Chile’s new tax breaks set to stimulate R&D

The university–company link is difficult, said Eduardo Bitrán Copyright: Flickr/Pontificia Universidad Catolica de Chile

Send to a friend

The details you provide on this page will not be used to send unsolicited email, and will not be sold to a 3rd party. See privacy policy.

[SANTIAGO] Chilean companies investing in R&D will benefit from the government’s revised tax incentives approved by parliament last month (18 January).

The government hopes the improved laws — which extend tax relief to include on-site R&D — will push the private sector contribution to overall investment in R&D from 44 to 60 per cent by 2014.

To qualify, companies must carry out half of their R&D in Chile.

Prior to the changes just 73 research contracts — mainly in agriculture, aquaculture, the environment, fishing, forestry and infrastructure — were registered for tax relief since the law’s inception in 2008.

Under the old system companies were eligible only if they collaborated with research centres accredited by the Chilean Economic Development Corporation (CORFO).

The new law will also entitle companies to tax relief for capital depreciation of R&D infrastructure and for the expenses incurred in obtaining intellectual property rights. Project submission and evaluation procedures have also been simplified.

The relief remains unchanged at just over US$46 per US$100 invested, the highest among member states of the Organisation for Economic Cooperation and Development (OECD), but the maximum amount of tax relief has increased three-fold to US$1.2 million per year.  

Among OECD countries Chile invests the least in R&D: 0.4 per cent of gross domestic product compared with an OECD average of 2.3 per cent.

"This law will encourage some of the more than two thousand Chileans studying abroad to return to Chile to do research in the centres that will be built as a result," said economy minister Pablo Longueira.

Pablo Catrián, technical manager of the tax incentive programme, told SciDev.Net the improvements "will enhance the appeal for companies interested in R&D to create labs and departments on their premises".

Ricardo Fernández, innovation manager at El Volcan — a Chilean company that manufactures materials for the construction industry — welcomed the changes, which he said will stimulate investment in R&D. "It’s a major step forward. The previous system was too bureaucratic and there were few accredited research centres [in construction] and some of their facilities, such as laboratories, did not meet the company’s requirements."  

Eduardo Bitrán, a former minister of public works, said the inclusion of on-site R&D is valuable but he regretted that the changes did not include incentives for companies that hire university R&D centres or technological institutes.

"The university–company link is difficult. Therefore, specific encouragements are needed," he added.

A related bill going through Congress will simplify Chile’s intellectual property law and bring it into line with international standards.