Tax reform could weigh on investments in Chile

Although Chile’s upcoming tax reform could impact negatively infrastructure investments and concessions, investors should remain calm.

“It is important to wait for the text with the amendments,” Hugo Hurtado law & tax partner at Deloitte told BNamericas during a tax seminar organized by Santiago's chamber of commerce.

Conceding to opposition demands, the government will modify its reform proposal and scrap the reintegration of tax systems. Instead, it will focus on benefiting small and medium-sized firms (SMEs) and improve tax collection and tax benefits for senior citizens. The amended bill is expected to reach the senate soon. 

Hurtado is more concerned about a provision in the original bill that sets an additional 1% tax for investment projects above US$10mn.

“That could have an important effect on financing, since there could be a higher investment cost,” he said.

Another aspect of the political agreement relates to a new real state tax for assets valued over 400mn pesos (US$518,000).

Hurtado said infrastructure concessions shouldn’t be subject to that tax, since though a private party operates an infrastructure asset, the state remains the owner. 

“It should be determined if the concept of concession is understood as an asset that could be taxed or not,” he said.

The expert also confirmed that although a specific aggregated value tax has not been considered in discussions about taxes on property whose value rose due to closeness to metro lines for example, the impact such externalities have on real estate has still been considered.