In January 2024, the withholding tax on fee-based invoices increased again, reaching 17% by 2028.
As of January 1, 2024, the withholding tax applied when issuing a fee-based invoice increased to 13.75%. This percentage will continue to rise progressively until reaching 17% in 2028.
The rationale behind this progressive measure is supported by Law No. 21,133, enacted in February 2019, which aims to integrate independent workers—those operating under fee-based invoicing—into the social protection system.
This law establishes a mandatory and gradual mechanism for the payment of social security contributions, allowing individuals to access social protection benefits, particularly for pension savings.
“The withholding on professional fees is increasing progressively from 10% in 2020 to 17% in 2028. This change does not affect fee-based invoices issued by company directors for their duties (board fees). This is because the legislator assumes that directors generally already have their social security situation covered, either through other income sources or personal savings,” said Felipe Salinas, Tax Director at CCL Auditores Consultores.
However, Salinas warned that, in his opinion, “this is not always the case,” as “it may be seen as unequal treatment which, although somewhat justified, could create inconsistencies with the principle that all individuals should contribute mandatorily to social security.”
Since the law came into effect in 2020, the withholding tax—or mandatory Monthly Provisional Payment (PPM) rate—has increased by 0.75% each year and will continue rising until 2028, when it reaches 17%. Therefore, as of January 1, 2024, the withholding rate has increased to 13.75%. It is recommended to take this into account when issuing invoices going forward.
Example of the increase in the withholding rate for fee-based invoices
- If your monthly gross fee is CLP 555,555, the change is as follows:
It is important to note that this increase is progressive over time. The legislation establishes a gradual rise in the percentage, allowing taxpayers to plan accordingly.