10% Single Substitute Tax: How to Regularize STUT, FUR and Excess Withdrawal Balances.

The Bill for National Reconstruction and Economic and Social Development includes a single 10% tax, in substitution of final taxes, applicable to all or part of the balances accumulated in the Total Taxable Retained Earnings Balance ("STUT"), the Reinvested Earnings Fund ("FUR"), and Excess Withdrawals from the former Taxable Earnings Fund.

The mechanism would allow companies to anticipate and settle the pending taxation on earnings accumulated in the registries mentioned above. In the case of accumulated earnings, they may subsequently be withdrawn, distributed, or remitted without becoming subject to Supplementary Global Tax or Additional Tax. For excess withdrawals, which have already been materially received by the owners, payment of the substitute tax will allow their pending taxation to be definitively regularized, without any latent tax liability remaining.

Key concepts

Before analyzing the mechanics of the substitute tax, it is essential to understand the nature of the registries to which this benefit will apply. Both FUR and STUT are legacy tax registries that track historical corporate earnings still pending taxation under final taxes (Supplementary Global Tax or Additional Tax):

Total Taxable Retained Earnings Balance (STUT): a registry tracking the remaining taxable earnings accumulated under the former FUT regime, for which final taxes remain pending.

Reinvested Earnings Fund (FUR): a registry tracking amounts that, under the regime in force until December 31, 2016, were withdrawn from one company and reinvested in another, deferring final taxation for as long as they remained reinvested.

Excess withdrawals: amounts withdrawn by owners up to December 31, 2014 that, by exceeding the company's available earnings for the corresponding period, were not subject to final taxes at the time of withdrawal and whose taxation remains pending.

The substitute tax proposed by the Bill

Taxpayers holding balances eligible for the regime in STUT, FUR, and/or pending excess withdrawals may opt into the single 10% substitute tax.

The tax base will correspond to the STUT balance, the FUR balance, or the amount of pending excess withdrawals over which the company exercises the option, and may cover all or only part of such amounts.

Deadline to exercise the option. The option may be exercised within 8 months of the Law's publication. To this end, the taxpayer must declare and simultaneously pay the tax using the form established by the Chilean Internal Revenue Service ("SII"). Payment will be final and will settle the pending taxation under final taxes with respect to the amounts covered.

Particularities regarding the tax base and the tax itself

STUT balances. The rule states that the maximum amount eligible is the lower of the amount recorded in the taxpayer's RAI and the amount recorded in its STUT, both as controlled on December 31, 2025 or 2026, depending on the year in which the taxpayer uses the mechanism — so that if used during 2026, the RAI and STUT balances existing at the close of 2025 will apply, while if the option is exercised during 2027, the balances of those registries at the close of 2026 will apply.

The calculation therefore works as follows:

Amount 1 (STUT registry): STUT balance as of the corresponding December 31, less allocations made during the year the option is exercised, adjusted for inflation (IPC).

Amount 2 (RAI registry): RAI balance as of the corresponding December 31, less allocations made during the year the option is exercised, adjusted for inflation (IPC).

FUR and/or Excess Withdrawal registry balances. For both registries, the balance recorded as of December 31, 2025 or 2026 will be considered, depending on the date the option is exercised, for income still pending final taxation.

The tax base is then determined by considering the FUR or excess withdrawals existing at the close of the 2025 or 2026 fiscal year, depending on the year in which the taxpayer uses the mechanism — so that if used during 2026, the FUR and/or Excess Withdrawal balances existing at the close of 2025 will apply, while if the option is exercised during 2027, the balances of those registries at the close of 2026 will apply. In both cases, any withdrawals made during the year the option is exercised must be deducted from the eligible balance.

Calculating the tax

Once the tax base corresponding to the FUR, STUT, and/or excess withdrawal balances has been determined, the company will choose to cover all or part of it. The 10% rate applies to the amount actually covered:

Amount covered under the regime × 10% = single substitute tax payable.

Reduction of covered amounts and associated credits

Amounts covered by the tax must be deducted from their respective tax registries or controls.

Amounts covered by this substitute tax must be deducted from the STUT and/or FUR balances recorded as of December 31, 2025 or 2026. For excess withdrawals, the covered amount must be deducted from the company's separate excess withdrawal control.

Covered amounts will not carry the right to the First Category Tax credit that would otherwise have applied under the general rules. Consequently, associated credits must be deducted from the corresponding SAC controls. For excess withdrawals, where applicable, the First Category Tax credit associated with the covered amounts must be deducted from the SAC registry.

Effects of the tax return and payment

Upon declaring and paying the single 10% tax, the pending taxation under final taxes with respect to the covered amounts will be deemed fully settled. This will produce the following effects:

FUR and STUT earnings: will not be deemed withdrawn, distributed, or remitted merely by opting into the substitute tax. Once the tax is declared and paid, they must be recorded as income with settled taxation in the REX registry — that is, the control column for these earnings shifts from STUT or FUR to REX.

Subsequent withdrawal or distribution: amounts originating from FUR and STUT may subsequently be withdrawn, distributed, or remitted without being subject to the general allocation order established under the Income Tax Law.

Remittances abroad: when amounts originating from FUR or STUT are paid, remitted, credited to an account, or made available to owners residing abroad, the corresponding Additional Tax withholding will not apply.

Excess withdrawals: payment of the substitute tax will allow their pending taxation to be definitively settled and deducted from the company's historical control record.

For FUR, covered amounts must be deducted from the tax cost basis of the corporate rights or shares acquired through reinvestment, as applicable.

Treatment of the tax and associated expenses: the substitute tax and any financial expenses or other disbursements incurred to opt into the regime must be deducted from the very income subject to this tax, and may not be used as an expense in determining Net Taxable Income subject to First Category Tax.

Conclusion

While this is a voluntary mechanism that has already been used in previous reforms — and has therefore already considerably reduced the balances of old retained earnings held by taxpayers — many companies still hold accumulated STUT, FUR, and Excess Withdrawal balances, having not availed themselves of previous voluntary processes, and now have a significant new opportunity to do so.

There will be an 8-month window for interested parties to opt into the 10% rate in place of normal taxation, making it an attractive rate for taxpayers wishing to plan earnings withdrawals for the coming years, since there is no obligation to actually withdraw the funds at the time the mechanism is used.

Before exercising the option, it will be necessary to review the correct determination of available balances, allocations made during the fiscal year, applicable adjustments, and the credits that must be deducted from the corresponding tax registries or controls. This review will require a coordinated analysis of each company's legal, tax, and financial background.