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flag Chile Chile: Tax system

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information

 

Corporate Taxes

Tax Base For Resident and Foreign Companies
A corporation is considered resident or domiciled in Chile if it is incorporated in the country. To determine whether an entity is considered to have a permanent establishment in Chile or not, the substance-over-form principle applies, meaning even though domestic requirements are not met, the taxpayer corporation may choose to be treated as a local PE in order to be allowed to deduct its business expenses.
 

Tax Rate

Partially Integrated System (PIS): under this regime the shareholders or partners are taxed only on the actual distribution of dividends or profits by the company 27%
SMEs (sales up to USD 2,8 million approx.) full integration regime 12.5% for 2024 (should increase to 25% thereafter)
 
Tax Rate For Foreign Companies
Resident companies are taxed on their worldwide income, whereas non-domiciled or non-resident companies are taxed only on their Chilean-sourced income.
Final shareholders are subject to a 35% flat rate applied by way of withholding upon receipt of a taxable distribution. The tax on corporate income was totally creditable against the final tax in the SME regime, but only 65% is creditable in the partially integrated system. Nevertheless, foreign owners of a partially integrated system entity that are resident in a double taxation treaty jurisdiction are entitled to full credit as well.
Capital Gains Taxation
Capital gains are subject to standard corporate tax but may be exempt based on certain criteria: the length of time the shares are held, the usual or occasional nature of the purchase or resale of shares and the relationship between the seller and the buyer. In specific situations outlined by domestic legislation, preferential tax treatment applies to capital gains from certain securities, including stock of listed local companies, investment funds' quotas listed on authorized stock exchange markets, mutual funds' quotas invested in stock trade values, and investment funds' quotas predominantly invested in stock exchange markets, with at least 90% of the portfolio dedicated to such investments.
Capital gains obtained upon the alienation of real estate may be considered as non-taxable income in certain cases.
Main Allowable Deductions and Tax Credits
Expenses linked to business interest, development, or maintenance, capable of generating income in the current or future commercial years, are typically tax deductible.
Deductible expenses include net operating losses, payments to foreign affiliates, and taxes (not including income taxes). Subject to conditions, interest expenses can be deducted. Under certain circumstances, bad debts and charitable donations (up to 5% of the company's net taxable income) can be deductible. The deductibility of payments made abroad for the use of trademarks, patents, formulas, consulting and other similar services is limited to a maximum of 4% of the income derived from sales and services in the corresponding year. Start-up expenses can be amortised over a six-year period. Fines, penalties and the respective legal costs incurred are deductible, subject to conditions.
Losses can be carried forward indefinitely, while carrybacks are not allowed.
Other Corporate Taxes
Other taxes include stamp tax (maximum 0.8%), municipal license fee (ranging from 0.25% to 0.5% on tax equity, up to a maximum of approximately USD 550,000), real property tax (1.4% in case of non-farming real estate and 1% for farming real estate, exemptions apply), payroll taxes (ranging from 0% to 40% of employees' remuneration), and social security contributions, as follows:

- a monthly 0.93% premium on remuneration for labour-related accident insurance
- 2.4% of the worker’s gross salary for compulsory unemployment insurance contribution
- a 1.61% premium for life and disability insurance
For job positions categorized as "heavy work," the employer is required to contribute an extra percentage to the employee's pension fund, ranging from 1% to 2%, with a cap set at a variable amount.

To determine these contributions, employees' taxable remuneration is assessed, capped at 81.6 UF (approximately USD 3,300), except for unemployment insurance, where the maximum taxable remuneration cap is 122.6 UF (approximately USD 4,950).

Other Domestic Resources
Internal Taxes Service (SII)
 

Country Comparison For Corporate Taxation

  Chile Latin America & Caribbean United States Germany
Number of Payments of Taxes per Year 7.0 28.2 10.6 9.0
Time Taken For Administrative Formalities (Hours) 296.0 327.5 175.0 218.0
Total Share of Taxes (% of Profit) 34.0 46.8 36.6 48.8

Source: The World Bank - Doing Business, Latest data available.

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Accounting Rules

 

Accounting System

Accounting Standards
Chile has adopted the IFRS (International Financial Reporting Standards) (for public companies and financial entities between 2009 and 2012 and for SMEs in 2013)
Accounting Regulation Bodies
Ministry of Finance
Accounting Law
The accounting rules are defined in the Código Tributario.
Difference Between National and International Standards (IAS/IFRS)
IFRS Standards are adopted as the national accounting standards of Chile
 

Accounting Practices

Tax Year
The fiscal year begins on 1 January and ends on 31 December of the same year (calendar year).
Accounting Reports
The basic financial statements include the balance sheet, the statement of income, the statement of cash flows and notes to the financial statements.
Publication Requirements
Companies have to produce their annual financial statement to the shareholders of the company. The account books must be published in Spanish and use the Chilean currency as reference.
 

Accountancy Profession

Accountants
The main representative body of Chilean accountants is the Chilean Association of Accountants (Colegio de Contadores de Chile).
Professional Accountancy Bodies
Colegio Contadores, Chilean Association of Accountants
Member of the International Federation of Accountants (IFAC)
Yes
Member of Other Federation of Accountants
The Chilean Association of Accountants is an active member of the Asociación Interamericana de Contabilidad (AIC) and the Confederación Iberoamericana de Contadores Públicos.
Audit Bodies
External audits are compulsory for companies with capital and foreign investors with repatriated profits. External auditors include Deloitte, KPMG, Ernst & Young, PricewaterhouseCoopers among others.
 
 

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Consumption Taxes

Nature of the Tax
Impuesto a las Ventas y Servicios o IVA (Value-Added Tax or VAT, in English).
Standard Rate
19%
Reduced Tax Rate
No reduced rates apply; however, certain products/services are exempt from VAT (see above).
Exclusion From Taxation
Various goods and services qualify for exemption, including the sale of used motorized vehicles, imports by the National Ministry of Defense, specific real estate transactions, admission to artistic, scientific, or cultural events supported by the Public Education Ministry, premiums for or payments from life insurance contracts, exports, entry to sporting events, importation of cultural or sporting awards and trophies, freight to and from Chile, and importation of capital assets incorporated into investment projects in Chile, under specific conditions.
Exporters are exempted from the VAT on their foreign sales and have a right to a reimbursement for the VAT paid on goods and services acquired as part of their export activities.
Method of Calculation, Declaration and Settlement
VAT is charged on domestic supplies of goods and services, and on the import of goods. Registration for VAT purposes is mandatory, with no threshold. Declarations must be made monthly calculating the difference between the tax paid and tax credit, and payment must be made at that time.
Other Consumption Taxes
Specific items are subject to taxes imposed under the VAT law ranging from 10% to 50%, including jewellery (15%); alcoholic beverages (from 15% for fermented to 31.5% for distilled); soft drinks with high sugar content (18%); other natural or artificial soft drinks, including energy or hypertonic drinks (13%); and 50% over the first sale or import of pyrotechnic items.

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Individual Taxes

Tax Base For Residents and Non-Residents
Tax residence in Chile is established by residing continuously for six months in one calendar year or for more than six months, whether consecutive or not, over two consecutive calendar years. If domicile is established before residence, with the intent to stay permanently or for a significant period, regular taxation applies from the date of entry into the country.
 

Tax Rate

Personal Income tax (employment income) Progressive rates up to 40%
The rate depends on the annual tax units (ATU), whose value in CLP is revalued each month (click here).
ATU 0-13.5 Exempt
ATU 13.5-30 4%
ATU 30-50 8%
ATU 50-70 13.5%
ATU 70-90 23%
ATU 90-120 30.4%
ATU 120-310 35%
Beyond ATU 310 40%
 
Allowable Deductions and Tax Credits
In general, all expenses incurred in the employer’s sole interest are duly deductible (for example travel and lodging expenses and documented entertainment).
Individuals resident in the country may deduct the interest paid for mortgage loans destined to the purchase or construction of one or more dwellings (capped at 8 annual tax units). A deduction for voluntary pension contributions is also applicable for resident employees, within a limit of 600 annual tax units. Furthermore, Chilean residents may receive a credit of up to UF 4.4 (approximately USD 177) per child for educational expenses. This credit is gradually reduced to zero for taxpayers with combined annual incomes exceeding UF 792 (approximately USD 31,896) from both parents.
Special Expatriate Tax Regime
Foreigners working in Chile are subject to taxation only on their Chilean-source income during the first three years in Chile, after which worldwide income is taxed.
Resident foreigners are taxed on their salary, deducting social security contributions. Non-resident foreigners cannot deduct social security contributions before acquiring Chilean residence. Foreign individuals may be exempt from some local social security payments, provided they belong to a foreign social security entity system covering at least pension, disability, illness, and death.Prior to establishing residence, a flat 15% tax is typically imposed on activities categorized as technical or engineering work, or professional services, which individuals provide through reports, advice, or plan development. Different rates may apply for other activities or if the paying company is based in a tax haven.
Capital Tax Rate
Capital gains are generally taxed as ordinary income. Gains on the sale of various assets may be tax-exempt or subject to a reduced rate if certain conditions are met.
A
real property tax applies at a rate of 1.4% in the case of non-farming real estate and 1% for farming real estate (surcharges apply for properties with a total fiscal value above USD 530,000 approx.). Non-rural residential properties in Chile are exempt up to CLP 47,360,490 (approximately USD 50,000) and are subject to an annual tax rate of 1.2% on the cadastral value up to a certain threshold, and 1.4% on any excess. Permanent rates can be reduced by supreme decrees to offset increases in tax charges resulting from reassessment of government appraisal values, with potential surcharges. Owners of properties exceeding 670 annual tax units face a specific and progressive surcharge ranging from 0.075% to 0.425%.

Social security contributions paid by the employee amount to around 20% of gross salary, with a monthly salary cap of 75.7 fiscal units. Foreign individuals may be exempt from some local social security payments, provided they belong to a foreign social security entity system covering at least pension, disability, illness, and death.
Further contributions are required for unemployment insurance (0.6% contributed by the employee) and labour accidents and professional illness insurance (depending on the sector of activity and on the duties of the employee).
Chile does not apply any wealth tax. Inheritance tax is imposed on the net value of transferred assets, with rates varying based on the closeness of the relationship between the recipient and the deceased.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Servicio de Impuestos Interno - SII, See the list of the conventions signed (in Spanish)
Withholding Taxes
Dividends paid by Chilean entities to resident individuals are subject to a global complementary income tax at progressive rates that range from 0% to 40%. Profits distributed abroad to non-resident/non-domiciled taxpayers are subject to an additional withholding income tax of 35%
Interest: 0 (residents)/35% (4% in some cases, like for interest on loans granted by a foreign bank or international financial institution and by an insurance company or pension fund that complies with certain registration requirements)
Royalties: 0 (residents)/15% (invention patents, computer programs, utility models, industrial designs and drawings, blueprints or topography of integrated circuits, and of new vegetable varieties)/30% (trademarks, patents, formulae, and other similar services; and in case the beneficiary is resident in a jurisdiction with a preferential tax regime).

Special interest and royalties rates apply to residents of countries with which Chile has signed a double taxation treaty.

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Sources of Fiscal Information

Tax Authorities
Servicio de Impuestos Interno - SII, Internal Taxes Service
Ministry of Finance
Other Domestic Resources
National Customs Service
Central Bank of Chile
Country Guides
PWC Tax Guide - Chile

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Latest Update: July 2024