Chile country tax guide

Spanish. Though technically documents contained in other languages must be officially translated into Spanish, we have seen the Chilean tax authorities accepting documents in English, or having them translated informally. 

Currently, corporate income tax rate amounts to 27%. To the extent dividends are distributed to a country that has a double tax treaty with Chile, then they will be subject to a 35% withholding tax, with a full credit for corporate income tax paid, thus, the overall income tax burden amounts to 35%. If that is not the case, the credit would be partial, and the overall income tax burden would amount to 44.45% (for foreign resident taxpayers) or a 0% to 44.45% Surtax (for individuals resident in Chile).

Exceptionally, small or medium companies are subject to a transitory 10% rate corporate income tax (commercial years 2020, 2021, and 2022) and then to a permanent rate of 25% from thereon, that can be fully used as a credit against final taxes (i.e. non-resident withholding tax or Surtax).

Corporate wealth tax

Companies are subject to an annual tax rate of 0.25% to 0.5% of their tax equity. The effective rate will depend on the commune in which the company is domiciled.

Dividends remitted from a Chilean company to a non resident individual are subject to a 35% withholding tax, while dividends received by Chilean tax resident individual must be included in the basis of its Surtax, which has a progressive rate ranging from 0% to 40% rates.

Dividends distributed within Chilean companies are exempt from corporate income tax.

Interest paid by a Chilean company to a non-tax resident is generally subject to 35% withholding tax. However, such rate may be lower, such as in the case of having the effective beneficiary of the payment in a country that has a double tax treaty with Chile, in which case the rate is limited to a 10% or 15% depending on the treaty country, or it can even lower to 4% rate if the effective beneficiary is a foreign bank or financial institution Interest expenses are deductible in the calculation of the taxable 
basis of corporate income tax.

Capital gains from the sale made by a Chilean company, of whether a Chilean company or foreign company, is generally subject to ordinary taxation, i.e. 27% tax rate. However, if the target company is tax resident of a treaty country, a tax rate limitation may apply to 16% or 17%, depending on the treaty country, and to the extent certain requirements are met.

As mentioned above, small to medium Chilean companies are subject to a transitory 10% rate corporate income tax (commercial years 2020, 2021, and 2022) and then to a permanent rate of 25% from thereon, that can be fully used as a credit against final taxes (i.e. non-resident withholding tax or Surtax). Corporate bodies with a charitable, non-profit or religious purpose are exempt from corporate income tax.

The individual’s tax residence is either established by a domicile (determined by the animus to stay in Chile) or their residence which means staying for 6 months or more within a two calendar year period.

Chilean tax resident individuals are subject to 0% to 40% annual progressive by tranches Surtax.

There is no joint taxation regime for married couples or individuals living under a civil union. 

Explained above.

Small to medium companies have a reduced corporate income tax and will generally give the right to a full credit of corporate income tax paid against final taxes.

Foreign treaty tax residents can fully use the corporate income tax paid (even by big taxpayers) against the non-resident withholding tax for an overall income tax burden of 35% (as opposed to 44.45%)

In the north and south poles of our country we have free trade zones, where there is no corporate income tax and sales are not VATable.

Private investment funds incorporated in Chile are generally not subject to corporate income tax.

There is still no personal wealth tax in Chile, though there is currently a bill being discussed in Congress to levy individuals with personal wealth over USD 22m with a wealth tax rate of 2,5% to be applied only once.

Gift and inheritance tax rates range from 0% to 25%. If the heir is family related it can deduct USD 41,000 from its tax basis.

Chile does not offer golden visas for passive investment.

Generally, third country nationals may obtain different kind of visas. They generally enter with a temporary visa of one year (extendable to another year) or work visa (for two years). They can opt for a permanent residency after two years. 

No.

Foundations are a common vehicle in Chile. It is a separate legal entity that uses contributed assets to fulfil a certain purpose defined by it’s founder. The founder transfers his assets to the private foundation and thereby loses his ownership. It is generally used for social interests’ goals (cultural, socioeconomic, etc).

Trust are rare in Chile. The tax legislation contains reporting obligations, but it has not qualify – for 
example – the nature of the transfer of assets from the settlor to the trustee. Foreign trust are incorporated to deal with inheritance tax.

Foundations cannot be lucrative (any profit must be reinvested; it cannot benefit the founder). While it is generally not a corporate income taxpayer, such tax may apply depending on certain circumstances.

Is to soon from the time in which trusts were somewhat regulated in our law to consider whether it will have tax advantages and/or disadvantages.