According to the Internal Revenue Service (SII), between November 2021 and January 2023, 48 high-net-worth taxpayers had carried out this process, while between February and September 2023, 164 more were added. Tax reform, constitutional political uncertainty, and public safety are among the reasons experts cite for this acceleration.
Read the full article in La Tercera-Pulso here.
In November 2021, the Internal Revenue Service (SII) regulated the procedure for requesting a change of domicile, making it possible to more accurately determine which taxpayers initiate this process.
This coincided with the discussion of the tax reform bill, which proposed a tax on high-net-worth individuals. This new tax would apply to individuals domiciled or resident in Chile whose assets, both in the country and abroad, exceed 6,000 UTA, equivalent to approximately US$5 million. The design included a tiered structure with marginal rates: between US$4.9 million and US$14.7 million, a 1% rate would apply, and above US$14.7 million, a 1.8% rate would apply.
Thus, around 6,300 individuals would have been subject to this tax. The expected revenue was 0.5% of GDP. According to the bill, the rule included guidelines allowing taxpayers to determine the economic value of their assets, understood as the value determined by independent third parties. It was also specified that other wealth-related taxes would be credited against the wealth tax, including property tax, additional property tax surcharge, and tax on deferred personal income tax payments.
As the proposal progressed, attention focused on whether this tax would impact this indicator. Ultimately, the tax reform was rejected, and the government will not pursue this tax in the current tax pact process.
Despite this, the figures show an increase in requests for changes in tax residency. According to the SII, between November 2021 and August 2022 there were 13 high-net-worth taxpayers; then, between August 2022 and January 2023, this rose to 35, totaling 48 tax residency change processes during that period. Now, between February and September of this year, 164 more were added, bringing the total to 212 since the measure began. Thus, in these eight months of 2023, tax residency change processes more than tripled.
In total, from November 2021 to September 2023, 700 taxpayers have initiated this process. Of these, 212 are high-net-worth individuals, while 488 belong to other segments.
The reasons
Tax experts state that there are at least three reasons why individuals—especially high-net-worth individuals—maintain the decision to change their tax residency. One is taxation and the ongoing uncertainty in that regard; the second is public safety; and the third is the constitutional political environment, which, regardless of the outcome of the upcoming vote, may remain an open debate.
Javier Jaque, Lead Partner at CCL Auditores Consultores, states that “the figures for changes in domicile are related to the instability projected into the future, because decisions to relocate abroad are not made overnight; these processes began as the country became more polarized.”
In this context, he notes that one of the factors behind this trend is “public safety, since all indicators show that the perception of insecurity has been increasing. Chile is no longer the safe country it once was. This is an issue that is present in taxpayers’ decisions.”