Chile - Taxation

Prior to 1920, government revenue was derived largely from export and import taxes, but since then, a more varied tax base has been achieved.

During the Allende period, the Congress, which was strongly influenced by opposition parties, resisted government efforts to introduce redistributive income tax policies. At the end of 1974, the military government eliminated the capital gains tax and established a 15% taxation rate for income from real estate, investments, and commercial activities, which has since been reduced to 10%. In 2002 corporate income was paid in two stages: first on declared profits, called the first category income tax (FCIT); and then on distributed profits. The rate for the FCIT was increased from 15% to 16.5% in 2003, and is scheduled to increase to 17% in 2004. The rate on distributed profits is 35% minus the FCIT credit. Dividends and interest payments to non-banks are taxed at 35%. Royalties and fees paid to non-residents are subject to withholding taxes of 20%, though this may be modified through tax treaties.

Personal income is taxed at rates ranging from 0% for the lowest wage and salary bracket to a maximum of 45%. Other direct taxes include a housing tax, assessments on real estate, and inheritance and gift taxes.

Consumption taxes include a value-added tax (VAT) with a standard rate of 18%, various stamp taxes, entertainment taxes, and excise on gasoline, alcoholic beverages, and tobacco.

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