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.

Footnotes

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 Mondaq.com.

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

Authors
Felipe Moro
 
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”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.