Credit of Real Estate Ventures eligibility for transactions carried out from January 1st, 2024 onwards and the gradual reduction by half of the eligible benefit for transactions carried out from January 1st 2022 onwards; and (b) the restriction of DFL No. 2/59 benefits to physical owners, and to two properties maximum regardless of their acquisition date, effective from January 1st, 2022.

III. VAT treatment of services

The Bill proposes the amendment of Goods and Services Tax Law by disposing that any service rendered from January 1st, 2022 onwards will be taxed with VAT (“IVA”) as a general rule, unless a special provision states otherwise. Services rendered by physical persons as well as certain services concerning health, education and passenger transportation would remain exempt from VAT, as shown in the Bill.

IV. Life insurance

The Bill proposes that Inheritance and Donations Tax (“IHD”) will apply to all benefits obtained by virtue of life insurance contracts entered into as of the date of publication of the law.