There’s a paradox at the heart of the R&D Law: the benefit is generous, but very few companies use it. The data shows it clearly.
A country that invests little in R&D
According to OECD data compiled in a University of Chile study (Weber, 2022):
| Indicator | Chile | OECD |
|---|---|---|
| R&D investment as % of GDP (2020) | 0.34% | 2.40% |
| Business share of R&D funding (2019) | 31% | 64% |
Chile is among the OECD countries that invest least in R&D, and businesses fund a much smaller share than elsewhere in the organization.
An incentive more generous than average
The curious part is that Chile’s incentive isn’t stingy. The OECD estimates an implied tax subsidy rate of 0.35 for Chile, against an OECD average of 0.17. In other words, for each peso invested in R&D, Chile’s tax support is comparatively high.
And yet almost no one uses it
| Indicator | Value |
|---|---|
| Incentive coverage across all companies (2015) | 0.02% |
| R&D-performing companies that use the incentive (2018) | 22% |
| Tax expenditure of the incentive as % of GDP | 0.003% (vs. 0.1% in the OECD) |
Even among companies that already do R&D, almost four out of five don’t use the benefit.
Why?
The study identifies several reasons, based on company surveys:
- Red tape: the reason for not applying for 22% of companies in 2018 and 17.9% in 2020. In a 2017 evaluation, 67% described the process as “cumbersome”.
- Lack of awareness: 18% in 2018 and 7.6% in 2020 didn’t know how to apply.
- Design: the benefit requires full accounting and taxation on actual income, and doesn’t refund unused credit, which leaves out many young companies operating at a loss.
- Confused concepts: many projects are rejected because they are innovation, not R&D. See Why Corfo rejects projects.
The result: a concentrated benefit
In 2021, 76% of certified companies were large. According to Corfo’s management report, in 2019 73% of taxpayers with certified projects were in the Santiago Metropolitan Region, which accounted for 88% of certified amounts. The northern and southern macro-regions had no certified projects that year.
Our take
The paradox isn’t explained by a lack of generosity, but by friction: the process is demanding, little known and hard for small companies. That’s also an opportunity. Companies that understand the instrument well and prepare a strong application get access to a benefit most of their competitors are passing up.
We discuss the specific barriers for small companies in SMEs and the R&D Law.
This article is for information only and is not tax advice. Sources: Weber (2022), “Incentivo tributario de la Ley I+D en Chile: aspectos críticos de su diseño”, University of Chile; Corfo, R&D Law Management Report 2020.
What is the UTM, and why is Chile's R&D Law measured in it?
A 100 UTM minimum, a 15,000 UTM cap, a 10 UTM fee: the R&D Law speaks in UTM. What this unit is, how it is updated and how to use it in your calculations.