On September 29, 2023, by means of the publication of Chile Decree No. 4 of January 25, 2023 (the "Regulation"), issued by the Ministry of the Environment (the "Ministry"), the Emission Compensation System for stationary sources subject to green tax (the “System”) entered into force. "Green Tax" is an annual tax triggered by the emission of particulate matter, nitrogen oxides, sulfur dioxide, and carbon dioxide into the environment that must be paid by establishments whose emission sources, individually or in total, generate 100 or more tons per year of particulate matter (PM), or 25,000 or more tons per year of carbon dioxide (CO2).
The System promotes the development of emission reduction projects which are previously approved or homologated by the Ministry pursuant to the standards set forth in the Regulation (the “Projects”). Each Project allows entities subject to Green Tax to purchase an "Emission Reduction Certificate” from the developer of the relevant Project certifying that the Project has complied with the applicable emission reduction standards set by the Regulation.
The relevant taxpayer is then entitled to present the purchased Emission Reduction Certificate before the Superintendence of the Environment (the "Superintendence") for the purposes of requesting a deduction in its total amount of declared contaminating emissions. In this regard, upon the presentation of the relevant Emission Reduction Certificate, the Superintendence may deduct the volume of emissions indicated in the respective certificate from the total amount of emissions declared by the taxpayer, for the purposes of determining the final amount of contaminating emissions that would be subject to Green Tax.
After the Superintendence has determined the final amount of contaminating emissions subject to Green Tax, it shall deliver such information to the Chilean Tax Authority (Servicio de Impuestos Internos) for the purposes of calculating the total amount of Green Tax that must be paid by the relevant taxpayer.
Taxpayers using the System to reduce the final amount of emissions subject to Green Tax must submit their request through a digital platform managed by the Superintendence. The term to submit such a request expires on the last business day of February of the year following the year of generation of the emissions reported by the taxpayer.
Finally, to be eligible for tax compensation under the System, taxpayers may only formulate requests based on Emission Reduction Certificates issued for reductions that occurred within a maximum timeframe of years prior to the taxable emissions declared.
During its first stage of implementation, it is expected that the System will operate with certificates previously validated by international programs recognized by the Ministry.
