Circular No. 48 SII: Systematization of Penalties and Fines for Failure to Report Foreign Investments

This alert aims to provide a summarized overview of the criteria outlined in Circular No. 48 issued by the Internal Revenue Service (SII) concerning the systematization of penalties and fines applicable for non-compliance with the obligation to report investments from Chile made abroad.

On October 12th, the Internal Revenue Service (SII) issued Circular No. 48 to systematize the regime for applying penalties and fines to taxpayers as a result of potential breaches of their duty to report investments made abroad.

This action was taken by the tax authority because, until the issuance of this Circular, instructions on this matter were scattered across various Circulars issued over time, causing a lack of clarity, inconsistencies, and confusion. This reporting obligation must be fulfilled by submitting Declaration Form 1.929 regarding Foreign Investments.

Therefore, this Circular plays a role in clarifying the penalties applicable for failing to report foreign investments, providing certainty to taxpayers regarding the fines they may face. These fines may vary depending on whether it involves:

• Non-submission of the declaration: In the case of Article 33 bis No. 2 of the Tax Code (TC), the fine can range from 10 UTA plus 1 UTA for each month of delay, with a cap of 100 UTA. If the declaration is submitted late, fines can range from 10 UTA plus 1 UTA per month of delay, also with a cap of 100 UTA, and the same applies to an incomplete or erroneous declaration.
• Non-submission of the declaration under Article 41 G letter F of the Income Tax Law: The taxpayer may be subject to a fine of 50 UTA.
• Late submission of the declaration: This can result in a fine ranging from 15 to 30 UTA (depending on the number of days of delay).
• Submission of an incomplete or error-ridden declaration without correction: In this case, the fine can be 30 UTA.

The Circular organizes and explains these criteria and various fine amounts to provide greater clarity to taxpayers.

Another important aspect covered in Circular No. 48 is the application of the Principle of Specialty regarding fine imposition. This means that if two or more non-compliance situations arise, only the most severe penalty specified in the regulation will be applied, based on the nature and amount of the operation in question.

Regarding what should be reported, the declaration instructions specify that it should include: i) the type of foreign operation, ii) the amount of the investment per operation (even if they generate no income or are not subject to taxes), iii) the destination country, iv) the associated income and taxes, v) costs, expenses, and income related to permanent establishments and controlled foreign entities, as applicable.

As for the obligated parties required to make this declaration, it states that they will be: i) first-category taxpayers (businesses), ii) taxpayers making foreign investments that may potentially qualify for foreign tax credits, and iii) those taxpayers or trusts with domicile, residence, or incorporation in Chile, who control entities abroad that do not have domicile or residence in the country.

Javier Edwards (Partner) | jedwards@ednabogados.cl

Andrés Veszpremy (Partner) | aveszpremy@ednabogados.cl

Benjamín Schmitz (Associate) | bschmitz@ednabogados.cl

Matías Edwards (Procurator) | medwards@ednabogados.cl

EDN Lawyers – Corporate and Taxation Department

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