The government announced that it will send a short bill to Congress to extend by one month the validity of this measure—enacted this Thursday—through which the Treasury aims to raise around US$700 million. While tax advisors welcomed the announcement, they still consider it insufficient if the goal is for it to be effective. Meanwhile, lawmakers also view it as limited but will wait to learn more details.
Read the article in La Tercera-Pulso.
This issue had been under discussion among tax advisors for at least a month: the limited timeframe for the new capital repatriation window, which in practice would have been just one month, since the text stated that it would come into effect on the first day of the month following the enactment of the law, that is, between November 1 and November 30.
However, the government did not initially respond and upheld this transitional rule that will apply only during 2024. That is, until now, as it has announced that it will send a short bill to extend the validity of the three transitional measures included in the law.
According to the Ministry of Finance, a short bill will be submitted to extend the deadline for capital repatriation and other measures so that they remain in force until the end of the year, such as the early termination of tax litigation, payment agreements or preferential arrangements with waivers and installments.
The capital repatriation window is a key provision for the Treasury in the new law, mainly because the expected revenue from this measure represents nearly all the resources projected to enter the public coffers this year.
According to the structural revenue projections included in the Tax Compliance Law—enacted this Thursday—the Treasury expects to receive $661,579 million, around US$713 million (based on an exchange rate of $928 projected by the Treasury for 2024) this year. Of that total, $644,077 million (US$694 million) would come from capital repatriation. These revenues are intended to offset lower income resulting from earlier overestimations at the beginning of the year.
However, for this extension to become a reality, it must pass through Congress, where the outlook is uncertain. Members of the Finance Committee in the Chamber of Deputies agree that the current deadline is insufficient and should be extended, but emphasize that it should go beyond December of this year. Nevertheless, they state that they must first review the details of the bill before analyzing it thoroughly.
The president of the Chamber’s Finance Committee, Carlos Bianchi (Independent), stated that extending the deadline beyond November “is necessary, otherwise it becomes materially ineffective for its intended purpose: collecting taxes we considered lost.” Regarding his vote, he noted that he “will decide after hearing the arguments of Minister Marcel and the positions presented during the debate.”
Meanwhile, Miguel Mellado, RN deputy, also agrees that deadlines should be extended beyond this year. “The short bill to extend deadlines seems appropriate to me, but the timeframe should cover all of 2025 so that it can meet the expectations the government has for this revenue.” Mellado emphasizes that “there will be support to extend deadlines, but we want the government to submit a bill that is truly effective.”
Agustín Romero (Republican) criticizes the government: “If Minister Marcel listens little to the opposition, he listens even less to experts. Among the criticisms raised, several experts pointed out that the timeframe was too short, but the minister seems more focused on pushing this reform through quickly to claim a win.” Regarding his vote, he says that “the measure must first be carefully reviewed, but I will not vote under pressure.”
Expert perspective
Among tax advisors, the announcement was well received, as it had been a long-standing request. However, they believe the extension period is still too short and therefore insufficient to meet the revenue target.
Alberto Cuevas, Tax & Legal partner at KPMG Chile, states that “the timeframe is still short. Gathering the necessary documentation alone typically takes about 30 to 45 days, based on previous experience.” In this regard, he adds that “so far there has been little interest. In our case, only four people had inquired. More promotion will be carried out, especially now that the SII’s circular has been released for public consultation.”
Hugo Hurtado, Tax & Legal partner at Deloitte, notes that “we still consider the additional timeframe too limited, as it effectively amounts to only eight weeks. This is challenging, especially considering that the circular published for consultation by the SII this Friday includes numerous requirements similar to those of previous years.”
Hurtado adds that “this limited timeframe may impact revenue collection, considering that we are talking about nearly US$700 million. We have seen clients who are interested but also concerned about whether they will have sufficient information to support their declarations.”
Víctor Fenner, Associate Partner for Tax Policy Knowledge at EY, states that “a greater number of individuals may consider using the benefit, although in my opinion the timeframe remains too short.” This is because “the process requires, among other things, conducting valuations for various types of assets, as well as reconstructing their full history to explain the nature and origin of the associated tax non-compliance. I believe two months is still insufficient.”
Loreto Pelegrí, partner in the Legal and Tax Area at PwC Chile, shares the same view, noting that “the timeframe may still be too short compared to the one in 2015,” which lasted one year.
Claudio Bustos, tax lawyer and partner at Bustos Tax & Legal, states that “the extension of the deadline is absolutely insufficient for a procedure of this magnitude.” Therefore, he argues that “the most reasonable approach would be to extend the deadline until March 31 or April 30 of next year. That is a reasonable timeframe that allows taxpayers to properly assess their decision and review all relevant information.”
And Javiera Campos, Director of International Taxation at CCL Auditores Consultores, notes that “the process will likely achieve greater revenue collection success than anticipated a few weeks ago. However, I would be cautious in affirming whether the proposed objective will be achieved.”