September 12, 2019 Chilean House of Representatives approves tax reform bill The approved tax reform bill is not yet law, as it still must go through the Senate. The current version of the bill, however, would create a single withholding tax rate for dividend distributions from Chilean companies to foreign shareholders abroad and establish a 19% value-added tax (VAT) on digital services. On August 22, 2019, the Chilean House of Representatives approved a tax reform bill after one year of debate and political negotiation. Discussion in the Senate is expected to take place during the last quarter of 2019 and could involve further amendments to the bill, given that some congressmen have announced their intentions to thoroughly review the bill. For more information on the original bill, see Tax Alert 2018-1710. The current version of the tax bill would eliminate the withholding tax rates that currently apply to dividend distributions from Chilean companies to foreign shareholders abroad and establish one rate that would apply to those dividend distributions, regardless of the shareholder's country of residence. This provision would eliminate the more burdensome tax treatment currently applicable to residents in countries that have not entered into a Double Tax Treaty with Chile. Shareholders also may be able to fully credit the corporate tax paid by the Chilean company against the withholding tax applicable to effective dividend distributions to foreign shareholders (overall tax rate of 35%). The tax reform bill also would:
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