Tax Incentives for Industrial Property in Chile

Santiago Ortuzar,  May 2, 2024

Alessandri - The tax discussion in Chile has been a recurring topic, however, a key perspective has been neglected: a greater promotion of innovation and creation of intellectual property. Industrial property, which includes patents, trademarks and industrial designs, is an essential pillar for sustainable economic development and the improvement of living standards.

Tax incentives can be a powerful tool to boost the generation of industrial property. In the short term, these incentives translate into tax reductions that alleviate the immediate financial burdens on creators and inventors. However, their impact goes beyond that; in the medium and long term they contribute to economic growth by broadening the taxable base.

The increase in the number of high value-added companies diversifies our economy beyond the extractive industries. These new companies not only generate significant revenues but also expand the V.A.T. taxable base, and increase employment resulting in higher income tax revenues.

In addition, tax incentives encourage significant investments in research and development (R&D). This catalyzes innovation leading to the creation of advanced technologies and innovative solutions that raise Chile’s international competitiveness.

On the other hand, startups and entrepreneurs often lack the financial resources to protect their inventions. Tax incentives can reduce the costs associated with applying for and maintaining patents, which in turn encourages the creation of new companies and the generation of industrial property. These incentives can be in the form of third party investments, making it more attractive to invest in start-up companies that have a high technological element and need capital to develop.

Chile has for many years sought to increase private investment in R&D as an engine for economic growth. However, Chile’s R&D spending is still below the average for Brazil during the 1990s and close to the regional average for the same period, but well below OECD averages. In recent years, Chile has allocated approximately 0.33% of its Gross Domestic Product (GDP) to R&D spending.

To overcome this gap, I call on the authorities to review and strengthen our current tax incentives to make them more effective and oriented towards tangible results. We need well-structured policies that not only reduce tax barriers but also actively promote a culture rich in innovation and invention.

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