“In September 2014, Chile entered into force its Voluntary Disclosure Mechanism”
Provided that the taxpayer is deemed resident in Chile prior to the 1st of January 2014, he or she can declare during this current 2015 fiscal year, unreported assets and income that they directly or indirectly own abroad. However, there is a caveat. The assets to be voluntarily declared will have to be domiciled or managed from jurisdictions that have anti-money laundering rules, adhere to the Financial Action Task Forces’ recommendations and whose Financial Intelligence Units subscribe to the Egmont Group.
If the taxpayer is eligible for voluntary disclosure, they will also have to fulfill the exchange control regulations if not already done so. Taxpayers will also have to substantiate with “prima facie” evidence that they acquired the assets on or before the 1st of January 2014.
After the declaration is filed, Chilean revenue will advise on the portion of the 8% single and substantive tax that will have to be paid. Once notice is received, the taxpayer will have 10 days thereafter to settle the outstanding tax amount. Once paid, Chilean revenue will have 12 months from the tax settlement date to request an audit. Such audit could result in a different amount for the tax payment.
Chilean tax attorneys have given mixed opinions on how to respond to this very important initiative. Some advisers have NOT recommended the amnesty route on the basis that clients would expose themselves to extreme scrutiny from Chilean revenue and other associated agencies.
Others have recommended compliance with the amnesty rather than the proverbial “sticking ones head in the sand”. Most tax advisers who recommend this route have also advised that it might be best to change the jurisdiction of the offshore structure to a high tax jurisdiction and once done, declare the structure. It is perceived that a transfer to a higher tax jurisdiction will place the structure in better standing when the declaration is made to Chilean revenue.
From a wealth planning perspective, a good place to start the conversation with your client is to consider a pure insurance policy (no wrapper) or perhaps a restatement of the existing grantor trust to an irrevocable structure with Letters of Wishes. Both solutions appear acceptable according to Chilean tax advisers. More on this soon…
