This is a brief presentation that provides summarized information of how to do business in Chile. You can find information about trade, law, taxes, labor law, and social security.
1. General Comparative Advantages
- Sustained Economic Growth
- Rule of Law
- Moderate Taxation
- Active Government Support
- Low Corruption
- Good Infrastructure
- Quality of Life
2. Foreign Trade
- Free Trade Agreements with all major partners (e.g. USA, EU, China, EFTA, Canada, Mexico, Japan and South Korea)
- The FTAs cover a market of more than 4.8 billion consumers
- Customs duties for most products abolished or significantly reduced
3. Corporate Law
The most important corporate structures are:
a) The Sociedad Anonima (SA)
- Is based on shareholder’s capital.
- Foreigners may hold up to 100% of the shares.
- Liability limited to the contribution to the capital.
- No minimal capital.
- Administration by the board of directors.
- At least one representative with domicile in Chile.
b) The Sociedad por Acciones (SpA)
- Is very similar to the SA
- The structure is very flexible: the shareholders may incorporate specific agreements in the company’s bylaws
c) The Sociedad de Responsabilidad Limitada
- Based on the partnership of two or more individuals and/ or legal entities
- The partners may be foreigners
- Liability is limited to the contribution to the capital
- No minimal capital
- Administration by the partners or an elected representative
- At least one representative with domicile in Chile
The founding procedure:
- 30 days if the founders are in Chile.
- More if they are represented by proxy: Notarization and Legalization.
- Costs in Chile depend on the capital; a reasonable average is USD 1,000.00 excluding legal fees.
Other formalities include:
- Registration with the tax authorities (SII); taxpayers number (RUT).
- Declaration of initiation of business activities to the SII.
- Municipal Licence.
- Special permits.
4. Accounting and Reporting
- IFR-Standards apply for publicly traded SA
- All businesses must present their accounting to the tax authorities for control.
- No statutory auditors required.
- The Chilean Peso (CLP) is legal tender for all debts. CLP 1.000.- are worth approx. US$ 2.-
- Financial obligations are usually expressed in UF (Unidad de Fomento). At the current rate the UF is worth CLP 21.479,09 (February 3rd, 2011).
- Foreign exchange operations through authorized banks and exchange houses; formal exchange market.
5. Currency and Financial Transfer
- Business income tax (1st category): 17%
- Individual income tax (2nd category or complementary): progressive rate of max. 40%
- General tax on payments abroad: 35%
- License fees: 30%
- Advisory services: 30%
- Interests on loans from authorized banks: 4%, others 35%
7. Treaties on Double Taxation
- Gains taxed only in the state of domicile
- Limitation on taxation at the source:
- Dividends: 15%
- Interests: 5% loans from credit institutes; 15% others
- License fees: 5% use of equipment; 10% others
- Chile grants tax credits. Most of partners grant exemptions
- VAT of 19% on customary sale of goods and services.
- Services of employees and independent consultants (e.g. lawyers, tax consultants) are not subject to VAT.
- The VAT paid on imports may be used as a credit against the VAT on the sale.
9. Labor Law
- Severance payment: One month’s salary (with limit UF 60) per year of service with limit of 11 years.
- Liability for provider’s respect of labor law and social security law.
10. Social Security
- Pension plan: Contribution 10% of the salary plus commission established by the fund (average 2.6%)
- Health Care: Contribution 7%; max. 70 UF
- Unemployment: Employer’s Contribution: 2.4%; Employee’s Contribution: 0.6%
- Exemption from contributions based on treaty