Law 20,444 Tax Benefits

General benefits for donations made under Law No. 20,444

Exempt from requiring judicial authorization for the donation.
Exempt from the Inheritance, Allocations, and Donations Tax.
Not subject to the 5% overall limit of Law No. 19,885 or counted when calculating other donations subject to the limit.
Subject to Income Tax and Sales and Service Tax benefits.
Importations of in-kind donations are exempt from all taxes, duties, fees, or other charges imposed by customs.

General rules for donations made under Law No. 20,444

Donors or their representatives, withholders, or payers must report the donation amount to Chile’s Internal Revenue Service (SII).
Donations benefiting from this law cannot be used in conjunction with tax benefits provided for in other laws.
Projects funded with contributions from third parties may display a plaque to recognize their contribution.
Beneficiaries may not make any special payments to the donor nor the donor’s employees, directors or blood relatives up to the second degree in the year immediately following the donation.

Taxes eligible for benefits

First Category Tax (IDPC), for taxpayers who declare their effective income via a full accounting balance sheet.

These taxpayers can make:

General donations to the Reconstruction Fund. These can be in cash or in kind (which are valued according to their cost).
- 50% of the donation made to the Fund can be claimed as credit against the IDPC.
- The remaining portion of the donation that does not constitute a credit or cannot be claimed as such may be deducted as an expense.
Donations to fund specific projects. These can be made to the Fund or directly to a beneficiary or their representative, and may be made in cash, in kind, or in project execution.
- The total donation amount may be deducted as an expense.

Both kinds of donations are limited as follows: The total amount of benefits may not exceed one of the following amounts, whichever the taxpayer chooses:

Net Taxable Income for the respective fiscal year.
Zero point sixteen percent (0.16%) of the company’s tax equity.

Second Category Tax (ISC)

Taxpayers may donate to the Fund or to specific projects.

This benefit consists of a credit of 40% of the total amount of cash donations against the ISC payable on income earned in the calendar year in which the donation is made.
The donation must be made through payroll deductions as agreed with the employer.
Donations made directly to the Fund by employees do not qualify for this benefit.

Inheritance Tax (IHAD)

Article 7 of Law No. 20,444 establishes the benefit that taxpayers may claim 40% of cash donations as a credit against the tax affecting death benefits, as established by Law No. 16,271 on Inheritance, Allocations and Donations Tax.

However, different time frames apply for:

Individual Donors: Individuals will be entitled to the benefit described above regardless of the time that has elapsed between the donation and the death.
Inherited Estate Donors: Entitled to the benefit described above as long as the donations are made within 3 years after the death of the deceased.

Value-Added Tax (VAT)

Regarding in-kind donations and project execution:

In-kind donations made by IDPC taxpayers who declare their effective income via a full accounting balance sheet will not be subject to VAT, but they must issue the corresponding non-taxed invoice.
Taxpayers who make donations are entitled to a tax credit for the tax paid on the purchase of goods and services used to make the donations.
These amounts will not be considered as non-taxable sales for the purpose of calculating the share of the common use tax credit to which the taxpayer is entitled.

Global Complementary Tax (IGC)