Voluntary System for the Declaration and Repatriation of Foreign Capital.

The so-called National Reconstruction Bill (Message N°018-374), hereinafter the "Bill", has continued to advance through the legislative process and is currently before the Senate.

The Bill includes a special framework to encourage the voluntary declaration of assets and income held abroad that have not fully complied with their applicable tax obligations (hereinafter the "Voluntary System"). Those who use it will be subject to a flat rate of 10%, replacing the standard taxation that would otherwise have applied to such income or assets. This rate is reduced to 7% if the taxpayer also decides to repatriate the assets or income to Chile, subject to certain deadlines and rules. This mechanism has been implemented in Chile before, with varying results: the 2015 process —which applied an 8% rate— raised over USD 1.5 billion, while the 2024 version —at 12%— raised only USD 94 million. Success depends not only on attractive tax rates but also on clear rules and reasonable deadlines. We believe the current Bill meets these criteria, and we summarize its key features below.

1. Deadline for Joining the Voluntary System

The Bill provides a 12-month window to join the Voluntary System. This period begins on the first day of the third month following the date on which the Bill is enacted into law.

2. Scope of Application: Eligible Taxpayers and Assets

2.1. Who may join the Voluntary System?

Both individuals and legal entities that were domiciled, resident, established, or incorporated in Chile prior to January 1, 2025 may join the Voluntary System. Those with pending tax assessments or audits from the SII (Chilean Tax Authority) in respect of the declared assets, as well as individuals who have been formally charged, prosecuted, or convicted for tax crimes, money laundering, or violations of the Constitutional Organic Law of the Central Bank, are excluded.

2.2. Declarable Assets and Income

Taxpayers may declare all types of assets or funds located abroad and acquired before January 1, 2025, including —for example— real estate, shares, foreign currency, crypto-assets, financial instruments, and interests in trusts or fiduciary arrangements. Income derived from the declared assets may also be declared, including dividends, profits, interest, and any other wealth increase generated by those assets up to December 31, 2025.

The Bill also clarifies that the following may be subject to declaration:

• Assets and income held abroad that, while subject to taxation in Chile, were not declared or taxed on time — even if they were previously reported for exchange-control purposes.
• Assets and income held abroad indirectly through agents, trusts, or other fiduciary arrangements.
• Assets and income located in Chile when the taxpayer is the beneficial owner through companies, entities, trusts, fiduciary arrangements, or agents established abroad.
• Assets and income that have not been taxed in Chile because they were not received under the Income Tax Law, or were not subject to Article 41 G of that law (passive income), or were not subject to any other provision requiring their recognition for Chilean tax purposes.

Anti-money-laundering and counter-terrorism-financing controls also apply: assets located in countries listed by the Financial Action Task Force (FATF) as high-risk or non-cooperative at the time of declaration cannot be included.

3. Tax Rate and Tax Base

Declaration without repatriation

Taxpayers who choose to declare their foreign assets and income without bringing them to Chile will be subject to a single, substitute tax of 10% on the market value of those assets and income.

Declaration with repatriation

Taxpayers who declare and also physically transfer their assets and income to Chile will qualify for a reduced single, substitute tax of 7% on the market value of those assets and income. In this case, the taxpayer must evidence the transfer of funds through the Formal Exchange Market within 3 years of the law's enactment and keep the capital invested in Chile for a minimum of 5 years. Taxpayers who choose to voluntarily recognize assets or income not yet required to be recognized under Chilean law may also access this 7% rate (applicable to passive income not yet required to be declared, unreceived operating income, and similar cases).

4. Inventory and Description of Assets and Income

Together with the sworn declaration, taxpayers must provide a detailed inventory and description of all declared assets and income, specifying their origin, nature, type, quantity, location, and the persons or entities holding them if they are not directly held by or in the name of the taxpayer — including those previously omitted or inaccurately declared. The SII may also require proof of ownership of the declared assets. Taxpayers who fraudulently use the Voluntary System to declare third-party assets face fines of up to 300% of the value of those assets and imprisonment.

5. Legal Effects of the Declaration

Twelve months after the taxpayer makes the payment associated with the voluntary declaration, it will be conclusively presumed that the declaration and supporting documentation were made correctly. As a result, all tax, civil, criminal, and administrative liabilities that may have existed with respect to the declared assets and income will be permanently extinguished. However, this benefit does not release the taxpayer from anti-money-laundering and counter-terrorism-financing reporting obligations, which remain enforceable.

6. Safeguards and Controls for Anti-Money-Laundering and Counter-Terrorism Financing

The Bill establishes control mechanisms focused on enforcement and the prevention of money laundering and terrorism financing. It authorizes the SII and the Financial Analysis Unit (UAF) to exchange banking information, granting the UAF unrestricted access to the relevant records. Additionally, the Bill requires the identification of ultimate beneficial owners, the submission of a detailed inventory including the origin of funds, and prohibits the declaration of assets located in countries listed by the FATF as high-risk or non-cooperative.

Conclusions and Recommendations

This transitional regime represents a genuine opportunity to regularize foreign-held assets, as it extinguishes by operation of law any prior civil, criminal, or tax liability under a strict confidentiality guarantee. Notably, failure to join the regime may be treated as an aggravating circumstance in tax fraud or crime cases under Article 97 N°4 of the Tax Code. Moreover, participation offers a meaningful economic incentive through the reduced 7% tax rate for those who choose to return or invest those assets in Chile. Given that the window is only twelve months and that participation requires well-documented, traceable information meeting the legal standards imposed by the regulation, we strongly recommend beginning eligibility reviews now and gathering the required documentation well in advance.