The President of Chile, Sebastián Piñera, emphasized on Wednesday two important milestones in the economic reactivation plan "Paso a Paso, Chile se Recupera" (step by step, Chile recovers), which focuses on small- and medium-sized enterprises. These are the tax measures to reactivate the economy law, which will become effective shortly, and the bill to modernize the law on insolvency and business resumption.
“SMEs are the soul of our middle class, the main source of jobs and the driving force throughout Chile,” said President Piñera. He was accompanied by Economy Minister Lucas Palacios, Labor Minister María José Zaldívar and Interior Minister Víctor Pérez.
The tax measures to reactivate the economy law promoted by the Government seeks to support small- and medium-sized enterprises by increasing liquidity and encouraging investment.
The initiative reduces the income tax rate for SMEs from 25% to 10% on taxable income during the period 2020 to 2022, which will mean that this sector will pay the lowest tax rate of the last 30 years. Another measure is that the VAT paid on goods and services between January and May by companies whose turnover has reduced by at least 30% will be refunded. Instantaneous depreciation will also be extended to 100% of fixed asset purchases for the whole country until the end of 2022. Furthermore, there will be additional assistance for taxi drivers, the drivers of shared taxis, known as “colectivos”, and freight hauliers, as this sector has been amongst the most severely affected during the last few months.
“The plan to recover jobs and stimulate our economy has a fundamental pillar, which is supporting and encouraging SMEs,” said the President.
The President also sent a bill to Congress to improve the current law that governs the Reorganization and Liquidation of Businesses and Individuals, by creating a new simplified process that will eliminate audit costs, reduce supervisory costs, streamline processes and reduce timeframes.
The law will establish a new simplified liquidation process for micro-, small- and medium-sized enterprises and sole traders, which will allow the debtor to keep their assets until they are sold and eliminate the requirement to own assets in order to initiate the procedure.
“In order to recover jobs and incomes and get our economy up and running, we must encourage the forces of freedom and creativity, and the ability of our SMEs, companies and all Chilean citizens to innovate, start up businesses and invest,” the President said. He was speaking after signing the bill to modernize the insolvency and business resumption law. He also emphasized the contribution of small- and medium-sized enterprises to economic development, as they currently generate 60% of the jobs in Chile.
Since March, the Government has been implementing a range of tax measures designed to support household income and inject liquidity into businesses. Over 30 tax measures have been put in place, which include: early tax refunds; the postponement of tax payments such as VAT and property taxes; a temporary reduction to 0% in stamp duty. Furthermore, municipalities have been granted special powers to postpone the collection of payments for local business and alcohol sales licenses.