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BlogTax Basics Full accounting and actual income: the requirement many companies overlook

Published in Tax Basics 3 min read

Author: NovaTax Team at NovaTax

Many companies come to the R&D Law with a good project and find out too late that they don’t meet a prior requirement: their tax regime. Before designing anything, it’s worth checking.

The requirement

According to the law and Corfo’s FAQ, the benefit is open to individuals or legal entities subject to First Category Tax (Chile’s corporate income tax) that declare their actual income using full accounting, and that have a contract or project certified by Corfo.

These are three conditions that must all hold at once:

  1. First Category: the company pays the tax on income from capital and business activities.
  2. Actual income: it is taxed on the profits it really makes, not on presumed income.
  3. Full accounting: it keeps a complete accounting system, with a balance sheet and formal records.

Why the law requires it

There are two practical reasons:

  • The benefit works against First Category Tax. Without that tax, there’s nothing to offset the 35% credit against.
  • Corfo and the SII need to trace spending. The law requires project expenditure to be reflected accurately and clearly in the accounts. Without full accounting, that traceability doesn’t exist.

Who is left out?

  • Employees and freelancers paid on fees, who are taxed under Second Category.
  • Taxpayers on presumed income, who aren’t taxed on their actual profits.
  • Companies under regimes without full accounting.

What about SMEs under the Pro Pyme regimes? A University of Chile study (Weber, 2022) noted that these regimes were in practice excluded from the incentive and that that year’s tax reform bill proposed including them. Since these regimes have variants and different accounting options, check your company’s exact regime with your accountant before applying.

What to do if you don’t qualify today

  • Consider changing regime. If your company plans to invest in R&D over time, moving to a regime with actual income and full accounting may make sense. It’s a tax decision with wider effects, so analyse it with an adviser.
  • Consider a joint project. If another company in the project meets the requirements, it can claim the benefit on its own contribution. See Joint projects.

On top of that: the project’s accounting system

Meeting the tax requirement isn’t enough. From the moment you submit the application (or the notice of intent), Corfo requires the company to run a financial and accounting system that accurately and clearly reflects project spending. In practice, that means:

  • A dedicated cost centre for the project.
  • Records of staff time allocation.
  • Invoices and proof of payment linked to every expense.

That traceability is the basis for later audits by Corfo and the SII.

This article is for information only and is not tax advice. Sources: Law 20,241, Certification Regulation (Supreme Decree 102/2012), Corfo’s FAQ and Weber (2022), University of Chile.