It is described as “purely revenue-driven,” but unlikely to achieve the same effects as in 2015; some even foresee that the Ministry of Finance’s projections may be optimistic. The proposal considers a 12% tax rate for a one-year period.
It was surprising, but not entirely. And the prevailing view is not positive regarding this proposal. These were among the first impressions expressed by tax experts and economists when evaluating the Ministry of Finance’s tax compliance proposal, which includes capital repatriation.
The Ministry of Finance’s proposal seeks to open a new window for taxpayers to repatriate capital. In the 2014 reform, a similar measure was introduced, granting a one-year period—2015—for taxpayers to declare assets or income held abroad, paying a special tax rate of 8%. Although the initial revenue expectation was US$128 million, the Internal Revenue Service reported collections of US$1.502 billion in 2015 from this measure.
This time, the tax rate will be 12%, the one-year period will be repeated, and it will benefit taxpayers domiciled, resident, established, or incorporated in Chile prior to January 1, 2024 with respect to their assets and income held abroad that, despite being subject to taxation in Chile, were not timely declared and/or taxed accordingly.
By submitting the declaration, taxpayers will be deemed to authorize the Internal Revenue Service, the Financial Analysis Unit, and any other relevant state authority to request specific information from banks regarding the assets or income included in the declaration. Banks will be required to provide such information upon request, accompanied by a copy of the declaration.
The bill references the previous experience, stating that “on that occasion, a window was opened in 2015 to regularize capital, resulting in revenue equivalent to 0.63% of GDP.” Therefore, it is now conservatively projected that the proposed capital repatriation measure will generate one-third of the revenue obtained in that instance, equivalent to 0.21% of GDP in 2024.
Tax experts and economists remain cautious regarding this measure. They describe it as primarily revenue-driven and unlikely to replicate the effects seen in 2015. Some even believe the Ministry of Finance’s projections may be overly optimistic, given that the current political and economic environment does not inspire the same level of confidence as it did nine years ago.
Javiera Campos, Director of International Taxation at CCL Auditores Consultores, comments that “while in theory it appears to be an appropriate measure to facilitate the repatriation of the significant capital outflows from the country since the social unrest, as well as for taxpayers who, for various reasons, did not participate in the 2015 process, I believe there is market skepticism toward such a measure in the current context, where trust and legal certainty are fundamental pillars for a successful capital repatriation process.”