Latin America businesses set for tax changes

Businesses and accounting practices across Latin America are adjusting to upcoming changes to corporate taxes in two of the region’s biggest economies.

In Brazil, with less than a month before the election, the government announced new tax breaks for manufacturing companies operating abroad or exporting goods.

A nine per cent tax break for Brazilian food and drink, construction and services companies that operate abroad is to be extended to all manufacturing firms working outside the country.

As part of a package of reforms, finance minister Guido Mantega also announced that all manufacturing companies exporting goods will get a special tax refund in 2015 equal to three per cent of the value of their exports.

In addition, payroll tax breaks and subsidies for industry will be maintained next year. Mr Mantega also said the government will seek to reform Brazil's complex tax system.

Brazil slipped back into recession this year and with interest rates high, the measures are designed to sweeten businesses ahead of this October’s election.

Meanwhile, Chile has become only the second Latin American nation after Mexico to impose a carbon tax on companies. Businesses have been strongly opposed to the measure, which will increase the cost of doing business in the country as it means hiking corporate taxes and closing off certain tax exemptions.

Chile hopes to increase its tax take above current levels by more than three per cent of GDP to pay for social spending programmes.

Its main effect will see corporate taxes increase from 20 per cent. Firms will get to pick one of two options - they may pay corporate taxes of 25 per cent with personal taxes paid on an accrued basis or 27 per cent and personal taxes paid on a dividend basis.

In addition, the Taxable Profits Fund (FUT), which enables companies to enjoy tax exemptions on reinvested profits, will be ended in fiscal year 2018. After this companies will have to pay taxes on their total profit.