The tax mega-reform reinstates Chile’s fully integrated tax system, which means that the obligation to restore 35% of the First Category Tax credit—applicable since 2014 to taxpayers under the semi-integrated regime—will be gradually eliminated.
The core of the tax reform remained largely unchanged during its passage through Congress. Its main provisions include reducing the corporate tax rate from 27% to 23% and restoring full integration of the tax system, effectively returning to the framework that existed prior to 2014.
Under the 2014 tax reform enacted during Michelle Bachelet’s second administration, Chile moved from an integrated tax system to a semi-integrated one. In practice, companies pay a 27% First Category Tax, but when profits are distributed, shareholders may use only 65% of that tax as a credit against their personal taxes, while the remaining portion must be “restored” or effectively paid back.
Under the new reform, this 35% restitution requirement will be eliminated. Beginning in 2029, 100% of the First Category Tax paid by a company will be creditable against either the Global Complementary Tax or the Additional Tax.
As part of the full reintegration of the system, a new tax registry will be required to track these earnings. Prior to the 2014 reform, this role was fulfilled by the FUT (Taxable Profits Fund), an accounting and tax register used by companies subject to First Category Tax.
The 2014 reform abolished the FUT and replaced it with the Taxable Income Registry (RAI), Exempt Income Registry (REX), and Accumulated Tax Credit Registry (SAC).
With the new reintegrated system, a registry similar to the FUT will once again be necessary. According to Ximena Niño, Senior Advisor, Tax & Legal at Deloitte, the main change will occur in the SAC (Accumulated Tax Credit Registry), as the gradual reintegration process will affect the tax credits allocated to profit distributions.
“Once the system becomes fully integrated in 2029, the credits incorporated into the SAC will no longer be subject to the restitution mechanism. In other words, 100% of the credit recorded in the registry will be available to offset final taxes,” she explains.
Niño further notes that in fiscal year 2027 the restitution rate will be 30%, allowing a 70% credit against final taxes; in 2028 the restitution rate will fall to 20%, resulting in an 80% credit; and beginning in 2029 there will be no restitution requirement, making the credit fully usable.
She also points out that the bill establishes an order for the use of accumulated credits: credits generated through 2026 must be used first, followed by those from 2027, then 2028, and finally those generated from 2029 onward. As a result, companies will need to track credits with different attributes throughout the transition period.
Loreto Pelegrí, Partner in PwC Chile’s Legal and Tax Practice, believes that the registry under the new integrated system is a necessary technical tool because integration requires precise identification of accumulated earnings, associated tax credits, and their subsequent allocation to shareholders.
She adds that, for reasons of simplicity and legal certainty, the registry should maintain as much continuity as possible with mechanisms already familiar to taxpayers, avoiding unnecessary administrative complexity.
Similar to the FUT?
According to Niño, the differences between the proposed integrated system and the former FUT are primarily procedural rather than substantive.
Under the FUT, both earnings and tax credits were tracked according to the year in which they were generated or received and were distributed on a strict first-in, first-out basis. Older earnings were distributed before newer ones, leaving the most recently generated profits in the company.
However, she argues that the underlying tax treatment remains essentially the same. Under the FUT, the proposed integrated system, and the current semi-integrated regime, profits are taxed when earned at the corporate level and again through final taxes when distributed or withdrawn by shareholders.
Pelegrí agrees that there is a significant conceptual similarity with the former FUT because the new system once again requires a mechanism to track accumulated earnings pending final taxation. From a practical perspective, she believes it is reasonable for the registry to be substantially similar to the FUT, as both seek to determine which profits have already been taxed, which remain invested within the company, and which tax credits may be associated with future distributions.
Antonio Guzmán, Partner, Tax Consulting, Tax & Legal at KPMG Chile, also sees similarities, noting that both systems are based on full integration between the First Category Tax and final taxes. Nevertheless, he argues that the new regime should not be equated with the historical FUT because it operates through different business registries and does not include certain deferral mechanisms such as reinvestments or excess withdrawals.
Meanwhile, Javier Jaque, Managing Partner of CCL Auditores Consultores, states that the new adjustments make the system resemble the FUT more closely. “Profits generated from 2029 onward will be allocated without restitution, while prior earnings subject to restitution will need to be absorbed first. As a result, the allocation order will resemble the historical FUT mechanism, which prioritized the oldest accumulated earnings”.