Administrative jurisprudence (Official Letter SII No. 496 of 03.09.2020). Tax effects of the disposal of assets called “business opportunity” by a company domiciled abroad to a related Chilean company

Acts

An American company dedicated to the manufacture of industrial equipment is studying the possibility of selling and transferring to a related Chilean company its “business opportunities” with respect to mining projects in South America, made up of all commercial activities operated from the US in relationship with income-generating projects within the mining industry in South America, mainly comprising a list of active and potential clients, in which their historical data, past management, sales strategies, market and profile are identified, including contact information, previous purchases of projects, equipment and identification of spare or replacement parts necessary for the maintenance of these clients’ projects (with associated diagrams and schematics).

Consultant Opinion

The consultant considers that the convention in question is the sale of a right or intangible good (article 1793 of the Civil Code). Furthermore, it considers that the “business opportunity” qualifies as a business secret protected by the Industrial Property Law. Consequently, in their opinion, it would not be affected by income tax or VTA.

Interpretation of the SII

1. The income generated by the sale of the “business opportunities” created or authored by the foreign company is not from Chilean sources. It adds that “business opportunities”, whether or not they are of asset quality, the value or acquisition price paid by the Chilean company may be deducted from the RLI of the First Category Tax, complying with the corresponding requirements.

2. Regarding VTA, it is stated that “business opportunities” fall, in principle, only on elements that although they have relevance and economic value, are of an immaterial nature, which would exclude the application of the basic taxable event “sale”, a conclusion that could vary if the final operation somehow included movable or immovable tangible assets. Neither would the taxable event “service” or any of the “taxable events” established in article 8 of DL 825 be applied.