This gradual increase in withholding is due to Law No. 21.133, published in the Official Gazette on February 2, 2019, which incorporates independent workers into the Social Protection system. It will reach 17% by 2028.
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Attention independent workers. A new increase in the withholding applied to the income received by workers under this employment condition began in January. According to the Internal Revenue Service (SII), each time a taxpayer issues a fee receipt, the withholding will increase from 13.75% to 14.5%.
This gradual increase in withholding is due to Law No. 21.133, published in the Official Gazette on February 2, 2019, which incorporates independent workers into the Social Protection system, establishing a mandatory and gradual mechanism for the payment of their contributions, allowing them access to all social security benefits, increasing by 0.75% each year until reaching 17% in 2028.
Likewise, in order to ensure the necessary resources to finance these contributions, the law also established that “as of January 1, 2020, the 10% withholding rate or the mandatory Monthly Provisional Payment (PPM) rate will be gradually increased in cases where the recipient does not apply withholding, upon the issuance of fee receipts.”
To avoid errors, the SII reported that if receipts are issued through sii.cl, or if a third party issues them on behalf of the taxpayer, there will be an application available on the SII website that will automatically calculate the new withholding.
According to estimates by CCL Auditores Consultores, this new withholding percentage applies to all issuers of fee receipts and issuers of third-party service receipts, affecting more than 1,000,000 people in Chile, where, for example, more than 300,000 independent workers exist in the public sector alone. The exception is company directors’ receipts, which remain fixed at 10%.
Felipe Salinas, Tax Director at CCL Auditores Consultores, explains that “the message is clear: companies must once again update parameters in their internal systems to ensure proper tax compliance, while independent workers issuing these documents must take into account this higher withholding, which in practice will result in reduced cash flow from service payments.”