Law No. 20,956: 'Law To Boost Productivity'

On October 26th, 2016, Law No. 20,950, otherwise known as the "Law to Boost Productivity" (the "Law"), was published in the Official Gazette, introducing various modifications to different laws and regulations in order to enhance the country's productivity through the expansion of the financial system and the promotion of the exportation of services.

Main measures for the expansion of the financial system:

Several legal provisions of Law Decree No. 824 (Income Tax Law - "ITL") are modified, eliminating a number of operative obstacles with the purpose of facilitating the settlement of foreign custodians in Chile and promoting the participation of foreign investors in the financial market. To these ends: The methodology for calculating interest accrued by publicly offered debt instruments referred to in Article 104 ("Article 104 Instruments") is modified in order to adjust their computation method to the particular terms of each instrument's issuance; A new withholding rule is established for issuers of Article 104 Instruments, under which they are obligated by default to make a general 4% withholding over the amount of interest accrued to the date of each payment or redemption with respect to the holders, allowing local holders to use the withheld amount as an anticipated payment towards any First Category Tax or Global Complementary Tax due1. It is established that for the application of the new withholding rule, the withheld amount must be paid within five business days following the withholding date, including several legal changes to ensure that the issuer has the necessary cash flows to cover the withholding tax. It is established that certain Article 104 Instruments issued by the Central Bank and the General Treasury of the Republic are exempted from the obligation of recognizing the difference over the principal balance due on redemptions or prepayments as interest. Finally, issuers and other agents that act as withholding agents must inform the Chilean Tax Authority as to which withholding mode has been chosen. Law No.19,983 (Governs the Transference of the Assignable Copy of an Invoice and Makes it Directly Enforceable) is modified establishing two new scenarios in which the invoice is understood to be irrevocably accepted: a) not claiming the lack of delivery of the merchandise or the provision of the service within eight calendar days from the receipt of the invoice; and b) to expressly accept the invoice within the same term. In...