Chile: Tax system

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	25% from 2023 (was 10% for years 2020-2022)

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. Gains derived from certain securities are subject to a preferential tax treatment (i.e. investment funds’ quotas listed on an authorised stock exchange market, stock of listed local companies, mutual funds’ quotas if the fund invests in stock trade values, etc.).
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

In general, expenses incurred to generate taxable income can be deducted.
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 a stamp tax (maximum 0.8%), municipal license fee, 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 1.85% premium for life and disability insurance
- additional contributions depending on the risk of the employment activity, at rates of up to 3.4%.

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.

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.

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: Certain products and services are exempt, such as used motorized vehicles; importation of goods by the National Ministry of Defense; certain real estate transactions; admission to artistic, scientific or cultural events, sponsored by the Public Education Ministry; premiums for or payments from life insurance contracts; exports of goods; entrance to sporting events; importation of cultural or sporting awards and trophies; freight from other countries to Chile and vice versa; importation of capital assets incorporated to investment projects in Chile, under certain circumstances.
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 20.5% 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 (10%); and 50% over the first sale or import of pyrotechnic items.

Individual Taxes

Tax Base For Residents and Non-Residents: To be considered a tax resident, an individual must either spend six continuous months in the country during a single calendar year, or spend more than six months (whether consecutive or not) within a period of two consecutive calendar years. If domicile is acquired before residence and the intention is to remain in Chile permanently or for a significant period of time, normal taxation applies as of 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, parents are granted a tax credit against their personal taxes for expenses related to the primary and high school studies of their children.
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.
A non-resident flat tax can also apply for technical or engineering work or professional services that an individual renders through a report, advice, or plan development, at a rate of 15%.
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.).
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 levied on the net value of assets transferred, at rates varying according to the proximity of the relationship between the recipient and the deceased.

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: 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: 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.

Sources of Fiscal Information

Tax Authorities: Overview of Chile's tax measures in response to Covid-19
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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