Chile: Law No. 20,956: "Law To Boost Productivity"

Last Updated: 15 November 2016
Article by Felipe Moro, Juan Pablo Loyola, Pablo Bucchi and Gabriel Acuña

On October 26th, 2016, Law No. 20,950, otherwise known as the "Law to Boost Productivity" (the "Law"), was published in the Official Gazette, introducing various modifications to different laws and regulations in order to enhance the country's productivity through the expansion of the financial system and the promotion of the exportation of services.

Main measures for the expansion of the financial system:

  • Several legal provisions of Law Decree No. 824 (Income Tax Law – "ITL") are modified, eliminating a number of operative obstacles with the purpose of facilitating the settlement of foreign custodians in Chile and promoting the participation of foreign investors in the financial market. To these ends:
    • The methodology for calculating interest accrued by publicly offered debt instruments referred to in Article 104 ("Article 104 Instruments") is modified in order to adjust their computation method to the particular terms of each instrument's issuance;
    • A new withholding rule is established for issuers of Article 104 Instruments, under which they are obligated by default to make a general 4% withholding over the amount of interest accrued to the date of each payment or redemption with respect to the holders, allowing local holders to use the withheld amount as an anticipated payment towards any First Category Tax or Global Complementary Tax due1.
    • It is established that for the application of the new withholding rule, the withheld amount must be paid within five business days following the withholding date, including several legal changes to ensure that the issuer has the necessary cash flows to cover the withholding tax.
    • It is established that certain Article 104 Instruments issued by the Central Bank and the General Treasury of the Republic are exempted from the obligation of recognizing the difference over the principal balance due on redemptions or prepayments as interest.
    • Finally, issuers and other agents that act as withholding agents must inform the Chilean Tax Authority as to which withholding mode has been chosen.
  • Law No.19,983 (Governs the Transference of the Assignable Copy of an Invoice and Makes it Directly Enforceable) is modified establishing two new scenarios in which the invoice is understood to be irrevocably accepted: a) not claiming the lack of delivery of the merchandise or the provision of the service within eight calendar days from the receipt of the invoice; and b) to expressly accept the invoice within the same term. In addition, the parties are no longer allowed to agree on a term to reject the invoice and it is stated that if the receipt has not been made within eight calendar days following its reception and there is no claim made regarding the content of the invoice or non-delivery of merchandise or provision of services, it will be presumed that the services have been provided and the merchandise delivered, leaving the bill suitable for assignment and directly enforceable, with no need for the receipt to be evidenced in the invoice. With this, a higher certainty is assured regarding the terms for the acknowledgment of receipt, thus enabling higher liquidity and lower financial costs for companies via factoring.
  • Article 45 of Law Decree No. 3,500 (Establishes the new Pensions System – "DL 3,500"), which establishes the instruments in which Pension Fund Managers ("AFP") may invest the funds of the Pension Funds, is modified, incorporating (a) instruments, transactions and agreements representative of real estate assets, private equity, private debt, infrastructure and other types of assets that the Investment Regime might determine; and (b) bonds issued by investment funds governed by Law No. 20,712. In both cases, the Investment Regime of the Pension Funds will determine the conditions to be met by these instruments.
  • Article 58 A of Law No. 19,728 (Establishes an Unemployment Insurance), which governs the investments of the Solidary Unemployment Fund and the Unemployment Fund. Previously, both funds may only invest in the instruments listed in article 45 of DL 3,500. The Law modifies the former, establishing that the Solidary Unemployment Fund must be invested in the instruments, transactions and agreements listed in article 45 of the DL 3,500 and in the promise of payment and subscription of investment funds quotas agreements described in article 48 of the said DL. On the other hand, the Unemployment Fund must be invested in all the instruments, transactions and agreements listed in said article 45, excepting for those included in letter n).
  • Law No. 18,840 (Organic Constitutional Law of the Central Bank of Chile) is modified, replacing the Cental Bank's power to create and regulate the operation of check and other securities clearinghouses to which banking companies and their subsidiaries attend to, for a broader power to create and regulate the operation of payment systems established in Chile, in which banking companies and other financial institutions controlled by the Superintendency of Banks and Financial Institutions participate, for the acceptance, settlement and liquidation of payment orders corresponding to money obligations, allowing the Central Bank to acknowledge payment systems established offshore. Additionally, it is indicated that transactions in accordance with the rules of these systems will be firm, i.e., final, irrevocable, binding and enforceable against third parties, and may not be affected by a declaration of nullity, unenforceability, inefficiency, challenge, forced liquidation, or any other cause, which seeks to limit or restrict the transactions carried out and remarking the principle of firmness and irrevocability of payment transactions of international payment systems.
  • Law No. 18,876 (Establishes the Legal Framework for the Incorporation and Operation of Private Deposit of Securities Custody Entities) is modified. The assets that may be deposited are increased from only publicly offered securities, to include other assets, documents and agreements at the discretion of the Securities and Insurance Superintendency ("SVS"). Furthermore, Article 14 is replaced, regulating in detail the pledge and real rights on securities held on deposit. Thus, in order to give greater flexibility to this type of pledge, it is noted that pledges or real rights over the deposited securities: a) may be granted subject to other laws; or b) may be granted subject to a new type of pledge named "Special Pledge over Deposit Securities Registered in the Book Entries System", regulated in article 14 and in article 14 ter. This new pledge will be granted, modified and released pursuant to a framework agreement entered into by the deposit entity and the depositors, to which their corresponding principals may adhere as well, provided they are qualified investors.
  • Decree with Force of Law No. 251 (Insurance Companies Law) is modified, allowing insurance companies to invest directly in public use infrastructure concession companies, and also allowing the SVS to exclude the shares of such companies from the prohibition of being subject to liens (these projects are generally subject to liens given the nature of their development).
  • Article 7 of Decree Law No. 1,123 of 1975 (Replace the Monetary Unit) is modified, eliminating the $1 and $5 peso coins. Additionally, it is established that in the case of payments made in cash, the quantities equal to or less than $5 will be rounded down, and the quantities equal to or greater than $6 will be rounded up, not generating any tax effects or any obligation to modify tax documents that have been, or should be, issued.

Main measures to promote the exportation of services:

  • Article 41 A of the ITL is modified, extending the foreign tax-credit benefit to any service qualified as an export service by the National Customs Service, no longer limiting it exclusively to technical and other similar services2; and extending the foreign tax-credit benefit for income arising from employed and independent work, when it comes from countries without a tax treaty to avoid double taxation. Article 59 of the ITL is also modified, eliminating the withholding tax rate increase for payments made to related parties on account of software and engineering services; and extending the withholding tax exemption to payments for technical or engineering works or services hired in order to export services from Chile.
  • Certain provisions of Law Decree No. 825 (Value Added Tax Law) are modified. On one hand, the VAT exemption of number 16, letter E, of article 12 is modified, broadening the concept of export services in order to include services that are partially rendered in Chile and used abroad. Article 36 is also modified, allowing the recovery of the VAT associated with the acquisition of goods and services used to render services that are entirely provided and used abroad, when such services would have been subject to VAT if rendered in Chile and are levied with a tax of an identical or similar nature in the country in which they are rendered or used.


1. This new withholding rule shall not apply when the terms of issuance of the respective instrument state that the withholding shall be governed by the rule applicable to representatives, custodians, brokers and other local entities designated by non-resident taxpayers for the purposes of complying with their tax obligations, in which case, the provisions of Article 74 No. 8 (formerly No. 7) shall apply.

2. Retroactively applicable to services provided on or after January 1st, 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions