This gradual increase in the withholding rate is due to the publication of Law No. 21,133 on February 2, 2019, in the Official Gazette, which incorporates fee-based workers into the Social Protection system.
Read the full article in La Tercera – Pulso.
A new increase in the withholding applied to income received by fee-based workers will take effect starting in January. According to the Internal Revenue Service (SII), each time a taxpayer issues a fee-based invoice, the withholding rate will be 13.75%, representing a 0.75% increase compared to 2023.
This gradual increase in the withholding rate is due to the publication of Law No. 21,133 on February 2, 2019, which incorporates fee-based workers into social protection systems, establishing a mandatory and gradual mechanism for the payment of their contributions. This allows them to access all social security benefits, with the rate increasing by 0.75% each year until reaching 17% in 2028.
Likewise, in order to secure the necessary resources to finance these contributions, Felipe Salinas, Tax Director at CCL Auditores Consultores, explains that the law also established that “as of January 1, 2020, the withholding rate will gradually increase from 10%, or the mandatory Monthly Provisional Payment (PPM) rate in cases where withholding by the payer does not apply, when issuing fee-based invoices.”
Who does this change apply to?
According to Salinas, this new withholding rate applies to all issuers of fee-based invoices, as well as issuers of third-party service invoices.
Salinas states that “in accordance with the progressive increase schedule for the withholding rate on electronic fee-based invoices, as of January 1, 2024, the rate will increase from the current 13% to 13.75%.” However, he clarifies that “as in previous years, this change does not affect fee-based invoices issued by company directors for their board fees.”
According to Salinas, “this is because the legislator assumes that directors generally have their social security situation covered, either through other sources of income or personal savings.” However, he adds that “in my opinion, this is not always the case and 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.”