How to do business in Chile

Can a local company be 100% held by foreign resident shareholders?

Yes. 

What are the main legal forms of companies in your country?

Non-resident individuals and companies can operate in Chile in one of the following ways: 

• By appointing a representative 
• By registering an agency or branch of a foreign entity  
• By setting up a company by shares (“Sociedad por Acciones”) 
• By a partnership or a corporation, in which case it is required to have another partner or shareholder (“Sociedad de Responsabilidad Limitada” o “Sociedad Anonima”)  
• By an individual limited liability company (only applicable to natural persons) (“Empresa Individual de Responsabilidad Limitada”).  

Must the managing director of the company be a resident and/or a national of your country?

No.

Are there any foreign exchange rules applicable to foreign investment in your country? If yes, please explain briefly?

No.

Are there any Central Bank rules applicable to foreign investment in your country?

Regulations apply to investors who make foreign exchange operations related to credits, deposits, investments and capital contributions coming from abroad. The procedure is applied to the operations whenever the amount is greater than USD 10,000 or the equivalent in other foreign currencies.  

Foreign currencies must be brought into the country through the Formal Exchange Market (FEM), composed of banks and authorised exchange houses.  

The foreign investor must inform the Chilean Central Bank of the investment, through a retail bank or the intervening financial institution, according to the terms and conditions contained in Chilean regulations.  

However, foreign currency can also be disbursed directly abroad, in which case the Central Bank must be informed directly by the interested parties, normally within the first 10 days of the following month.  

How long does it take to incorporate a company?

Usually about 3 weeks; in emergency situations it can be done faster. 

What are the main taxes applicable to all businesses in your country?

All taxes in Chile are levied at the national level. There are no significant municipal, provincial or regional taxes, except for the Municipal Licence.  

• The principal sources of tax revenue are:  
• Corporate income tax: the general corporate tax rate is 27% 
• Personal income tax: personal income tax rates are marginal and can be as high as 44.45% 
• Value-added tax (VAT): the rate of 19% is applicable to services and the sale of goods and construction projects 
• Customs duties: general 6% rate 
• Stamp tax: general 0.08% one-time rate. 

In addition, the Chilean tax system includes a real estate tax, inheritance and gift tax, and several other less important taxes. 

What is considered a permanent establishment in your internal law? Is it different from the classical OECD definition of article 5?

It is defined in internal law and is very similar to the classical OECD definition.

Are there any thin capitalisation rules?

Yes, in the event that a loan is considered “related” and is subject to any of the reduced rates under a double taxation agreement or by provision of law, thin capitalisation rules would apply. 

In the event that there is an “excess debt”, consisting of a ratio between the total debt and the taxpayer’s own capital greater than 3:1, thin capitalisation rules will apply; and interest on the excess debt with related parties is taxed at the level of the debtor company with a 35% single tax that will be charged to the debtor. 

Are there any stamp/registration duties payable upon injection of equity? Same question on intra-group loans.

There is no stamp or registration duty upon the injection of equity. However, higher equity will usually trigger a higher municipal licence tax which is calculated on the tax equity of a company and has a maximum rate of 0.005%. 

Intra-group loans are levied with a one-time stamp tax with a general rate of 0.08%. This rate can be lower in certain circumstances. 

Is there a withholding tax on dividends?

Yes, currently all treaty countries will have an effective tax rate of 35%, while non-treaty countries will usually have an effective tax rate of 44.45% 

Is there a withholding tax on interests?

Yes, the general rate is 35%, notwithstanding tax treaties. The rate can be as low as 4% for foreign financial institutions and other entities.  

Is there a withholding tax on services paid to foreign suppliers?

Yes, services are taxed with a general rate of 35%. Technical services are taxed with a rate of 15%. 

How many tax treaties does your country have to date? Please list the main countries (notably EU) with which your country has a tax treaty in force.

There are 35 tax treaties in force. Currently, double taxation treaties are in force with the following countries:  

• (EU) Austria, Belgium, Croatia, Czech Republic, Denmark, France, Ireland, Italy, the Netherlands, Poland, Portugal, Spain and Sweden 
• (non-EU) Argentina, Australia, Brazil, Canada, China, Colombia, Ecuador, India, Japan, Malaysia, Mexico, New Zealand, Norway, Paraguay, Peru,  Russia, South Africa, South Korea, Switzerland, Thailand, the UK and Uruguay.  

All these treaties are based on the OECD model, although they also include clauses proposed in the United Nations model. In addition, Chile has signed double taxation agreements with the UAE and the US which have not yet entered into force. 

What is the applicable rate of VAT/GST?

The applicable VAT rate is 19%. Exports are fully VAT exempt. 

Under your internal law, is a capital gain realised by a non-resident shareholder taxable in your country? If there is a minimum shareholding, please indicate the rate applicable.

Yes, the general rate is 35% calculated on the capital gain. There is no minimum shareholding. 

In case of change of control, is there a rule providing for the loss of tax carried forward losses?

No. This could occur in intra-group reorganisations. 

Are there indirect sale rules incorporated into the tax legislation of your country? Please explain briefly.

Capital gains obtained from the direct or indirect disposal of shares, quotas, bonds or other securities convertible into shares or corporate rights, or other rights representative of a company incorporated in Chile, are also considered as Chilean source income, whether they are disposed of by a seller domiciled in Chile or abroad. In the case of indirect disposal of shares, certain additional requirements must be met. There are minimum thresholds which trigger this tax. 

Are international reorganisation processes considered a taxable event in your country when, directly or indirectly, the ownership of entities located in your country is modified but remains as part of the Group Company? Are there any exceptions?  

International reorganisations may be tax exempt if certain requirements are met.