Chile Reforms R&D Law
| Author | Conrad Von Igel |
| Position | Executive Director, InnovaChile |
| Pages | 29-29 |
p. 29WIPO | MAGAZINE
CHILE REFORMS
R&D L AW
Empirical evidenc e shows a direct relationship bet ween a country’s level
of investment in resear ch and development (R&D) and its r ate of economic
growth and compe titiveness. In Chile, investment in R&D s tands at 0.4 percent
of the gross domesti c product (GDP), far below the average of cou ntries in
the Organisation for Economic Co-operation and Development (OECD), which
is 2.3 percent of GD P. In an effo rt to stimulate R&D investment, t he Chilean
Congress recently amended the country’s R&D law (Law 20.241), to expand
the tax credit available to foreign and domestic companies and introduce
greater exibility into the scheme.
Chile’s current law, enacted in 2008, encourages private investm ent in R&D by pro-
viding a tax credit of 35 pe rcent for expenditure on R&D contracts with pre-cer tied,
third party R&D centers. T he lack of uptake in using the scheme, however, has been
attributed to its many restrictions.
Under the new law, the tax credit ceil ing for each company has been triple d to
US$1.2 million per year. It further eliminates a provision in the 20 08 law limiting the
amount that could be claime d to 15 percent of a compa ny’s gross sale s. This did little
to encourage start-ups and sma ll and medium-sized enterprises (SMEs) to use the
scheme. Businesse s will now be able to claim tax relief for “in-house” R&D projects
as well as those developed ex ternally, and the new scheme has been extended
to include a broad range of expenditu re, including that associated with intellectua l
property (IP) protection. Al l IP protection expenses incurred in relation to obtain ing
and/or defending IP rights may now be clai med under the new scheme.
In an attempt to provide companies w ith more exibility in the development of R&D
projects, the new law also provides ta x relief on R&D activity under taken beyond
Chile’s borders. If less than 50 percent of a com pany’s R&D activity takes place
outside Chile, all related expens es are eligible for tax exemption. However, if more
than 50 percent of a company’s R&D expenses relate to projects ou tside Chile,
the tax exemption applies to all exp enses incurred for projects in Chile an d up to
50 percent of those relating to foreign R&D ac tivity. Thus, companies will be able to
benet from this tax cre dit while also taking advantage of specialize d R&D services
that may only be available internatio nally.
Under the 2008 law, companies were a ble to obtain their tax credit certic ate only for
pre-certied activities. The new amendments introduce more exible procedures that
allow companies to acquire the se certicates up to 180 days after the R&D project
has started, in line with OECD b est practices.
In introducing these chang es, Chile hopes to attract foreign compani es interested
in undertakin g R&D projects and to support domestic companie s by facilitating the
planning, approval and acce leration of R&D investment decisions. A key goal is to
provide more companies wi th the support they need to establish R&D depa rtments
and stable innovation routines, wi th a view to promoting the country’s productivity,
competitiveness and economic development. ◆
By Conrad Von Igel,
Executive Director, InnovaChile
To continue reading
Request your trial