On January 21, 2026, the Chilean Internal Revenue Service (SII) issued Ruling No. 146, which sets criteria on disbursements associated with partners who work in the company and receive a business salary. The SII starts from a relevant doctrinal assumption: a partner receiving a business salary does not, in principle, have the status of a dependent worker. From there, it determines which payments qualify as necessary business expenses to generate income and which do not. The margin for error lies in the details.
What happened
The Ruling responds to a query about the tax treatment of certain payments when a partner is on the payroll with a business salary rather than under a Labor Code employment contract. The distinction is nuclear: without a relationship of subordination and dependence, the rights inherent to an employment relationship do not arise.
The SII established two categories.
The first, payments that are not accepted as necessary business expenses:
- Severance pay (indemnización por años de servicio): The partner with a business salary has no employment relationship under the Labor Code. The labor obligation to pay severance does not exist. Therefore, the disbursement lacks the legal or contractual cause required by Article 31 of the Income Tax Law to qualify as a deductible expense. The SII is categorical: it is a disallowed expense.
- Unemployment insurance (Seguro de Cesantía, AFC): Same reasoning. If there is no employment relationship, there is no obligation to contribute to the AFC. The payment lacks a legal basis and is not deductible.
The second, payments that may be accepted, subject to conditions:
- Meal and transportation allowances: The SII does not automatically reject them. It states that they may be deductible if: (i) they are reasonably tied to the partner's activity in the company, (ii) they are properly documented, and (iii) they do not constitute a disguised distribution of profits. The assessment is case by case.
- Business salary itself: Deductible under Article 31(6) of the Income Tax Law, provided it corresponds to the partner's effective and permanent work in the company and its amount is proportional to the services rendered. The SII does not set a specific cap, but disproportionate amounts risk reclassification as disguised profit distribution.
What this could mean for your company
If your company has partners on the payroll with a business salary and you are paying severance provisions or AFC contributions for them, those items are at immediate risk of being classified as disallowed expenses. The consequence: not only is the deduction reversed, but Article 21 of the Income Tax Law applies — a 40% penalty tax on amounts that do not qualify as necessary expenses and that benefit the partners.
The practical impact goes beyond the tax adjustment. Many companies structure partner compensation packages that mirror employee benefits without verifying whether each component has a legal or contractual basis. This Ruling draws a bright line: if the obligation does not exist under the Labor Code or the partnership agreement, the payment is not deductible.
For meal and transportation allowances, the standard is more flexible but requires documentation. A fixed monthly allowance with no connection to actual expenses or the partner's business activity is vulnerable to challenge. An allowance tied to documented business meals or actual commuting costs has a better footing.
There is a gray area worth monitoring: partners who simultaneously have a business salary and an employment contract for different functions. The SII did not address this scenario in Ruling No. 146. If your company uses dual structures, the tax treatment of each payment component should be assessed separately.
What you can do
- Review the compensation structure for every partner with a business salary. Identify which components — severance provisions, AFC contributions, allowances, bonuses — have a legal or contractual basis and which do not. Remove or restructure items that lack support before the next tax audit.
- Document the basis for meal and transportation allowances. If you pay these to partners, ensure they are tied to actual business activity, proportional, and supported by receipts or a documented methodology. A blanket fixed allowance without supporting evidence is the weakest position.
- Assess the Article 21 exposure. Calculate the potential penalty tax on any payments that may be reclassified as disallowed expenses. If the exposure is material, consider a voluntary correction before the SII initiates a review.
If you need to review your partner compensation structure or assess your Article 21 exposure, schedule a consultation with Cubillos Lama
This content is for informational purposes only and does not constitute legal advice for any specific case.