By Javiera Campos, Director of International Taxation at CCL Auditores Consultores.
Read the full column in DF Tax.
The concern over the massive capital flight that has occurred in the country since 2020, which had accumulated more than USD 30 billion by the end of last year, is well known. However, less attention has been given to tax compliance (or the lack thereof) regarding the outflow of capital and the subsequent investments abroad.
In this context, and especially due to the consequences associated with non-compliance, we have observed with concern how fines (which may reach up to 100 UF) and excessively high interest associated with the correction or late filing of Affidavit No. 1929 on foreign operations have discouraged many taxpayers from regularizing their tax situation, particularly when, due to lack of knowledge or proper advice, they did not file the declaration in the year of the capital outflow, thereby maintaining a state of non-compliance over the years.
Although we are referring to a specific affidavit, it seems to us that there is a broader issue behind this that must be seriously addressed in the discussion of the new tax pact currently under debate following the failed tax reform. If we want to increase fiscal revenue, one of the pillars we must strengthen is tax compliance. This also includes providing incentives to those taxpayers who wish to regularize their tax situation, without being effectively prevented from doing so by disproportionate surcharges that are often unfeasible to pay.
In this regard, it seems worthwhile to evaluate a temporary window that would allow taxpayers in certain situations of non-compliance to regularize their tax status with the waiver of fines and interest associated with corrections or late filings of affidavits.
In the long term, this strategy undoubtedly generates more revenue than the application of fines and interest, which, in practice, many ultimately choose not to pay. Likewise, in the case of Affidavit No. 1929, it allows the Internal Revenue Service to keep under control the income that has left the country.
It is also important to remember that although the deadline to file Affidavit No. 1929 on foreign operations for a given year expires in June of the following year, the information supporting such declaration will have an impact on the Income Tax Return filed in April of that same year to which the affidavit corresponds.
In simple terms, passive income received or accrued during the 2022 fiscal year from controlled entities abroad, which will be reported in Affidavit No. 1929 to be filed by June 2023, must nevertheless be declared in the Income Tax Return in April 2023. Therefore, concern regarding the information to be included in Affidavit No. 1929 should not arise mid-year, but rather immediately at the time of filing the Income Tax Return.