These tax changes are welcome news for taxpayers. The changes will provide more access to certain exemptions and credits.

On October 26, 2016, Chile enacted, and published in the Official Gazette, a Law that establishes a set of measures to promote productivity.

To increase Chile's productivity, the Law aids in expanding financing possibilities and makes payment systems more efficient, as well as promotes the export of services to diversify the economy.

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

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

Additionally, the Law modifies 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 Law eliminates 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 is expanded to include amounts paid abroad for engineering services and technical services intended for export.

Generally, the tax changes related to the fixed income market will be effective February 1, 2017. For the export of services, the changes will be effective November 1, 2016, with some exceptions.

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