Through ruling issued on April 23rd of 2019, Santiago’s Court of Appeals (Rol 251-2018) confirmed a sentence dictated by one of Santiago’s Tax and Customs tribunals, by which it forced Banco de Chile to provide information on Uber Chile SpA’s current accounts.
Uber Chile argued that its sole source of income is a paid services contract subscribed with Uber BV (Netherlands), being one of the hired services, to open in Chile current accounts to be put at disposal of Uber BV, in order for the latter to be able to pay the drivers.
Consequently, Uber Chile stated that the required information of such current accounts is not in any way related to Uber Chile’s incomes, whose remuneration for the services contract with Uber BV is not determined by the payments made by the latter in these accounts, thus, the information would have not been required to verify the integrity of Uber Chile’s tax statements, but to obtain information on Uber BV and Uber’s drivers.
The fact that Uber Chile allegations have been dismissed, forcing Banco de Chile to deliver the aforementioned banking information, opens an interesting debate on the use made by the IRS of its powers to obtain information about taxpayers different to the one that is being audited, which is especially relevant in this type of applications, given that, by obtaining information about the administrator of the platform, it is possible to indirectly access information regarding all of its users.
Ruling No. 967, April 4th of 2019
On one side, this ruling ratifies a criterion already established by the IRS, which is that First Category taxpayers that acquire bonds at a discount, must consider such discount as an interest, which, as a general rule, are taxed when accrued (when the bond is purchased and the interests are still owed).
What is interesting about this ruling is that it makes reference to bonds issued by foreign companies, establishing that, because it is a foreign income, the interest for the discount must be always recorded only when perceived (paid), amending the criterion mistakenly established in Ruling No. 2546 of 2018, which stated that they should be recorded when accrued.
The Tax Modernization Project deals with this problem, establishing that incomes related to the discount of documents must always be recorded when perceived, which would appear to be more reasonable.
Ruling No. 1025, April 12th of 2019
Alike the aforementioned ruling, this one amends a prior but quite recent criterion that the IRS considers to be mistaken. Trough the previous ruling (No. 2545 of 2018), the IRS established that an individual that is habitually dedicated to buying and selling real estate, shall be considered a “individual entrepreneur” even if it has not been formally incorporated as such, thus, the profits arising from a real estate sale could not be subject to any of the benefits available to individuals with no effective income (8.000 UF exemption, and global reliquidation or sole tax of 10%).
Ruling No. 1025 of 2019 modifies the prior criterion, indicating, likewise the law, that habituality is no longer a factor to be considered to determine taxation in the sale of real state, in a way that an individual could make use of the tax benefits, provided that the sold real estate has not been assigned to the accountability of its formally incorporated individual company.
It is important to point out that this new criterion is in line with the changes proposed in the Tax Modernization Project regarding taxation on capital gains in the sale of real estate.
For different reasons, on Ruling No. 1.034, in order to determine the possibility of benefiting from article 14 ter’s simplified tax regime, and on Ruling No. 1.036, to establish if a VAT exemption is or not applicable, the IRS faced the need to define which elements differentiate a simple real estate lease from hotel services or touristic accommodation.
This definition, which seems to be acquiring more importance due to the arise of certain platforms such as Airbnb, is left relatively open by the IRS, establishing that each particular case will be determined as one or the other in the corresponding audit process. Nevertheless, the IRS still gives a few hints, for example, in Ruling No. 1.034, in which it indicates that, in such case, the features and location of the cabins determine that the services shall be deemed touristic accommodations, or in Ruling N. 1.036, in which it states that there is no predetermined term that allows to distinguish a lease from hotel services.
Ruling No. 1049, April 17th of 2019
In the context of a revocable donation of social rights of a limited liability company, which has similar effects as those of an usufruct, the IRS solves a situation that would seem quite counter-intuitive in respect with the attributed tax regime, being useful to keep it in mind.
On Ruling No. 1.049 of 2019, the IRS ratifies the criterion which determines that, in the case of a revocable donation or when constituting an usufruct over social rights of a company host to the attributed tax regime, although, for tax purposes, the income will be attributed to the bare owner (nudo propietario), the usufructuary will be entitled to withdraw the profits, benefitting from their quality as non-taxable income as a consequence of having been attributed, and therefore, having complied with all their tax obligations.
The last tax reform (Law No. 20.780) restricted the use of the Territorial Tax as credit against the First Category Tax (Corporate Tax), especially regarding non-agricultural real estate, maintaining the possibility to use it only in the case of construction or real estate companies that build or commission to build real estate for their subsequent sale.
In this context, the IRS solves two different situations. On one hand, in rulings No. 1.182 and No. 1.183, the IRS interprets that if the real estate is given in a lease to purchase contract (lease with a purchase option), this gives place to a sole contract in which all the rents are linked to the transfer of the property, thus, the Territorial Tax may be used as credit during all the time in which the contract remains in force. On the other hand, Ruling No. 1.184 solves that if the properties are simply leased while put up for sale, the Territorial Tax may only be used as credit against the profits which arise in the sale of real estate.
Ruling No. 868, April 2nd of 2019
In the last tax reform (Law No. 20.780), as a consequence of broadening the application of the VAT to the sales of real estate made by habitual sellers (i.e. real estate companies) and not only by construction companies, as it was before, a transitory article was included in the Law which allowed people who had executed a promise to purchase agreement on real estate before January 1st of 2016, but that later executed the purchase contract, to still benefit from the VAT exemption, even if the new law was already in force.
This ruling refers to the assignment of these promise agreements, it is to say, the transfer of these promises to allow a different person from the one who originally subscribed the agreement, to execute the purchase contract. The IRS indicates that the assignment is valid and that, in theory, the exemption should still apply in favor of whom indeed subscribes the purchase. However, the IRS sends a message, making it clear that it may use all of it legal powers to verify that such acts do not have the sole purpose of obtaining the VAT exemption, in accordance with what is set forth in the general anti avoidance rule.