LAW NO. 20.493 CREATES A NEW SYSTEM OF PROTECTION FOR THE TAXPAYER IN THE FACE OF VARIATIONS IN THE INTERNATIONAL PRICES OF FUELS Having present that the National Congress has given its approval to the following bill, Bill: TITLE I Of the Mechanisms for the Protection of the Taxpayers of the Specific Taxes to the Fuels established in Law No. 18.502.-Repealed. Repealed. Article 1 °.-Repealed. TITLE II of the System for the Protection of the Contributor to Variations of Fuel Prices.-Repealed. Repealed. Article 2 °.-Repealed. Article 3 °.-Repealed. TITLE III of the Taxpayer's Protection Insurance against Variations in Fuel Prices Article 4 °.-Authorization to hire hedges. Authorize the Fisco to hire insurance or cover necessary to cover the volumes of fuel consumption indicated in Article 1 of this Law, subject to the Specific Taxes set out in Law No. 18.502, estimated by the National Energy Commission and previously informed by the Ministry of Finance. The mechanism will be called "Taxpayer Protection Insurance against Variations in Fuel Prices." By means of one or more supreme decrees, signed by the Ministry of Finance, an insurance system shall be established, consisting of the hiring of the financial coverage referred to in the preceding paragraph and the provisions that are necessary for its operation. The President of the Republic, by means of the supreme decrees indicated in the preceding paragraph, shall establish rules for determining the type of financial coverage that may be contracted, whether "call" options, "put" options or options that combine payment profiles for both, buying or selling them. These options may only refer to the fuel prices mentioned in Article 1 of this law for those fuels authorized to be marketed in Chile. They may also be applied at the price of other fuels, provided that such prices exhibit similar behaviour to those of the previous ones and that they are also traded on markets with a high volume of transactions in relation to the operations of the Fisco. The prices mentioned above may be expressed in Chilean currency and in currencies of general acceptance of the international markets of changes to the date of the contract, provided that in the same contract the same currency is used to define the price exercise and the average price that is compared to the exercise price to determine compensation. The compensation and the premiums may be defined in a third currency, provided that this is the Chilean or a general acceptance in the international markets of changes to the date of the contract. For each of these contracts, the maximum difference between the date of recruitment and the last date of financial year shall be 18 months. Similarly, in each contract the minimum difference between the date of recruitment and the first date of financial year shall be two months. The exercise price of the options shall be calculated on the basis of the average of the fuel prices corresponding to the respective coverage contract for at least eight consecutive weeks in the period from the date of subscription and the date of exercise of the option. In addition, none of the exercise prices of a single "put" option sold by the Ministry of Finance, either simple or combined, may be higher than the average referred to below by ten percent, and none of the exercise prices of the same option. "call" option that is purchased by the Ministry of Finance, either simple or combined, may be lower than the average rate raised by ten percent. For "put" options and for options that combine "put and call" option payment profiles, only those classes of options that are authorized through a Ministry of Finance office, which must be specific to the each new class authorized. Within the next 15 days, the Minister of Finance shall send a report to the Special Committee on Budgets, which justifies such authorization. A regulation, issued by the Ministry of Finance, signed by the Minister of Energy, will establish the procedures for the procurement, security, supervision and control of these operations. These procedures will have for the sole purpose of hiring those options that combine to achieve the minimum cost and the maximum coverage for the covered consumers, considering also the security of compliance of the counterparts. The same regulation shall establish the mechanisms for periodic information to the public, concerning the contracting and evolution of these operations. In any case, the operations, including their evolution, must be informed within thirty days of the end of the respective calendar semester, to the Special Committee on Budgets. In the case of contracts covered by hedges approved in accordance with this law, it shall be required, at least, that each "put" and combined option to be sold shall avoid committing payments which exceed, on each date of financial year, the product of the physical quantity of fuel covered by this contract for 15% of the average price, for a number of weeks which may be chosen from eight to twenty-six, without the final week of that period being before the eighth week prior to the respective date of the fuel to which the option refers. Also, the net sum of all the premiums payable and received in the same week for the same fuel shall not exceed 4% of the average import parity price of that fuel in the last two weeks, multiplied by the estimated physical demand for that week of the fuel subject to Specific Tax. When the Ministry of Finance projects that this restriction has significant potential to be breached, it must take measures to ensure that the contracts entered into below achieve a reasonable assurance that it will be fulfilled. The Ministry of Finance must provide coverage on a continuous basis, except that due to serious and exceptional circumstances it is not possible or advisable to contract it, such as, by way of example, in case a significant number of the Insurance providers for variations in international prices of high credit rating fuels do not offer the Ministry of Finance such insurance in the form and volumes in which it requires them to provide the cover required, or that there are indications of conduct which is against free competition on the part of such suppliers or entities supplying essential information to such insurance providers, among others which are determined on the basis of a supreme decree signed by the Ministers of Finance and Energy. The decree shall also determine the period during which the obligation to provide continuous coverage shall be suspended, which shall not be less than three months. After one month after the suspension of the continuous coverage has materialised, the variable component of the Excise Taxes laid down in law N ° 18.502 shall be determined again in accordance with Article 3 of Title II of this Law. Similarly, the second stage provided for in this law will be reinitiated again on the next date when the Ministry of Finance for the first time is required to choose whether or not to cover the previously contracted Title III mechanism. From Thursday of the week following that date, the variable component established by Article 3 ° shall be equal to zero and shall apply the variable component set out in Article 5 of Title III of this Law. In the or the supreme decrees referred to in the third indent of this article, the following matters shall be regulated: (1) The determination of the formula to estimate the number of options to be bought and, or to sell and its scope. The variables relating to physical quantities of products subject to the Specific Tax must have a prior report from the National Energy Commission; 2) The periodicity with which the options and the periods and periods of exercise will be contracted, settlement and payment of premiums which they may have; 3) The criteria for choosing the formula used to create the most recent available projection of the expected consumption that pays Specific Tax, for each fuel, provided for in Article 5 ° next. These projections should have a prior report from the National Energy Commission; 4) The criteria for determining the frequency of the dates for the exercise of the options, and 5) The criteria for selecting and diversifying the counterparties in the case of options contracts, which minimise the risk of non-compliance. DELETED PARAGRAPH. The representation of the Fisco in the negotiation and subscription of contracts and operations carried out in compliance with this article may be delegated by the President of the Republic to the Minister of Finance, and by this, in turn, in the officials whom he himself designates. The Ministry of Finance may contract the provision of support services for the management of insurance or hedges. A regulation, issued by the Ministry of Finance, shall establish the requirements and procedures for the procurement, supervision and control of these support services. The National Energy Commission shall provide the Ministry of Finance with the advice it needs in relation to the protection mechanism referred to in this law, as determined by the supreme decrees adopted in accordance with this law. Article. The Commission shall also send, in the form specified in the Regulation, to the The Ministry of Finance information referred to projections of the expected consumption covered by the Specific Tax, for each fuel, the prices of these in the international market and the specifications of quality to be considered for the procurement of hedges, in order to enable the Ministry to determine the options to be contracted. If there is a balance of premiums payable for previously contracted 'call' options, the time limits for which are expiring, and if the outstanding balance exceeds the maximum ceiling set out in Article 4 (9) for the net sum of the all the premiums to be paid and received in the same week for the same fuel shall be reduced by 100% of the outstanding balance of the sum of the net allowances not yet transferred to the consumer, if any, and premiums received in the same week for the sale of "put" options, if any. The remaining balance will be covered by the Fisco. Article 5 °-Definition of the Variable Component of the Specific Taxes set out in Law No. 18.502, in the Insurance of Protection. In the second stage, with the protection insurance for price variations, the variable component of the Specific Taxes to the Fuels will be determined as the Net Payment of the options assigned to each fuel in that week, divided by the amount of the respective fuel covered by the protection insurance and weighted by the degree of coverage. The Net Payment of the options assigned weekly to each fuel will be calculated as the sum of the net cost of the premiums paid and received that week, minus the net settlement that would correspond to that week of exercising the options corresponding to the same fuel and the compensation of options sold for that fuel, according to the respective contracts. The following taxes and specific tax credits of variable rate, to the fuels referred to in Article 1 of this Law, which shall be applied mainly through the tax, shall be established for the benefit or the tax charge, as appropriate. New variable component of the Excise Taxes set out in Law No 18.502: 1) If the Net Payment is positive for a fuel, that fuel will be taxed by a tax, the amount of which per cubic meter will be equal to the Net Payment divided by the most recent projection available from the expected consumption covered by the insurance protection and weighted by the degree of coverage, for that same fuel. The variable component of the Specific Tax shall be equal to the value of that tax which shall be added to the base component. 2) If the Net Payment is negative for a fuel, it will operate a tax credit for that product, the amount of which per cubic meter will be equal to the absolute value of the Net Payment divided by the most recent available projection of the expected consumption covered by the protection insurance and weighted by the degree of coverage, for that same fuel. The variable component of that specific tax will be that tax credit and this value will be subtracted from the base component. 3) If the tax credit is greater than the base component, the absolute value of the difference between the two will be paid by the Service of the Treasury to the importer or seller in the first sale in Chile, as established in the regulation that is dictated. 4) The compressed natural gas for vehicle consumption will be taxed or receive a tax credit whose amount per thousand cubic meters will be equal to the amount of the tax or credit, as appropriate, of the liquefied petroleum gas for consumption vehicle in the same period multiplied by 1,5195. This tax or credit shall be the variable component of the compressed natural gas specific tax and shall be added to or subtracted from the base component, as appropriate. These amounts will be calculated for the first time on Tuesday of the following week at the beginning of the second stage, they will govern from the first day of the following week and will be modified each time a new Neto Payment is determined. The Specific Tax to be applied to fuels will be reported by the Internal Revenue Service at the latest on the Thursday of the week in which it begins to govern. The amount of the Specific Tax will be expressed in UTM/m3 in the case of automotive gasoline, diesel oil and liquefied petroleum gas, and in UTM/1,000m3 in case of compressed natural gas, and will be calculated as set out in the regulation to be dictated to the effect. For the purposes of this article, the period of seven consecutive days, the beginning and end of which shall be determined by the respective decree, shall be understood per week. The variable component of the Specific Tax will have the same treatment with respect to the Value Added Tax as the one applied to the Specific Tax. Also, the payment provided for in issue (3) of this Article shall be added to the selling price for the purposes of calculating the value added tax. TITLE IV of the Oil Price Stabilization Fund Article 6 °.-Amendments to the Oil Price Stabilization Fund. Amend the law N ° 19,030, which creates the Oil Price Stabilization Fund, as follows: 1) Enter the following amendments to Article 2: (a) Add, in the sixth indent, following the expression " will restrict to the first decimal ", the expression", rounding the rest ". (b) Substitute, in the ninth indent, the paragraph beginning with the phrase "This shall be calculated" and to the end point, by the following: " This shall be calculated for the first time within the week of publication of this law, considering the prices average observed in the previous week and will be governed from the day of the following week. The price of parity shall be fixed once a week, in the light of the average price observed in the previous week and shall enter into force on the Thursday following its fixing. ' (c) The latter shall be replaced by the following: " Orders to be issued pursuant to the provisions of this Article shall be executed from the date specified therein. "2) Replace Article 5 °, by the following:" Article 5 °.-For all the effects required by this law, the National Commission Energy will estimate weekly resources available from the Fund, as well as weekly consumption expected average over the next 12 weeks, hereafter, also "q". The Minister of Finance to increase, by decree issued under the formula "By order of the President of the Republic", the Fund in 5.4 million dollars of the United States of America, by means of one or more transfers of resources (3) Amend Article 6, as follows: (a) Eliminate in point (a) of the first subparagraph, the expressions following the sentence 'shall be equal to the difference between the two prices', the comma (,) that follows the word "prices" to be a separate point (.). (b) Intercalase the following second indent: "The temporary protection (T) parameter indicated above shall be equal to 12." (4) Replace Article 8 °, by the following: "Article 8 °.-The provisions of this law shall apply only to domestic kerosene." FINAL PROVISIONS Article 7 °.-Facultact to the Treasury Department to transfer to the Single Fiscal Account the balances of the specific sub-funds of automotive gasoline, diesel oil, liquefied gas and petroleum oils created under the Law No 19,030, which creates the Oil Price Stabilization Fund. Article 8 °.-The expenditure that this law will incur will be attributed to the item 50, Public Treasury, of the Public Sector Budget Law. TRANSITIONAL PROVISIONS Article 1.-During the first stage, the variable component of the Fuels Specific Taxes laid down in Law No 18.502, shall be determined in accordance with Article 3 of Title II of this Law. The second stage shall be initiated on the date on which the Ministry of Finance for the first time is responsible for choosing whether or not to cover the previously contracted Title III mechanism. From Thursday of the week after that date, that variable component established by Article 3 ° shall have a value equal to zero and shall apply the variable component established by Article 5 ° of Title III of this Law. The Ministry of Finance will inform on its electronic page the first procurement in the framework of the insurance mechanism of the Taxpayer Protection against Variations in the Fuel Prices indicated in Title III, within 3 days the following working conditions of the contract. Article 2.-To count of the tax return of the month after the publication of this law and until the declaration of the month of June 2011 for the operations carried out in May of that year, the taxpayers of the Tax to the Value Added that they have the right to recover the Fuels Specific Tax and whose annual income from the previous calendar year, by sales, services or other activities of their rotation, have been less than 60,000 monthly tax units, must be recovered only in the amount of the specific tax equivalent to the component basis, without considering the variable component. Until the June 2011 declaration for the operations carried out in May of that year, to calculate these amounts, these taxpayers will not have to add to their income those obtained by those who have been related in the terms of the Article 20 (1) (b) of the Law on Income Tax. They will also be required to recover the Specific Tax on Fuels, in the terms indicated in this article, those taxpayers of the Value Tax. Added that they start activities between January 1, 2011 and June 30, 2011, and that they do not have revenue from sales, services or other activities of their turn during the previous year. Such recovery shall be effected in the manner specified in this Article, up to that tax return for the operations carried out in May 2012. From July 2011 until July 2013, in each calendar month, the guitarianism of 15,000 monthly tax units referred to in the fifth paragraph of article 1 of this law will be replaced by the guarism resulting from subtracting 60,000 units. Monthly taxes the amount of 1,800 monthly tax units for each month since June 2011, up to the figure of 15,000 monthly tax units in July 2013. During the last two working days of each month the Internal Revenue Service shall publish on its website the guitarianism of the fifth indent of Article 1 ° that shall govern for the purchase of fuel during the three calendar months. the following and the guismos that they governed in the previous six months. " Article 3.-The minimum validity provided for in the fifth indent of Article 2 ° shall be two weeks, the first time the indicated parameters are fixed. Article 4.-Until 30 June 2014, inclusive, the maximum values of the parameters "n" and "s" referred to in the fifth indent of Article 2 of this Law shall correspond to fifty-two weeks, and the minimum values of both parameters will correspond to four weeks. Article 5.-Until 30 June 2014, inclusive, the percentage referred to in Article 2 (7), seventh indent, shall be 10%. Article 6.-Until 30 June 2014, including the decree referred to in the second sentence of Article 2 (8), it shall be valid for at least four weeks. And because I have had to approve and sanction it; therefore, promulgate and take effect as the Law of the Republic. Santiago, January 25, 2011.-SEBASTIAN PINERA ECHENIQUE, President of the Republic.-Felipe Larraín Bascunan, Minister of Finance.-What I transcribed to you for your knowledge. Salutes atte. to you, Rodrigo Alvarez Zenteno, Deputy Minister of Finance.-Laurence Golborne Riveros, Minister of Mining and Energy.