|
|
|
|
|
|
|
|
On past October 25th, the Constitutional Court issued an unexpected ruling in respect with default interests established in article 53 of the Tax Code, which determines that belated payments of taxes are subject to penalty interests under a monthly rate of 1,5% for each month or fraction of a month of delay.
The Court determined the inapplicability due to unconstitutionality of paragraph 3 of article 53, since it considered that, when the delay is not imputable to the taxpayer’s acts but to the authority’s lateness, therefore “giving the same treatment to both the defaulter taxpayer as to the one who has legitimately filed a claim”, such a high rate derives in an unfair punishment, “applying an automatic penalty without a fair and rational process as the Constitution requires”.
|
|
|
|
|
Supreme Court
As it has been observed in the last rulings issued by the Supreme Court, the Court has been expanding the criterion of “necessary expenses” used by the IRS. Likewise, in ruling issued on October 16th of the current year (ROL 15514-2017), the Court determined that compensations that must be paid by an electrical company due to unauthorized interruptions or suspensions of the electrical supply, are to be considered necessary expenses, given that, by being expressly established in the law, “the taxpayer has had to inevitably incur in them”.
|
|
|
|
|
Most favored nation clause
The entry into force of the Double Taxation Convention (“DTC”) between Chile and Japan activated most of Chilean DTC’s “Most Favored Nation” clause, in respect with royalties and interests. The IRS issued Circular Letter No. 50 of 2018 to explain the implementation of the new applicable rates in the DTCs subscribed with Austria, China, Ecuador and Spain, just as it had done previously this year through Circular Letter No. 22 of 2018, in respect with the DTCs entered into with Korea, Denmark, Ireland, United Kingdom, Poland and Czech Republic. Our recommendation is to read these rulings thoroughly when having to apply the modified conventions, specially regarding their enforceability, given that, for instance, the reduction to a 10% of the general rate applicable to interests only enters into force as of 2019.
|
|
|
|
|
VAT
Through Ruling No. 2118 of 2018, the IRS concluded that the lease, by a Chilean domiciled lessor, of movable property situated abroad qualifies as a VAT taxable event, given that the territoriality rules allow to levy not only “services” rendered in Chile, but also those that are used within the country. What is interesting of the IRS’s analysis is that, in order to reach this conclusion, although it recognizes that a lease is not a service, it still considers it as one for VAT purposes. Being a change in the IRS criteria, this Ruling was published in the Official Gazette.
Such criteria was used by the Court of Appeals of Coyhaique in ruling issued on September 7th of 2018, which was later confirmed in November by the Supreme Court. Ruling No. 2120 of 2018 analyzes the lease of postal-office boxes, which is a common practice when a taxpayer is looking to establish its domicile in a given commune. The IRS concludes that, if the boxes are attached to a building, they are deemed “immovable property by adhesion” (“Inmuebles por adherencia”) and therefore, their lease should not be levied with VAT. In case they are not attached, they shall be considered movable property, being object to such tax.
|
|
|
|
|
Income
Through Ruling No. 2117 of 2018 the IRS clarifies the situation of credits for taxes paid abroad on profits distributed by a foreign company to a Chilean company that, during the same commercial exercise, is later divided.
Foreign tax credits can only be used by the company that indeed perceived the profits. Therefore, the discussion lied on the fact that, if such credits could only be used by the divided company, then if part of the foreign profits had to be proportionally assigned to the new company, a part of the credit would be lost, given that the new company would not be able to use it, nor the legal follower would be allowed to use it completely.
The IRS interpreted that, as long as proportionality in the assignation of assets and liabilities is respected, actions derived from foreign income as well as profits generated by these, are allowed to be kept in the divided company, being the latter able to use the full foreign credit.
|
|
|
|
|
|
|
|
|
|
|
