In Chile, we have three categories, regarding tobacco products:

1. Cigars: The tax for Cigars is 52,6% on its consumer sale price, taxes included, of each package, box or envelope, considering every fraction of the tax inferior to a Chilean peso as a whole number.
2. Cigarettes: Packages, boxes or envelopes of cigarettes pay a specific tax equivalent to 0.0010304240 UTM () for each cigarette that they contain; also, a tax of 30%, which is applied to the consumers sale price, tax included, for each package, box or envelope, considering every fraction of the tax inferior to a Chilean peso as a whole number. Therefore, the specific tax shall be calculated taking the UTM at the moment of the tax determination as a reference.
3. Manufactured Tobacco: The manufactured tobacco, in strand, tablet, pastes or ropes, granulated, sting or powdered, will pay a tax of 59,7%, over the sales consumer price, tax included, for every package, box or envelope that is expended, considering every fraction of the tax inferior to a Chilean peso as a whole number.

### How is it calculated?

a) Cigar's tax

In accordance to article 3 of the Decree Law number 828, the cigar's tax is 52.6%. This tax is applied to the sale price, taxes included (the tax of applied to manufactured tobaccos and VAT).

On the other hand, considering the regulation of article 15 of the Decree Law 825 , the taxes included in the Decree Law 828 must be also considered in the taxable base of the VAT.

Determination of the variable component of the specific tax on the cigar's sales:

Specific tax = SPC x Cigar's tax

Where:

SPC = Sale Price to the Consumer (taxes included)

Determination of the VAT

VAT = SPC

——- x 0.19

1.19

Where:

SPC = Sale Price to the Consumer (taxes included)

Example:

Sale Price to the Consumer: CLP\$ 5,900

Specific tax : 52.6%

Specific tax

Specific tax = CLP\$ 5,900 x 52.6%

Specific tax = CLP\$ 3,104*

(*) Every fraction inferior to one Chilean peso is considered as a whole number.

VAT

VAT = CLP\$ 5,900

——– x 0.19

1.19

VAT = CLP\$ 942

Composition of the price by package of cigars

 Detail Amount Net price by package CLP\$ 1,854 Specific tax CLP\$ 3,104 VAT CLP\$ 942 Sale price to the consumer CLP\$ 5,900

b) Manufactured tobacco's tax

In accordance to article 5 of the Decree Law 828, the tax applied to manufactured tobaccos is 59.7%

Determination of the variable component of the specific tax on sales of manufactured tobacco

Specific tax = SPC x Tax of manufactured tobacco

Where:

SPC = Sale Price to the Consumer (taxes included)

Determination of the VAT

VAT = SPC

——– x 0.19

1.19

Where:

SPC = Sale Price to the Consumer (taxes included)

Example

Sale price to the customer for each package: CLP\$ 2,990

Specific tax : 59.7%

Specific tax

Specific tax = CLP\$ 2,990 x 59.7%

Specific tax = CLP\$ 1,786*

(*) Every fraction inferior to one Chilean peso is considered as a whole number.

VAT

VAT = CLP\$ 2,990 x 0.19

———————-

1.19

VAT = CLP\$ 477

Composition of the price by package of tobacco

 Detail Amount Net price per package CLP\$ 727 Specific tax CLP\$ 1.786 VAT CLP\$ 477 Sale price to the consumer CLP\$ 2.990

c) Cigarettes' tax

The tax applied to cigarettes is based on a specific tax of 0.0010304240 UTM per cigarette and a tax of 30% over the sale price to the consumer, tax included, per package.

Determination of the fixed component of the specific tax on the sales of cigarettes:

Fixed component of the specific tax = 0.0010304240 UTM x cigarette

Determination of the variable component of the specific tax on cigarettes sales:

Variable component of the specific tax = SPC x cigarettes tax

Where:

SPC = Sale Price to the Consumer (taxes included)

Determination of the VAT

VAT = SPC

—– x 0,19

1,19

Example:

Sale price to the consumer per package of 20 cigarettes: CLP\$ 1,900

UTM to April 2015 : CLP\$ 43,240

Specific tax to the variable component : 30%

Specific tax to the fixed component : 0.0010304240 UTM

Fixed component of the specific tax

Specific tax = 0.0010304240 x 43,240 x 20

Specific tax = CLP\$ 891*

(*) Any fraction equal or above 0.5 is considered as a whole number

Variable component of the specific tax

Specific tax = CLP\$ 1,900 x 30%

Specific tax = CLP\$ 570

VAT

VAT = CLP\$ 1,900

————– x 0.19

1.19

VAT = CLP\$ 303

Composition of the price per cigarettes package

 Detail Amount Net price per package CLP\$ 355 Fixed component of the specific tax CLP\$ 891 Variable component of the specific tax CLP\$ 570 Sale price to the consumer CLP\$ 1,900