These tax changes are welcome news for taxpayers. If enacted, the changes will provide more access to certain exemptions and credits.

On August 30, 2016, Chile's Congress sent a bill that establishes a set of measures to promote productivity in Chile to the Constitutional Court of Chile for judicial review, which is the last stage before enactment.

To increase Chile's productivity, the bill would aid in expanding financing possibilities and make payment systems more efficient, as well as promote the export of services to diversify the economy.

Specifically, the bill would modify the Income Tax Law (ITL) provisions related to calculating income, interest withholding obligations and other provisions that should increase the participation of foreign investors in the fixed income market.

The bill also would extend the definition of export services contained in the VAT Law to other services to allow more services to access the VAT exemption.

Additionally, the bill would modify Article 41 A of the ITL to allow companies that export services to claim a credit for the taxes paid abroad on income received for those services.

The bill would eliminate the increased withholding tax rate on payments made abroad for computer programs and engineering or technical services when paid to a related company.

A withholding tax exemption would be expanded to include amounts paid abroad for engineering services and technical services intended for export.

Generally, the tax changes would be effective on the first day of the fourth month following the publication of the bill in the Official Gazette.

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