According to the SII, in the last two years the number of assessments issued for inheritance tax tripled compared to 2020–2021. Meanwhile, the amount increased from $187.972 billion to $392.494 billion over the same period. The reasons? A change in the declaration and auditing model, as well as the government’s tax reform, which would make it more burdensome.
Read the article in La Tercera-Pulso.
One of the key focuses in recent years within the Tax Compliance Management of the Internal Revenue Service (SII) has been to close loopholes that enable tax avoidance as much as possible. In this regard, one area of oversight has been high-net-worth taxpayers and their tax behavior in relation to the declaration and payment of inheritance and donation taxes.
To be classified as a high-net-worth individual, a person must have income exceeding US$150,000 over the last three tax periods, personal wealth above US$1 million, or family-based wealth exceeding US$2 million.
The SII estimates that there are 92,226 high-net-worth individuals in Chile, according to the current registry. During 2023, the SII’s analysis of this segment focused on controlling non-compliance risks in two areas: intergenerational wealth transfers (inheritances and donations) and the declaration and payment of the global complementary tax.
In the first area, since 2021 the SII has modified the declaration and auditing model for the Inheritance, Estate, and Donation Tax, enabling electronic Form 4412, which simplified and streamlined the process for taxpayers, reducing processing times. This has led to an increase in both the number of filed returns and the amounts paid.
Before 2021, inheritance tax declarations were based on a semi in-person model, where supporting documents for all items had to be submitted to the Regional Office in every case, without exception, and reviewed by a tax auditor.
Now, the SII explains that, through the implementation of the Integrated Tax Compliance Management Model, and with a structural solution in declaration and control, “the current form allows the declaration to be submitted entirely online, without requiring documentation at the time of filing, which must only be presented in the event of an audit or other request from the SII.”
Regarding tax oversight, the agency states that “the changes made have allowed analyses to be incorporated into the SII’s tax risk matrix, making it possible to proportionally prioritize audit actions based on taxpayer risk, which also streamlines the entire declaration and auditing process compared to the previous model.”
The SII’s Deputy Director of Audit, Carolina Saravia, explained that “the declaration and payment of this tax (inheritances and donations) has been reinforced through actions by the Service itself, including sending emails to identified heirs based on risk models, as well as publishing detailed information on inheritance and donation taxes on sii.cl.”
Saravia reflected the impact of the model change in figures: “The impact of the change in the declaration and auditing model led to an increase from $73.730 billion in inheritance tax payments in 2020, prior to the new system, to $182.683 billion paid in 2023.”
Of the total inheritance tax assessed, 75% is associated with individuals classified as high-net-worth. Their heirs paid approximately more than $137 billion in 2023.
If the 2020–2021 period is compared with 2022–2023, after the implementation of the changes, the number of inheritance tax assessments increased from 15,931 to 48,676, tripling. In terms of revenue, it rose from $187.972 billion to $392.494 billion, more than doubling. :contentReference[oaicite:0]{index=0}
However, between 2022 and 2023, the increase was more moderate, at 8.5% in the number of assessments issued. “This new declaration mechanism, which simplified the process for taxpayers, allowed for the declaration and payment of taxes that were pending from previous periods during 2022, the first full year of the new system. From 2023 onward, we have observed a normalization in declarations and amounts paid, a trend that should continue in the coming years,” Saravia emphasized.
The SII also notes that donation taxes show a similar trend to inheritance taxes, reaching a peak in amounts paid in 2022, the first full year of the new system. “The sustained increase in the declaration and payment of this tax suggests that the strategy has yielded positive results, both in preventive terms through information actions and through enforcement actions related to intergenerational wealth transfers, especially among high-net-worth taxpayers,” Saravia stated.
Last year, there were 4,590 assessments issued, with total payments amounting to $47.337 billion. Of that total, nearly 98% corresponds to high-net-worth taxpayers.
In the 2020–2021 period, prior to the changes, there were 3,392 assessments issued, while between 2022 and 2023 the number increased by 181%, reaching 9,539 assessments. In terms of amounts, it rose from $56.437 billion to $138.799 billion.
Expert perspective
Tax experts state that this sharp increase is due not only to the factors described by the SII but also to regulatory changes included in the government’s rejected tax reform, which are still present in the current tax compliance bill.
Rodrigo Winter, Partner of the Legal and Tax Area at PwC Chile, stated that the rejected bill “modified certain rules regarding the inheritance and donation tax base, particularly for real estate and the differences in tax bases between partnerships and corporations, which led many taxpayers to make donations before the bill came into effect.” He also noted that it “included a wealth tax, prompting some taxpayers to transfer assets to their descendants in advance, paying donation taxes to avoid being subject to that tax.”
Javier Jaque, Lead Partner at CCL Auditores Consultores, indicated that, in his view, two factors explain the increase: “The first is the SII’s auditing plan and automation for inheritance tax, while the second is the tax reform proposed at the beginning of Gabriel Boric’s administration, which included changes to the donation tax.” Meanwhile, Ignacio Gepp, Partner at Puente Sur, highlighted that “the tax authority appears to have abandoned its passive approach to inheritance tax oversight, moving toward a proactive model where it reaches out to heirs to remind them of their tax obligations.”