1. Spending Measures (Budget Allocations)
The Chilean Government elaborated an Emergency Economic Plan that contemplates fiscal resources for up to USD$11.75 billion, which is equivalent to 4.7% of the Chilean Gross Domestic Product (GDP).
The purpose of the injection is:
i) Strengthening the Health System Budget.
ii) Protecting Chilean household’s income.
- Enactment of the Job Protection Act with the purpose to reduce working hours, and setting off the drop-in salary with resources from the Unemployment Support Fund of State and Employer Contributions.
- Covid-19 Bonus: Family Income Support Bonus for recipients of certain family subsidies (for the 60% of the most vulnerable population).
- Creation of a Solidarity Support Fund that will be distributed through Municipalities.
iii) Implement tax and economic measures to give liquidity to companies, SMEs and workers.
2. Tax Measures (Deferral of Payroll Tax Obligations, Extensions of Tax Filing Deadlines)
From the tax perspective, the Emergency Economic Plan considers the following measures:
- Suspending the obligation to make Provisional Monthly Payments (PPM) for the months of April, May and June 2020.
- Deferral of the payment of VAT corresponding to the months of April, May and June 2020, allowing its payment in 6 or 12 monthly quotes with 0% interest rate. This measure applies to companies whose sales are less than USD$11,6 MM.
- Advance payment of income tax refunds requested by companies classified as SMEs (with sales of less than USD$2,5 MM). The refund is anticipated for the month of April.
- Extension of the deadline to pay the income tax declared by the SMEs in the next income operation (April) until July 2020.
- Deferral of the payment of the Real Estate Tax corresponding to the month of April for: (i) companies with sales under USD$11,6 MM and (ii) individuals with properties with a tax assessment under USD$153,000. The deferred contribution will be paid in three quotas, together with the following three contribution quotas, with an interest rate of 0%.
- Temporary reduction of Stamp Tax to 0% for all credit operations. This measure applies during the next 6 months (April to September).
- More flexibility to celebrate agreements for the payment of tax debt with the Chilean General Treasury, without interest or fines. This measure applies to SMEs and people with lower incomes.
- Acceptance as tax expenditure of all those expenses that companies have to incur in connection with the health emergency caused by the COVID19.
- Extension of deadlines for submitting several affidavits associated with this tax year’s operation.
In addition, the Chilean IRS has enabled the execution of several administrative procedures remotely on its website.
3. Subsidies to Preserve Jobs, Employee Benefits, Food Assistance
The Employment Protection Act recently enacted, allows to workers in Chile, who are unable to work due to the coronavirus pandemic, to continue receiving a part of their wages, accessing the benefits of a Public Unemployment Insurance during this emergency period.
Even though that Schools are closed, public feeding programs are ongoing, providing food services to students.
4. Public Loan Guarantees and Expansion of Loans to Businesses
- Expansion of governmental guarantees for loans to micro, small and medium-sized companies.
- Capitalization of the state-owned Banco Estado for USD$500 MM with the purpose to provide financing to individuals and SMEs.
5. Student Loan Relief
- The Ministry of Education denied the possibility to suspend students loan payments.
6. Insolvency Law Relief
Currently, there are no amendments to the Insolvency Law (Chilean Insolvency Act No. 20,720), which provides to companies three alternatives to resolve their financial difficulties: (i) Reorganization; (ii) Pre-packaged Agreements; and (iii) Liquidation.
1. Reduction of Interest Rates
The Chilean Central Bank reduced the monetary policy interest rate by 1,25 basis points, to 0.5%.
2. Expansion of Central Bank’s Holdings of Government Bonds
The Chilean Central Bank implemented a set of additional measures aimed at give liquidity to the economy and support the flow of credit.
i) Establishment of the Credit Facility Conditioned to the Increase in Placements (FCIC), as special financing facility for banking companies, supplemented by the activation of the Liquidity Credit Facility (LCL) subject to special terms and conditions, both in domestic currency (Chilean Peso).
ii) Corporate bonds will be included within the eligible collaterals for all liquidity operations in Chilean pesos in force, including the FCIC.
iii) A program of purchase of bank bonds will be initiated to the participants of the SOMA system (Open Market Operations System) for an equivalent amount up to 4 billion dollars.
3. Other Measures to Support Flow of Credit
The Chilean Financial Market Commission (CMF) announced five measures to promote the flow of credits to individuals and companies:
i) A regulatory exception for banks that facilitates deferring up to three installments in the payment of mortgage loans without new provisions.
ii) A regulatory exception for banks to extend credits term until 6 months to individuals and SMEs, without considering this as a renegotiation for provisions purposes.
iii) Use of surplus mortgage guarantees to guarantee loans to SMEs.
iv) Exceptional authorization of an extension of 18 months to banks to sell assets received in payment.
v) Modification to the treatment of the amount in cash that the banks must constitute as a guarantee for the margin of variation of derivative operations compensated bilaterally. With this, there would be a significant reduction in the capital charge associated with derivative contracts, which stimulates its use, precisely, in periods of higher volatility in the exchange rate.
4. Suspension of Foreclosures/Evictions
The Congress approved a bill proposed by the Ministry of Justice and Human Rights, which establishes extensions for the evidentiary terms of judicial proceedings and suspension of non-essential hearings, which would have an impact on the judicial procedures of execution. mortgage and eviction. However, there is no a general suspension of judicial foreclosures nor evictions.
5. Reductions/Suspensions of Mortgage Payments
See section 3) i) below.
Some Banks are offering to their clients the possibility to suspend mortgage payments, on a voluntary basis.
6. Asset Purchases (Liquidity Facilities, Purchase of Private and Public Sector Securities, Acquiring Equity of Larger Affected Companies)
7. Exchange Rate Adjustments
The Chilean Central Bank extended the term of the Currency Sales Program until January 9, 2021, with the purpose to intervene the exchange rate USD / Chilean Pesos (CLP).
1. Social Distancing
The Chilean Government adopted the following social distancing measures:
i) All public events with more than 50 people are forbidden indefinitely.
ii) All individuals that travel from countries classified as High Risk by the World Health Organization will must to be quarantined for 14 days upon entering the country.
iii) Mandatory Quarantine for some specific borough (communes) in Chile continental (mainly in the Metropolitan Region) and Easter Island.
iv) National mandatory quarantine for aged 80 years or older.
v) Enactment of an Act that regulates remote work.
2. Closure of Public Places for Gathering
Restriction on mobility measure (curfew) from 10:00 p.m. and 05:00 a.m.
3. Closure of Non-Essential Businesses
Since March 19, all permanent shopping malls are closed indefinitely, except banks, pharmacies, supermarkets, medical centers and home supply stores.
In addition, non-essential businesses, such as cinemas, theaters, restaurants, pubs, discotheques, gyms are closed indefinitely, and sports events cancelled or suspended.
4. School Closures
Classes have been suspended in all educational levels, both in public and private institutions, until April 12. The continuity of studies is being promoted online.
Chile is a member of the Forum for the Progress of South America (PROSUR), in which the countries issued a joint statement to share criteria in decision-making in the management of the emergency caused by the Covid-19.
i) Constitutional State of Catastrophe
A State of Catastrophe was decreed by the Government for 90 days from March 19, 2020.
The Chilean Government announced that the Ministry of Energy reached an agreement with the electricity distribution companies to implement a contingency plan that will support Chilean families to pay their electricity cost during the State of Catastrophe.