CHILE Law and Practice Contributed by: Felipe Díaz Toro, Victor Riadi and Ignacio Ruiz Rodríguez, EDN Abogados
be subject to corporate income tax on said distributions. • Non-Resident Investors: Distributions made to non-resident investors (either natural persons or corporate entities) by FIPs will be subject to a withholding tax ( Impuesto Adicional ) at a 35% rate. Said foreign taxpay - ers are allowed to use 65% of the corporate tax levied at the SPV level as a credit against the aforementioned withholding tax. If such dividend was paid by an FI, there is no with - holding tax applicable. Instead, a sole tax ( Impuesto Único ) established by the LUF will be levied at a 10% tax rate (no tax credit for corporate tax levied at SPV level applies). • Institutional Investors: Distributions made to a Chilean pension fund are not subject to taxation. Taxation of sales and redemptions regard - ing units of an FI are deemed capital gains. In general, they are subject to income tax, be it corporate income tax or IGC, with the following exceptions: • Income tax will not apply when said redemp - tions are a consequence of the fund’s liquida - tion. • Neither tax applies when redemptions derive from a capital decrease. • Redemptions made by a non-resident inves - tor will be levied with the sole tax ( Impuesto Único ) established by the LUF (10% rate). The taxation of sales and redemptions regarding units of an FIP are also deemed capital gains, subject to income tax, be it corporate income tax or IGC. However, if such redemptions are made by a non-resident investor it will be levied with a withholding tax at a 35% rate (allowing the use of 65% of the corporate tax levied at the SPV level as a credit against said withholding tax).
In addition, a full tax exemption on dividends or capital gains derived from redemptions and sales of units can be granted to non-resident investors in both FIs and FIPs, provided that at least 80% of the fund’s investment portfolio is comprised of assets located abroad or securities issued by an entity domiciled in a different jurisdiction. 3. Retail Funds 3.1 Fund Formation 3.1.1 Fund Structures See 2.1.1 Fund Structures . 3.1.2 Common Process for Setting Up Investment Funds See 2.1.2 Common Process for Setting Up Investment Funds . 3.1.3 Limited Liability See 2.1.3 Limited Liability . 3.1.4 Disclosure Requirements See 2.1.4 Disclosure Requirements . 3.2 Fund Investment 3.2.1 Types of Investors in Retail Funds See 2.2.1 Types of Investors in Alternative Funds . 3.2.2 Legal Structures Used by Fund Managers See 2.2.2 Legal Structures Used by Fund Man- agers . 3.2.3 Restrictions on Investors See 2.2.3 Restrictions on Investors . 3.3 Regulatory Environment 3.3.1 Regulatory Regime See 2.3.1 Regulatory Regime .
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