InnovaChile director Conrad Von Igel supports tax incentive acts. (Photo: innovacion.gob.cl)

Tax incentive for R&D investment

CHILE
Thursday, August 16, 2012, 02:00 (GMT + 9)

Next month the new Tax Incentive Act of Private Investment in Research and Development (R&D) will come into force, announced InnovaChile executive director of the Production Development Agency (Corfo), Conrad von Igel.

It is expected that the legislation would allow companies to recover up to 48 per cent of what they invest in R&D.

"Most developed countries have tax incentive acts to ensure that the private sector should lead this process," said Von Igel.

He explained that the idea of amending the R&D Act 20.241 -- which dates back to 2008 – came from the diagnosis that "in developed countries, in one way or other, all have had a common variable that is a high intensity of innovation, particularly in R&D."

InnovaChile director noted that the average expenditure on innovation in Chile is only 0.5 per cent of GDP, while in the Organization for Economic Cooperation and Development (OECD) it represents 2.4 of GDP.

A research project is "any methodical search designed to generate new knowledge in science or technology, being either basic or applied in nature," the norm states.

By development the regulation refers to "systematic work that builds on existing knowledge gained from research and/or experience to guide the production of new materials, products or devices; to the implementation of new processes, systems and services; or to the substantial improvement of the existing ones."

While the act was amended almost completely, the benefit of 35 per cent tax credit deducted directly from the first category tax was maintained.

The remaining 65 per cent of the amount invested in R&D may be considered necessary expenditure to produce the independent income of the company's business, La Segunda reported.

Von Igel made it clear that in applying the 20 per cent tax that companies pay to this 65 per cent, 13 per cent is obtained, which is a percentage that added to 35 per cent represents a total profit of 48 per cent. "In other words, almost half of what they spend, will be returned by the State via taxes," he stressed.

Other major changes included are the possibility of having a tax benefit for 'intramural' projects, that is to say, which will not need to hire an R&D centre to be run; and with which firms can perform up to 50 per cent of their expenditure abroad.

In addition, the new act eliminates the requirement as to the annual gross income ceiling and the ceiling is increased to 15,000 UTM (USD 1.2 million), Von Igel added.

By Analia Murias
editorial@fis.com
www.fis.com

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