WORLD TRADE  
ORGANIZATION  G/SCM/N/186/CHL 
27 October 2009 
 
 (09-5331) 
Committee on Subsidies and 
Countervailing Measures Original:   Spanish 
 
 
 
SUBSIDIES 
 
New and Full Notification Pursuant to Article XVI.1 of the  
GATT 1994 and Article 25 of the SCM Agreement  
 
CHILE 
   The following notification, dated 15 October 200 9, is being circulated at the request of the 
delegation of Chile. 
 
_______________ 
 
 
TABLE OF CONTENTS 
 
Page
 
 
I. TAX CREDIT FOR INVESTMENT IN THE PROVINCES OF ARICA AND 
PARINACOTA (REGION I)................................................................................................... 2 
II. EXEMPTION FROM FIRST-CATEGORY TAX UNDER THE INCOME TAX 
LAW ON FISCAL-YEAR PROFITS OF MANAGEMENT COMPANIES AND USERS IN THE FREE ZONES IN THE CITIES OF IQUI QUE (REGION I) 
AND PUNTA ARENAS (REGION XII)................................................................................. 3 
III.
 FUND FOR THE PROMOTION AND DEVELOPMENT OF REMOTE 
AREAS.......................................................................................................................... ............. 5 
 
 G/SCM/N/186/CHL 
Page 2  
 
  I. TAX CREDIT FOR INVESTMENT IN THE PROVINCES OF ARICA AND 
PARINACOTA (REGION I) 
1. Title 
 Tax Credit for Investment in the Provin ces of Arica and Parinacota (Region I). 
 2. Period 
 To July 2009. 
 
3. Objectives 
 To reverse the declining economy of the provi nces of Arica and Parinacota, making use of 
both their advantageous geographical position fo r trade purposes and their tourist attractions, 
strengthening entrepreneurship and conso lidating Arica as an inter-ocean corridor. 
 
4. Background and authority 
 Background
:  Arica and Parinacota, as outlying provin ces, are at a disadvantage in relation to 
the development of the rest of the country. 
  Authority
:  Law No. 19.420, published in the Offici al Journal of 23 October 1995, amended 
by Laws Nos. 19.478 (Official Journal of 24 October 1996) and 19.669 (Official Journal of 
5 May 2000).  Decree having Force of Law (DFL) No. 1 of the Ministry of Finance, published in the Official Journal of 11 September 2001, contains the revised, coordi nated and consolidated text of 
Law No. 19.420.  The latest amendment to this Law was by means of Law No. 20.268 of 
24 June 2008.  
5. Form of the subsidy 
 Tax credit in the form of a tax allowance. 
 
6. To whom and how is the subsidy provided 
 This incentive is for taxpayers with invest ment projects in the following amounts for the 
periods below:  
1. In the province of Arica: 
 
(a) 2008 and 2009:  1,000 UTM ($36,682,000, equivalent to US$63,177)
1; 
(b) 2010:  1,500 UTM ($55,023,000, equivalent to US$94,766); (c) 2011:  2,000 UTM ($73,364,000, equivalent to US$126,355). 
 
2. In the province of Parinacota, investments must amount to more than 1,000 UTM 
($36,682,000, equivalent to US$63,177). 
  The period for eligibility is up to 31 December of each year. 
                                                     
 
1 UTM at August 2009:  $36,792.  Source:  Central Bank. 
Average exchange rate of the Chilean  peso to the US dollar in the period January-July 2009:  $580.62.  
Source:  Central Bank.  G/SCM/N/186/CHL 
 Page 3 
 
 
   The beneficiaries are entitled to a tax credit of 30 per cent of the value of certain 
non-convertible assets, namely, buildings, machin ery and equipment, including immovable property 
intended primarily for commercial exploitation for tourist purposes, directly tied in with the 
production of goods or the supply of services of th e taxpayer's business or activity, purchased new or 
finished in the financial year. 
 
 For investment operations carried out in Parin acota, the tax credit is 40 per cent.  The same 
percentage is applied to investments made in Arica in immovable property intended primarily for 
commercial exploitation for tourist purposes, and id entified as being of particular interest by the 
Director of the National Tourism Service. 
 
 Taxpayers are also eligible for this credit if th ey invest in the construction of buildings for use 
as offices or dwellings, whether or not they incl ude business premises, car pa rks or shops, consisting 
of more than five units, in places specified in the Law, with a built area of not less than 1,000m2 and 
completed or built during the financial year. 
 
 The taxes are forgiven by de ducting the credit from the first-category tax payable as from the 
trading year of the purchase or construction of the property.  
7. Amount of the subsidy 
 In 2008, the tax credit, estimated in term s of tax revenue forgone, was calculated at 
Ch$10,000 million (equivalent to US$17,222,969).
2 
 
8. Duration 
 This incentive became effective, retroactiv ely, as from 1 January 1995.  The period for 
eligibility is up to 31 December 2011. 
 
 The benefit will apply only in regard to assets incorporated in the investment project on any 
of the above-mentioned dates on which the benefit is still effective, although the credit may be 
recovered up to the year 2034.  
9. Statistical data 
 No data available. 
 
II. EXEMPTION FROM FIRST-CATEGORY TAX UNDER THE INCOME TAX LAW 
ON FISCAL-YEAR PROFITS OF MANAGEMENT COMPANIES AND USERS IN THE FREE ZONES IN THE CITIES OF IQUIQUE (REGION I) AND PUNTA 
ARENAS (REGION XII) 
1. Title 
 Exemption from first-category tax under th e Income Tax Law on fiscal-year profits of 
management companies and users in the free zone s in the cities of Iquique (Region I) and Punta 
Arenas (Region XII).  
                                                     
 
2 Average exchange rate of the Chilean peso to the US dollar in the period January-July 2009:  
$580.62.  Source:  Central Bank. G/SCM/N/186/CHL 
Page 4  
 
  2. Period 
 To July 2009. 
 
3. Objectives 
 To stimulate the economic development of Region I and Region XII, so as to form an 
attractive area for investment, economic activ ity, settlement, growth and sovereignty. 
 
4. Background and authority 
 Background
:  These areas, because of their locati on and geographical features, are at a 
disadvantage in relation to the development of the rest of the country. 
 
 Authority :  The legal authority is contained in Ministry of Finance Decree No. 341, published 
in the Official Journal of 8 June 1977, the revised, coordinated and consolidated text of which is set 
forth in Decree having Force of Law No. 2 of the Ministry of Finance, published in the Official 
Journal of 10 August 2001. 
 
5. Form of the subsidy 
 In practice, the subsidy is a temporary financial benefit.  It is not equal to the overall amount 
of the tax exemption.   Indeed, the 1984 Income Tax Law provided for a first-category tax (on companies) and a 
second category tax (on natural persons).  Accordingl y, the owners of an enterprise may discount the 
amount of first-category tax paid (15 per cent on a company's annual profits) from the amount payable 
as second-category tax (a progressive tax that re presents a percentage of withdrawn profits).
3 
  Since the companies concerned benefit from first-category tax exemption, management 
companies and users in free zones have nothing to discount from their second-category tax and must 
therefore pay the full amount of this tax.  The benefit of the exemption therefore amounts strictly to the financial cost not incurred for the period betw een the time when the first-category tax became 
payable and the time (or times) when profits are withdrawn and the corresponding second-category tax becomes payable.  6. To whom and how is the subsidy provided 
 This incentive is for management companies a nd users (all legal persons) in the free zones of 
Iquique (Region I) and Punta Arenas (Region XII).  They must meet the requirements established by 
the Ministry of Finance and the Ministry of th e Economy, Development and Reconstruction, under 
contracts containing conditions freely ag reed on with the interested party. 
 
 These benefits also apply to manufacturing co mpanies already established or setting up in 
Arica and manufacturing companies in the Alto Hospicio district in Iquique.   Beneficiaries are exempt from the first-category tax under the Income Tax Law on fiscal-year profits. 
 
                                                     
 
3 The level of income considered for the second- category tax includes income other than withdrawn 
profits, such as salaries, etc.  G/SCM/N/186/CHL 
 Page 5 
 
 
  7. Amount of the subsidy 
 There are no official calculations of tax revenue forgone. 
 
8. Duration 
 This incentive took effect on 25 June  1975 for Iquique and Punta Arenas and on 
10 December 1976 for Arica.  In both cases it is of indefinite duration. 
 
9. Statistical data 
 No statistical calculation has been made to assess the trade effects of the subsidy. 
 III. FUND FOR THE PROMOTION AND DEVELOPMENT OF REMOTE AREAS 
1. Title 
 Fund for the Promotion and Development of Remote Areas. 
 
2. Period 
 To July 2009. 
 
3. Objectives 
 To contribute to the development of the disadvantaged regions of Tarapacá, Aysén, 
Presidente Carlos Ibáñez del Ca mpo, Magallanes and the Chilean Antarctic territories and the 
provinces of Chiloé and Palena, by providing assistance to small and medium-sized investors wishing 
to invest or reinvest in production in these remote regions. 
 
4. Background and authority 
 Background
:  Being in outlying regions and provinces, these areas are at a disadvantage in 
relation to the development of the rest of the country. 
 
 Authority :  This fund was created by virtue of Articles 38 and 39 of Decree Law No. 3.529 of 
the Ministry of Finance, published in the Official Journal of 6 December 1980.  Decree No. 15 of the Ministry of Finance, published in the Official Journal of 20 April 1981, lays down the terms and 
conditions of this fund.  
 Decree having Force of Law No. 15 entered in to effect pursuant to a budgetary note 
(No. 50-01-02-33-01-002) incorporated in the Public Sector Budget Law for 2009 (Law No. 20314).  
5. Form of the subsidy 
 Direct transfer. 
 
6. To whom and how is the subsidy provided 
 Funds may only be accorded for investments by small and medium-sized investors, and 
producers of goods and services in the sectors of constr uction, machinery, equipment, special animal 
feed and small-scale fishing.  The annual amount of individual investment or reinvestment must not G/SCM/N/186/CHL 
Page 6  
 
  exceed 50,000 UF ( unidades de fomento  - Chilean inflation-indexed monetary units)
4, equivalent to 
US$1,804,853.5  Funds granted under this programme may not be accepted together with any other 
benefit granted by the Government of Chile for the same goods or services.   This fund makes a contribution of 20 per cent of the cost of investment or reinvestment made 
up to 31 December 2009.  The benefit is renewed from year to year under the Budget Law. 
 
7. Amount of the subsidy 
 For 2009, the Budget Law has estimated th e maximum amount to be paid out at 
Ch$1,274 million (equivale nt to US$2,194,206).
6 
 
8. Duration 
 This facility is available until 31 December 2009.   The benefit is renewed from year to year 
under the Budget Law.  9. Statistical data 
 No data available. 
 
__________ 
 
                                                     
 
4 Value of the UF at 31 July 2009:  20,958.67. 
5 Average exchange rate of the Chilean peso to the US dollar in the period January-July 2009:  
$580.62.  Source:  Central Bank. 
6 Idem .