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Inheritance tax collection doubles in 2022-2023 compared to the previous biennium

One of the focuses that has been present in recent years in the Tax Compliance Management of the Internal Revenue Service (SII), is to close as much as possible the loopholes that give rise to avoidance. A point of inspection, in this sense, has been the taxpayers of large assets and their tax behavior regarding the declaration and payment of inheritance and donation taxes.

For a person to be classified as High net worth individuals must have an income greater than US$150,000 for the last three tax periods, a personal asset greater than US$1 million, or a base family asset greater than US$2 million.

The SII numbers 92,226 high-net-worth people in Chile, according to the current payroll. During 2023, the analysis of this segment by the SII aimed to control the risks of non-compliance in two areas: the intergenerational transfer of assets (inheritances and donations), and the declaration and payment of the complementary global tax.

In the first of them, Since 2021, the SII modified the declaration and inspection model for the Inheritance, Assignments and Donations tax, enabling the electronic form 4412 that made it possible to simplify and facilitate this process for taxpayers, reducing processing times, which has had a growing effect regarding the declarations submitted for this tax, as well as the amounts paid.

Before 2021, the inheritance tax declaration was based on a blended declaration model, in which the documents for all the items of the form in all the declarations had to be accredited and presented to the Regional Directorate, without exception, where an auditor had to receive, validate and review all the declarations presented.

However, now, the SII explains that, with the application of the Integrated Tax Compliance Management Model, and taking into account a structural solution in the field of declaration and control“the current form was established that allows the declaration to be submitted completely online, without documentation being required at the time of the declaration, but they must be presented only in the case of inspection or other SII requirements.”

In the field of inspection of these taxes, the service maintains that “the changes made have allowed the analyzes to be considered within the tax risk matrix of the SII, with which it is possible to prioritize inspection actions proportionally to the taxpayer’s risk. , which also speeds up the complete declaration and inspection process, compared to the old declaration and review model.”

Carolina Saravia, deputy director of Supervision of the SII.

The deputy director of Supervision of the SII, Carolina Saravia, explained that “the declaration and payment of this tax (inheritance and donations) has been reinforced through actions of the Service itself, which include everything from sending emails to heir taxpayers determined according to the risk model, to publishing in sii.cl “detailed information on inheritance tax and gift tax.”

Saravia reflects in numbers the effects of the change in the inheritance declaration process: “The impact of the change in the declaration and inspection model of this tax led to it exceeding $73,730 million, corresponding to the amount paid for inheritance tax in 2020, prior to the implementation of the new system, to $182,683 million paid for inheritance tax in 2023″.

Of the total inheritance tax paid, 75% is associated with deceased persons classified as High Net Worth. His heirs paid an approximate amount of more than $137 billion in 2023.

If the period 2020-2021 is analyzed and it is compared with 2022-2023, with the change already underway, the number of transfers issued for inheritance tax went from 15,931 to 48,676, tripling. As for collection, it rose from $187,972 million to $392,494 million, more than doubling.

However, between 2022 and 2023 there is a more limited increase, of 8.5% in the number of money orders issued. “This new declaration mechanism, which facilitated the process for taxpayers, allowed, during 2022, which was the first year of full operation of the new system, to declare and even pay some taxes that were pending from previous periods. Starting in 2023, we begin to observe a normalization of declarations and amounts paid through this new system, a trend that should be maintained in the coming years,” Saravia stressed.

The SII mentions that in the case of donations a similar evolution is observed as inheritance, marking a peak of amounts paid in 2022, the first year of operation under the new system. “The sustained increase in the declaration and payment of this tax suggests that the strategy has been showing positive results both in preventive terms, with various information actions and also by the inspection actions developed by the SII, in topics such as intergenerational transfer of wealth, especially in relation to High Net Worth taxpayers,” said Saravia.

Last year there were 4,590 money orders issued, with a paid amount of $47,337 million. Of that total, around 98% corresponds to High Net Worth taxpayers.

In the 2020-2021 period, prior to the changes, There were 3,392 money orders issued, while between 2022 and 2023 the number increased by 181%, totaling 9,539 money orders. In amounts, it went from $56,437 million to $138,799 million.

Tax experts say that This strong increase is due to the factor described by the SII, but also to the regulatory changes that were present in the rejected tax reform of the current government. and that now are also still present in the project of compliance with tax obligations.

Rodrigo Winter, partner in the Legal and Tax Area of ​​PwC Chile, stated that the rejected project “modified some inheritance and donation tax rules related to the tax base.” of certain assets such as real estate and the different tax base that applies between personal and capital companies, which is why many taxpayers chose to make donations before the rejected project came into effect. He also said he “contemplated a wealth tax. This implied that some taxpayers donated assets to their descendants, advancing the inheritance tax and paying gift tax, in order to not be subject to said tax.

Javier Jaque, leading partner of CCL Auditores Consultoresindicated that in his opinion there are two factors that explain the increase: “The first is the inspection plan and automation by the SII and for the inheritance tax, while as a second element, the tax reform proposed at the beginning of the Gabriel Boric government stands out, where it was proposed modifications in the donation tax”. While, Ignacio Gepp, partner of Puente Sur, He highlighted that “the tax administration seems to have abandoned its passivity regarding the inspection of the inheritance tax, and is moving towards a proactive model, where “They approach the heirs to present their tax obligations.”

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