The Chilean Internal Revenue Service issued Letter No. 1127, clarifying the mechanism under the Sales and Service Tax Law (LIVS) that allows first-category taxpayers to obtain early refunds of VAT credits arising from fixed asset acquisitions.
The clarification was requested by a company operating under the general pro-small and medium-sized entity (SME) regime.
The Tax Agency explained that:
- Under the Income Tax Law (LIR), companies under the pro-SME regime may immediately and fully depreciate physical assets classified as fixed assets during the fiscal year in which the assets are acquired or manufactured, provided the assets form part of the company’s fixed assets and correspond to amounts effectively paid
- Fixed assets are assets intended for use rather than ordinary commercial trading, and the LIVS requires such assets to consist of tangible movable or immovable property
- Immediate depreciation under the LIR does not change the nature of the assets as fixed assets and does not prevent application of the VAT refund mechanism where the legal requirements are satisfied
The guidance clarifies the interaction between depreciation rules and eligibility for early VAT credit refunds related to fixed asset investments.
Source: File
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