By Javiera Campos, Director of International Taxation at CCL Auditores Consultores.
Read the column in El Mercurio Legal.
The new capital repatriation mechanism proposed in the anti-evasion bill approved by Congress has been presented as a key strategy to generate new fiscal revenue, while also allowing the regularization of investments that have significantly left the country in recent years. However, the Executive’s initiative may face significant obstacles that could prevent it from meeting expectations.
First, although the goal is to capture new fiscal revenue, the ongoing outflow of capital to jurisdictions with more favorable legal and tax conditions suggests that many taxpayers may not be interested in participating in this process. Therefore, this trend could initially discourage taxpayers from taking advantage of this new repatriation opportunity.
Additionally, the limited timeframe to opt into the process has been identified as a warning sign for its success. As currently drafted, the regulation may restrict the number of taxpayers who, even if interested, are able to complete the necessary analysis and gather the required information to submit their application. This is particularly relevant given the complex and time-consuming task of analyzing and consolidating information on intricate or long-standing investments, often involving multiple family members. For this reason, taxpayers interested in participating in the new repatriation process are encouraged to begin their analysis and documentation gathering as soon as possible, in order to submit their declaration before November 30 of this year.
In an effort to facilitate the process, the Minister of Finance, Mario Marcel, has announced that the timeframe for reviewing supporting documentation will be more flexible. Although taxpayers will still have until November 30 of this year to submit their declaration, they would now have between 4 and 6 months to provide documentation proving ownership of the assets. It has been indicated that the implementation of these changes would occur at the administrative level, with the Internal Revenue Service (SII) issuing a circular and a resolution with detailed instructions for submitting applications and adjusting the deadlines for supporting documentation.
Despite appreciating the measure and the Executive’s intention to facilitate the process, serious concerns arise regarding its implementation through administrative means, as it implies a modification to the explicit text of the law (and not merely an interpretation). Therefore, it would be advisable to extend the deadline through legislative means, via a short law (which could also extend deadlines for other measures included in the bill that expire even earlier, such as payment agreements with the Treasury), in order to ensure its effective applicability.
In light of these challenges, capital repatriation in its current form appears to face a difficult outlook. To improve its effectiveness, it would be advisable for the Government to review not only the deadline for submitting supporting documentation, but also the deadline for filing the declaration to opt into the process, adapting them to current economic and social realities. Only then could this opportunity be transformed into a tangible success for national public finances.