CHILE Law and Practice Contributed by: Javier Cortés, Juan Pablo Márquez and Gonzalo Pérez, Cortés Del Río Tax & Legal
The Chilean IRS’s powers include: • the power to request information from taxpayers and third parties; • the power to examine the accounting records and documentation of any taxpayer or related party; • the power to summon taxpayers in order to provide information and documentation regarding specific transactions; • the power to adjust the price of transactions using the reassessment power, under which, the IRS may disregard a transaction price and reassess its value according to the fair market value; • the power to carry out unannounced visits to inspect the premises of taxpayers; and • the power to obtain banking information subject to secrecy (only with the taxpayer’s consent or with prior judicial authorisation from the competent tax and customs court) under a specific procedure. The statute of limitations for issuing tax assessments and collecting taxes is three years, counted from the deadline for filing the corresponding tax return. Such three-year period is extended to six years for cases involving tax evasion or non-filing of tax returns. The general penalty framework in tax violations is gen - erally the same for cross-border and domestic tax vio - lations. The Chilean IRS is responsible for imposing and collecting administrative tax penalties. Criminal sanctions require the intervention of the courts, and cases are only initiated at the request of the Chilean IRS. Administrative penalties include: • a penalty payment, usually a percentage of the unpaid tax or a pre-determined amount; • a penalty interest payment which is calculated based on the current interest rate and which accrues on a daily basis; and • other measures, such as closure of the business premises, in more severe cases. 6. Penalties and Sanctions 6.1 Tax Penalties
The Chilean IRS has a forgiveness policy for prompt payment of unpaid taxes, resulting in a percentage of the tax debt being forgiven automatically upon online payment by the taxpayer. The Chilean IRS may grant further forgiveness of interest and penalties in certain cases, at the taxpayer’s request. Regarding cross-border penalties, there is a specific penalty applicable to transfer pricing adjustments, consisting of 40% of the difference detected by the Chilean IRS, and in some cases, the Chilean IRS may apply an additional 5% penalty if the taxpayer does not co-operate during the audit process. Penalties may be challenged before the tax courts in the first instance and before the Courts of Appeal on further review. The Chilean IRS may grant total or par - tial forgiveness of interest and penalties, where there is 100% prompt payment of the underlying tax, pursu - ant to the annual condonement decree issued by the Ministry of Finance. 6.2 Criminal Penalties The Chilean Tax Code contains specific criminal pen - alties regarding different types of tax evasion and tax fraud situations: • malicious presentation of false tax declarations involves a penalty of 100% to 300% of the amount of tax evaded, and could involve imprisonment for three to five years; • fraudulent claims for tax refunds involve a penalty of 100% to 400% of the amount unduly claimed, and could involve imprisonment for three to 15 years; and • malicious omission of tax declarations involves a fine of 50% to 300% of the taxes due, and could involve imprisonment of 541 days to five years. While legal entities cannot be imprisoned, they are subject to significant financial penalties and the court may, in extreme cases, impose forced dissolution. Legal representatives and board members of legal entities may be subject to penalties on behalf of the entity, in certain cases.
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