DBI Chile 2017

DOING BUSINESS IN CHILE
2017
Editors:
Africa: Ridha Hamzaoui, Emily Muyaa, Mei-June Soo

Asia-Pacific: Mei-June Soo, Nina Umar, Ying Zhang
Caribbean: Priscilla Lachman, Sandy van Thol
Europe: Khadija Baggerman, Larisa Gerzova, Adrián Grant Hap, Marjolein Kinds, Ivana Kireta,
Magdalena Olejnicka, Andreas Perdelwitz, Marnix Schellekens, Kristina Trouch, Ruxandra Vlasceanu
Middle East: Ridha Hamzaoui, Mei-June Soo
Latin America: Vanessa Arruda Ferreira, Maria Bocachica, Diana Calderon Manrique, Lydia Ogazón Juárez
North America: John Rienstra, Julie Rogers-Glabush
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DOING BUSINESS IN
CHILE
ARGENTINA
FEBRUARY 2017
JANUARY 2013
DOING BUSINESS IN CHILE 2017
INTRODUCTION
This publication has been prepared by the International Bureau of Fiscal Documen-
tation (IBFD) on behalf of BDO Member Firms and their clients and prospective cli-
ents. Its aim is to provide the essential background information on the taxation
aspects of setting up and running a business in this country. It is of use to anyone who
is thinking of establishing a business in this country as a separate entity, as a branch
of a foreign company or as a subsidiary of an existing foreign company. It also covers
the essential background tax information for individuals considering coming to work
or live permanently in this country.
This publication covers the most common forms of business entity and the taxation
aspects of running or working for such a business. For individual taxpayers, the
important taxes to which individuals are likely to be subject are dealt with in some
detail. We have endeavoured to include the most important issues, but it is not fea-
sible to discuss every subject in comprehensive detail within this format. If you
would like to know more, please contact the BDO Member Firm(s) with which you
normally deal. Your adviser will be able to provide you with information on any
further issues and on the impact of any legislation and developments subsequent to
the date mentioned at the heading of each chapter.
About BDO
BDO is an international network of public accounting, tax and advisory firms
which perform professional services under the name of BDO. The fee income of
the member firms in the BDO network, including the members of their exclusive
alliances, was US$7.6 billion in 2016. These firms have representation in 158
countries and territories, with over 67,700 people working out of 1,401 offices
worldwide.
BDO’s brand promise is built upon our vision, to be the leader for exceptional
client service – always, and everywhere. When you choose to work with BDO you
quickly discover why we’re different from the rest. BDO offers a comprehensive
collection of high quality tax services and assets designed to support exceptional
performance, and all our tax engagements benefit from the hands-on involve-
ment of experienced professionals, backed by world-class resources. We are agile
enough to handle the biggest and the smallest names in the industries we serve,
and our relationship-driven culture means that we can provide responsive and
personalised advice to all our clients.
We work hard to understand our clients’ businesses and ensure that we match
both our service offering and our people to their complex individual needs. We
believe that providing our clients with access to experienced professionals who
are actively engaged in addressing their tax and business issues is the most reli-
able way to provide exceptional service, always with a strong focus on trust and
transparency.
Regardless of your location, size or international ambitions we can provide effec-
tive support as you expand into new areas of the world. In an ever-evolving eco-
nomic environment, businesses need a global network that provides exceptional,
bespoke service combined with local knowledge and expertise. BDO is uniquely
positioned to serve this demand, providing effective support and a truly global
integrated global footprint.
3
TABLE OF CONTENTS
CORPORATE TAXATION .......................................................................... 9
INTRODUCTION ...................................................................................... 9
1. CORPORATE INCOME TAX ..................................................................... 9
1.1. TYPE OF TAX SYSTEM ....................................................................... 9
1.2. TAXABLE PERSONS .......................................................................... 11
1.2.1. Residence .......................................................................... 11
1.3. TAXABLE INCOME ............................................................................ 11
1.3.1. General ............................................................................ 11
1.3.2. Exempt income ................................................................... 12
1.3.3. Deductions ......................................................................... 12
1.3.3.1. Deductible expenses ................................................ 12
1.3.3.2. Non-deductible expenses .......................................... 13
1.3.4. Depreciation and amortization ................................................ 13
1.3.5. Reserves and provisions ......................................................... 15
1.4. CAPITAL GAINS .............................................................................. 15
1.4.1. Immovable property ............................................................. 15
1.4.2. Shares .............................................................................. 16
1.5. LOSSES ..................................................................................... 16
1.5.1. Ordinary losses ................................................................... 16
1.5.2. Capital losses ..................................................................... 17
1.6. RATES ...................................................................................... 17
1.6.1. Income and capital gains ........................................................ 17
1.6.2. Withholding taxes on domestic payments .................................... 17
1.7. INCENTIVES ................................................................................. 17
1.7.1. Accelerated depreciation ....................................................... 18
1.7.2. Foreign Investment .............................................................. 18
1.7.3. Capital gains on the alienation of shares .................................... 20
1.7.4. Special regime for income from bonds ....................................... 20
1.7.5. Funds ............................................................................... 21
1.7.5.1. Foreign investment funds .......................................... 22
1.7.5.2. Investment funds .................................................... 22
1.7.5.3. Risk capital companies ............................................. 22
1.7.6. Business platform regime ....................................................... 23
1.7.7. Research and development credit ............................................. 23
1.7.8. Credit for investment in tangible fixed assets .............................. 23
1.7.9. Benefits for reconstruction gifts .............................................. 24
1.7.10. Regional ............................................................................ 24
1.8. ADMINISTRATION ............................................................................ 24
1.8.1. Taxable period .................................................................... 24
1.8.2. Tax returns and assessment .................................................... 24
1.8.3. Payment of tax ................................................................... 24
1.8.4. Rulings ............................................................................. 25
2. TRANSACTIONS BETWEEN RESIDENT COMPANIES ......................................... 25
2.1. GROUP TREATMENT ......................................................................... 25
2.2. INTERCOMPANY DIVIDENDS ................................................................... 25
3. OTHER TAXES ON INCOME .................................................................... 25
3.1. SPECIAL TAX ON MINING INCOME ............................................................ 25
3.1.1. Taxable persons .................................................................. 26
3.1.2. Taxable income ................................................................... 26
3.1.3. Rates ............................................................................... 26
5
DOING BUSINESS IN CHILE 2017 TABLE OF CONTENTS
4. TAXES ON PAYROLL ............................................................................ 26

4.1. PAYROLL TAX .............................................................................. . 26
4.2. SOCIAL SECURITY CONTRIBUTIONS ........................................................... 26
5. TAXES ON CAPITAL ............................................................................. 27
5.1. NET WORTH TAX ............................................................................ 27
5.2. REAL ESTATE TAX ........................................................................... 27
6. INTERNATIONAL ASPECTS ..................................................................... 28
6.1. RESIDENT COMPANIES ....................................................................... 28
6.1.1. Foreign income and capital gains .............................................. 28
6.1.2. Foreign losses ..................................................................... 28
6.1.3. Foreign capital .................................................................... 28
6.1.4. Double taxation relief ........................................................... 28
6.2. NON-RESIDENT COMPANIES .................................................................. 29
6.2.1. Taxes on income and capital gains ............................................ 29
6.2.2. Taxes on capital .................................................................. 31
6.2.3. Administration .................................................................... 31
6.3. WITHHOLDING TAXES ON PAYMENTS TO NON-RESIDENT COMPANIES ........................... 31
6.3.1. Dividends .......................................................................... 31
6.3.2. Interest ............................................................................ 31
6.3.3. Royalties ........................................................................... 32
6.3.4. Other ............................................................................... 32
6.3.5. Withholding tax rates chart .................................................... 33
7. ANTI-AVOIDANCE ............................................................................... 37
7.1. GENERAL ................................................................................... 37
7.2. TRANSFER PRICING .......................................................................... 38
7.3. THIN CAPITALIZATION ....................................................................... 39
7.4. CONTROLLED FOREIGN COMPANY ............................................................ 40
7.5. OTHER ANTI-AVOIDANCE RULES .............................................................. 41
7.5.1. Low-tax jurisdictions ............................................................ 41
7.5.2. Other anti-avoidance provisions ............................................... 42
8. VALUE ADDED TAX ............................................................................. 42
8.1. GENERAL ................................................................................... 42
8.2. TAXABLE PERSONS .......................................................................... 43
8.3. TAXABLE EVENTS ............................................................................ 43
8.4. TAXABLE AMOUNT ........................................................................... 43
8.5. RATES ...................................................................................... 43
8.6. EXEMPTIONS ................................................................................ 43
8.7. NON-RESIDENTS ............................................................................. 45
9. MISCELLANEOUS TAXES ....................................................................... 45
9.1. CAPITAL DUTY .............................................................................. 45
9.2. TRANSFER TAX .............................................................................. 45
9.2.2. Shares, bonds and other securities ............................................ 45
9.3. STAMP DUTY ................................................................................ 45
9.4. CUSTOMS DUTY ............................................................................. 45
9.5. EXCISE DUTY ................................................................................ 45
INDIVIDUAL TAXATION ........................................................................... 47
INTRODUCTION ...................................................................................... 47
1. INDIVIDUAL INCOME TAX ...................................................................... 47
1.1. TAXABLE PERSONS .......................................................................... 47
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TABLE OF CONTENTS DOING BUSINESS IN CHILE 2017
1.2. TAXABLE INCOME ............................................................................ 47

1.2.1. General ............................................................................ . 47
1.2.2. Exempt income ................................................................... 48
1.3. EMPLOYMENT INCOME ....................................................................... 50
1.3.1. Salary ............................................................................... 50
1.3.2. Benefits in kind ................................................................... 50
1.3.3. Pension income ................................................................... 50
1.3.4. Directors’ remuneration ........................................................ 50
1.4. BUSINESS AND PROFESSIONAL INCOME ....................................................... 50
1.5. INVESTMENT INCOME ........................................................................ 51
1.5.1. Dividends .......................................................................... 51
1.5.2. Interest ............................................................................ 52
1.5.3. Royalties ........................................................................... 52
1.5.4. Income from immovable property ............................................. 52
1.6. CAPITAL GAINS .............................................................................. 52
1.6.2. Shares .............................................................................. 53
1.7. PERSONAL DEDUCTIONS, ALLOWANCES AND CREDITS ......................................... 54
1.7.1. Deductions ......................................................................... 54
1.7.2. Allowances ........................................................................ 54
1.7.3. Credits ............................................................................. 55
1.8. LOSSES ..................................................................................... 55
1.9. RATES ...................................................................................... 55
1.9.1. Income and capital gains ........................................................ 55
1.9.2. Withholding taxes ................................................................ 55
1.10. ADMINISTRATION ............................................................................ 56
1.10.1. Taxable period .................................................................... 56
1.10.2. Tax returns and assessment .................................................... 56
1.10.3. Payment of tax ................................................................... 56
1.10.4. Rulings ............................................................................. 56
2. OTHER TAXES ON INCOME .................................................................... 56
3. SOCIAL SECURITY CONTRIBUTIONS .......................................................... 56
3.1. EMPLOYED .................................................................................. 57
3.2. SELF-EMPLOYED ............................................................................. 57
4. TAXES ON CAPITAL ............................................................................. 57
4.1. NET WEALTH TAX ........................................................................... 57
4.2. REAL ESTATE TAX ........................................................................... 57
5. INHERITANCE AND GIFT TAXES ............................................................... 58
5.1. TAXABLE PERSONS .......................................................................... 58
5.2. TAXABLE BASE .............................................................................. 58
5.3. PERSONAL ALLOWANCES ..................................................................... 59
5.4. RATES ...................................................................................... 59
5.5. DOUBLE TAXATION RELIEF ................................................................... 59
6. INTERNATIONAL ASPECTS ..................................................................... 59
6.1. RESIDENT INDIVIDUALS ...................................................................... 59
6.1.1. Foreign income and capital gains .............................................. 59
6.1.2. Foreign capital .................................................................... 60
6.1.3. Double taxation relief ........................................................... 60
6.2. EXPATRIATE INDIVIDUALS .................................................................... 60
6.2.1. Inward expatriates ............................................................... 60
6.2.2. Outward expatriates ............................................................. 61
6.3. NON-RESIDENT INDIVIDUALS ................................................................. 61
6.3.1. Taxes on income and capital gains ............................................ 61
6.3.1.1. Employment income ................................................ 62
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DOING BUSINESS IN CHILE 2017 TABLE OF CONTENTS
6.3.1.2. Business and professional income ................................ 62

6.3.1.3. Investment income .................................................. 63
6.3.1.4. Capital gains ......................................................... 63
6.3.2. Taxes on capital .................................................................. 63
6.3.3. Inheritance and gift taxes ...................................................... 63
6.3.4. Administration .................................................................... 64
KEY FEATURES ..................................................................................... 65
8
CORPORATE TAXATION DOING BUSINESS IN CHILE 2017
CHILE
This chapter is based on information available up to 2 February 2017.
Introduction
On 29 September 2014, Law 20,780 was published in the Official Gazette. The law pro-
vides for a structural reform of the tax system of the country with different effective
dates over a 4-year period. Law 20,780 provides, inter alia, a new income tax regime
effective from 2017, which is considered the most relevant tax reform over the last 30
years. On 8 February 2016, Law 20,899 was published in the Official Gazette introduc-
ing further amendments to the tax system, including also the new income tax regime.
Several regulations and administrative interpretations concerning these laws have
been published. In this survey, amendments introduced by Law 20,780 and Law 20,899
are reflected as they become effective.
Companies are subject to income tax and to a business licence that is calculated as
percentage of capital.
A VAT system and excise taxes also apply. Income from mining operations is subject to
a special tax. Employees must make social security contributions.
The tax system applies throughout the entire Chilean territory.
The tax administration is the Servicio de Impuestos Internos (SII).
The currency is the peso (CLP).
The Chilean tax system provides a comprehensive system of monetary adjustments to
offset the effects of inflation.
The “monthly tax unit” is a tax adjustment index and its value is adjusted monthly by
the tax administration in accordance with inflation. The “annual tax unit” is equal to
12 monthly tax units. The “tax unit” is used, inter alia, to determine certain applicable
tax rates, whether or not income or gains are taxable, and the amount of fines.
years. On 8 February 2016, Law 20,899 was published in the Official Gazette introduc-
ing further amendments to the tax system, including also the new income tax regime.
Several regulations and administrative interpretations concerning these laws have
been published. In this survey, amendments introduced by Law 20,780 and Law 20,899
are reflected as they become effective.
1. Corporate Income Tax
1.1. Type of tax system
General income tax regime before 1 January 2017
Business income derived by an enterprise was subject to business income tax
(impuesto de primera categoría).
Thereafter, business profit distributed to the enterprise’s owners (individuals) was in
general also subject to income tax, whether residents (impuesto global complemen-
tario – individual income tax) or non-residents (impuesto adicional – non-resident
income tax). However, the tax paid by the enterprise could be used as a credit against
9
DOING BUSINESS IN CHILE 2017 CORPORATE TAXATION
the owners’ tax liability (see example below). A special ledger (Fondo de Utilidades
Tributables, FUT) was required to keep track of retained profits and the corresponding
tax credit.
The same system was applicable to non-residents, i.e. tax paid by the enterprise was
also creditable against the non-resident withholding tax on dividends, profits distribu-
tions or remittances – the 35% impuesto adicional, see section 1.3.1.).
Inter-company dividends and other profit distributions were not subject to business
income tax.
New income tax regimes as from 1 January 2017
Under Law 20,780, effective from 2017, two new income tax regimes became appli-
cable (in addition to various special transitory provisions and regimes), as follows.
Integrated income tax regime with income attribution (régimen de impuesto de
primera categoría con imputación total de crédito en los impuestos finales (renta
atribuida))
Under this regime, income derived by enterprises is subject to business income tax at
the rate of 25%.
Business income derived by an enterprise is immediately attributed to the enterprise’s
owners and, accordingly, the enterprise owners are subject to tax on that income.
However, the business income tax paid by the enterprise will be used as a credit
against the owner’s tax liability.
Subsequently, when the income is effectively distributed or withdrawn, the enterprise
owner will only be subject to tax on the income that was not previously taxed. As a
result, distributions to non-residents are not subject to withholding tax, unless the
income tax was not previously paid on the attributed income.
Inter-company dividends and other profit distributions are not subject to business
income tax.
Partially integrated income tax regime (régimen de primera categoría con deducción
parcial de crédito en los impuestos finales (semi integrado))
Under this regime, income derived by an enterprise is subject to business income tax.
Subsequently, the income distributed to the enterprise owners will be subject to
income tax. However, the business income tax paid by the enterprise will be used as a
credit against the owner’s tax liability, but it will be limited to 65% of the rate of busi-
ness income tax levied.
If the enterprise owner is resident of a country with which Chile has a tax treaty in
force, the tax credit limit does not apply, i.e. the full business income tax paid is cred-
itable against the income tax due by the non-resident.
The business income tax is levied at the rate of:
– 25.5% on income derived or accrued in 2017; and
– 27% on income derived or accrued in 2018.
Inter-company dividends and other profit distributions are not subject to business
income tax.
Law 20,899 of 2016 amended these new income regimes (see Introduction) with the
aim to simplify them. A main amendment introduced by this Law concerns the choice
of the regime. Accordingly, taxpayers that may opt for either of the new income tax
10
regimes are permanent establishments of non-resident enterprises and enterprises

(other than joint-stock companies or partnerships limited by shares) that report their
income on the basis of full accounting records, provided that all of their owners, share-
holders or members are exclusively:
– resident or domiciled individuals; and/or
– non-resident or non-domiciled taxpayers.
If these enterprises do not opt for a regime, they will be subject to the integrated
income tax regime by default.
All other enterprises will be subject to the partially integrated income tax regime
(including joint-stock companies or partnerships limited by shares).
The application of a new income tax regime will be for a minimum period of 5 years
(except for taxpayers that may applied for simplified income tax regimes (see section
3.)).
1.2. Taxable persons
Any person undertaking commercial, industrial, mining or other business activities is
subject to business income tax. Persons deriving income from capital are also subject
to this tax. The business income tax is levied on income from any business activity
whether the enterprise is a legal entity, a branch, permanent establishment of a
foreign company, sole proprietorship or an individual.
This survey is restricted to Chilean-incorporated joint-stock companies (SAs) and
limited liability companies (SRLs), as well as to foreign-incorporated entities of a
similar nature. These entities are referred to in the text as companies.
Companies are legal persons and taxable entities. Generally, fiscally transparent
persons do not exist under Chilean law.
1.2.1. Residence
Companies incorporated in Chile are treated as residents.
Companies and other legal entities organized abroad are treated as non-residents. Per-
manent establishments in Chile of non-residents are treated as separate entities for
income tax purposes and are also considered non-residents.
1.3. Taxable income
1.3.1. General
Resident companies are subject to business income tax (renta de primera categoría –
“first category income”) on their worldwide income. Non-residents are subject to non-
resident income tax on their Chilean-source income (impuesto adicional). In general,
Chilean-source income is income from assets located in Chile or activities carried out
therein. The legislation also establishes other specific sourcing rules, which include
certain types of services rendered abroad and paid from Chile (subject to impuesto
adicional).
First category income includes generally all income other than income from dependent
or independent personal services realized by individuals or by professional companies.
All items of income are taxable except those specifically excluded from the concept of
income and those specifically exempt.
11
Taxable income is defined as gross income less direct costs of goods and services, and
necessary expenses to produce that income, adjusted for inflation and corrected as
provided by law. Chilean-source income is calculated on a cash or accruals basis.
Foreign-source income is generally calculated on a received basis; however, income
derived by permanent establishments of resident companies located abroad is calcu-
lated on an accruals basis (see also section 7.4. on CFC rules). The computation of
annual income is generally based on the taxpayer’s accounting records.
1.3.2. Exempt income
The income tax law provides that some receipts (ingresos que no constituyen renta)
are not considered income for tax purposes and thus are not subject to income tax and
are not included in tax returns. These include:
– indemnity payments received for actual material damages, and non-material
damages when declared by the courts, but excluding indemnity payments with
respect to assets belonging to a business or activity subject to business income tax
on actual income (however the damaged assets may be deductible as an expense);
– capital contributions received by companies from their shareholders or partners;
the appreciation resulting from the revaluation of capital made under the integral
adjustment mechanism established in the Income Tax Law; and the excess over par
value obtained by a joint-stock company when placing its shares on the market,
provided that it is not distributed;
– the distribution of profits and accumulated reserves by joint-stock companies to
their shareholders in the form of stock dividends or any increase in the par value of
the shares realized by capitalization of the company’s profits or reserves;
– dividends paid by joint-stock companies out of receipts which are not considered to
be income for tax purposes;
– refund of capital by companies and capital revaluations authorized by law, pro-
vided that the distributions do not pertain to capitalized profits subject to income
tax upon distribution;
– the repatriation of capital invested abroad. In order to substantiate the capital
nature, the investment can be registered with the tax administration and/or be
substantiated by other means; and
– certain capital gains from the alienation of shares (see sections 1.4.1. and 1.7.3.)
and bonds (see section 1.7.9.).
Income exempt from business income tax includes:
– In general, dividends and profits paid between resident enterprises (or paid to per-
manent establishments in Chile of non-resident companies), see section 2.2. (such
dividends are normally subject to individual income tax or non-resident income tax
as the case may be); and
– certain capital gains from the alienation of shares and bonds (see sections 1.4.1.
and 1.7.3.).
1.3.3. Deductions
1.3.3.1. Deductible expenses
In general expenses are deductible, provided that they are deemed necessary for
earning taxable income and provided that a deduction is not specifically disallowed
under the income tax law. The tax administration has stated, based on the tax
legislation that a deductible expense must: be related directly to the business or
activity; be necessary for the production of the income (i.e. unavoidable or compul-
12
sory for carrying on the business); not be deducted as part of the direct cost of goods
and services required for obtaining the income; actually be incurred in the period; and
be substantiated before the tax administration.
Dividends are not deductible, whereas interest and royalties generally are.
Outbound payments made under contracts with related parties, which are subject to
the non-resident income tax according to article 59 of the LIR (including royalties,
interest, service fees, leasing and insurance premiums), are deductible in the tax year
of payment, provided that the non-resident income tax is paid or the payment is
exempt or excluded from such tax under domestic law or under a tax treaty (article 31
of the LIR as amended by Law 20,780).
1.3.3.2. Non-deductible expenses
Non-deductible expenses include:
– amounts incurred for the acquisition, leasing or maintenance of cars and other
vehicles, unless the transaction represents the normal business of the enterprise or
is deemed necessary by the tax administration;
– amounts incurred for the acquisition, maintenance or exploitation of property not
used for the business activities of the enterprise;
– the portion of gifts for educational purposes that is creditable under specific laws;
– interest paid in respect of loans used directly or indirectly to acquire, maintain
and/or exploit goods producing income not subject to business income tax. How-
ever, interest paid in respect of loans used for acquiring shares, participation rights
in companies, bonds and, in general, all types of securities (capital mobiliario) may
be deductible provided it satisfies the general requirements described in section
1.3.3.1.;
– capital expenditures;
– compensation for personal services of the taxpayer’s spouse or unmarried children
under the age of 18;
– fees paid by a partnership to a partner for independent personal services; and
– expenses incurred in supermarkets or similar markets, unless they are necessary
for the taxpayer’s habitual business and comply with some additional require-
ments.
Non-deductible expenses (gastos rechazados) are generally added back to the net
income of enterprises and are deemed to be distributed at the end of the tax period
and subject to income tax accordingly. This income tax is payable by the shareholder
or the company, depending on the circumstances. Where payable by resident
companies or permanent establishments of foreign enterprises, these expenses are
subject to a single tax at the rate of 40%. Where the income tax on these type of
expenses is not payable by the company, the individual income tax (impuesto global
complementario) or the withholding tax on non-residents (impuesto adicional),
applies instead of the 40% single tax, and the tax so determined is increased with a 10%
of the amount of the “deemed distribution”.
1.3.4. Depreciation and amortization
Generally, tangible assets must be depreciated in accordance with the straight-line
method, i.e. a fixed percentage of the depreciable value may be deducted in each
year in accordance with the useful life of the asset, taking into account the residual
value.
13
Accelerated depreciation is available with respect to new or imported assets with a

useful life of 3 years or more. Under the accelerated depreciation method, the tax-
payer may calculate depreciation deductions on the basis of a useful life that is equal
to one third of the normal useful life of the asset. Accelerated depreciation is
optional.
Taxpayers may also opt to depreciate fixed assets considering a useful life of 1 year,
provided that (LIR as amended by Law 20,780):
– in the previous 3 years to that in which the new or used assets will start to be used,
the taxpayer derives annual average receipts not exceeding 25,000 indexed units
(unidades de fomento, UF). If the enterprise has less than 3 “years of existence”,
the annual average will be calculated considering the effective “years of exis-
tence”; or
– the taxpayer’s effective capital does not exceed 30,000 UF. This is applicable in
case the taxpayer does have activities in the 3 previous years.
In addition, taxpayers may opt to depreciate fixed assets considering a useful life of a
tenth (1/10) of that established by the tax administration, provided that in the previ-
ous 3 years to that in which the new or imported assets will start to be used, a taxpayer
derives annual average receipts of more than 25,000 UF but less than 100,000 UF. The
useful life in this case may not be less than 1 year. If the enterprise has less than 3
“years of existence”, the annual average will be calculated considering the effective
“years of existence”.
Depreciation is calculated on the net value of tangible fixed assets at the end of the
tax period, after adjustment for inflation. Depreciation related to spare parts and
accessories may be taken as from the date on which they are used.
The period of the useful life of some assets has been specified by the tax administra-
tion. Depreciation allowances on assets that have become obsolete before the end of
their useful life may be taken at twice the normal depreciation rate. Under certain cir-
cumstances, the tax administration (SII) may authorize a special depreciation rate; a
higher depreciation rate may be available for an asset if its useful life is shorter than
normal, for instance in cases where the asset is used in two or more shifts, is used in
the processing of corrosive products, or in saline or corrosive environments.
Type of asset Years

Machinery in general 15
Trucks for general use 7
Furniture and implements 7
Heavy tools 8
Light tools 5
Pickups, cars and buses 7
Wooden sheds, either closed or open 20
Metallic sheds 20
Factory buildings of a permanent nature (brick masonry) 40
Wooden houses 30
Buildings, apartments and isolated houses 50
Buildings with steel structures and T-beams 80
Single-engine planes with capacity for six passengers 10
Computation or data-processing equipment 6
Audio and video equipment 5
14
Exploration costs may, at the option of the taxpayer, be deducted in the first tax year
or amortized over the first 6 years of the project.
There is no amortization of intangibles.
Note that depreciation rules are subject to some specific changes effective as from tax
year 2017.
1.3.5. Reserves and provisions
Amounts added to reserves or provisions, including provisions for future expenses or
for bad debts, are normally not deductible.
Technical provisions of insurance companies are deductible up to the compulsory
amount required by the Superintendency of Securities, provided that the gross amount
of the corresponding premiums is duly registered. Voluntary contributions to the
reserves in excess of the compulsory amount are not deductible.
1.4. Capital gains
Capital gains are generally considered ordinary income and are thus subject to busi-
ness income tax (and, subsequently, to individual income tax or non-resident income
tax with a credit for the business income tax paid) when realized, i.e. in the case of a
sale or disposition of fixed assets.
Capital gains may also be excluded from the scope of income tax (see section 1.7.3.).
1.4.1. Immovable property
From year 2017, a distinction should be made based on the date of the acquisition of
the immovable property.
Regarding immovable property acquired before 2004:
Capital gains arising from the alienation of such immovable property that is part of the
assets of a person subject to business income tax on actual net income (based on com-
plete accounting) are subject to tax under the general rules.
Capital gains arising from the alienation of immovable property, other than that men-
tioned above, are not taxable income, unless:
– the property has been owned for a year or less prior to the alienation;
– the alienator habitually buys and sells properties (transactions are always consid-
ered “habitual” when included in the company’s deed of incorporation as part of
the business); or
– transactions are carried out between shareholders of an open joint-stock company,
owning 10% or more of the shares, or shareholders of a closed company limited by
shares and the company in which they have an interest (related parties).
Regarding immovable property acquired on or after 2004:
Capital gains arising from the alienation of such immovable property are subject to tax
under the general rules.
However, gains arising from the alienation of immovable property owned by individuals
(residents or non-residents) are not taxable income if the property has been owned for
at least 1 year prior to the alienation (or 4 years in the case of apartments or subdi-
vided property). This exemption applies up to a 8,000 UF gains threshold which is
determined per each individual during his entire life (not per alienation). Any gain in
15
excess of the mentioned threshold is subject to individual income tax (impuesto global
complementario) or withholding tax on non-residents (impuesto adicional), as appro-
priate. Individuals resident in Chile may opt for a 10% flat tax.
1.4.2. Shares
Before year 2017, capital gains from the alienation of shares were subject to business
income tax and, subsequently, to individual income tax or non-resident income tax
with a credit for the business income tax paid, where:
– shares have been owned for less than a year before the alienation;
– the alienator habitually buys and sells shares (transactions are per se considered
“habitual” when included in the company’s deed of incorporation as part of the
business); or
– transactions are carried out by shareholders of an open joint-stock company
shares or members of other companies, or in the case of transactions between the
above shareholders or members and the joint-stock company or a company in
which they have an interest (related parties).
If none of the above circumstances apply, capital gains from the alienation of shares
were subject to a flat tax (impuesto único a la renta) and the income was not subject
to a further individual income tax or non-resident income tax.
Capital gains from the alienation of shares are exempt from tax when derived by
persons that are not subject to business income tax on actual net income, provided
that the gains do not exceed ten monthly tax units or ten annual tax units, depending
on certain conditions.
From year 2017, capital gains arising from the alienation of shares when derived by
persons that are subject to business income tax on actual net income are subject to tax
under the general rules. In other cases, the capital gains are subject to individual
income tax (impuesto global complementario) or withholding tax on non-residents
(impuesto adicional), as appropriate.
However, capital gains from the alienation of shares acquired before 31 January 1984
are never considered income for tax purposes and thus are not subject to income tax.
In addition, capital gains from the alienation of shares are exempt from tax when
derived by persons that are not subject to business income tax on actual net income,
provided that the gains do not exceed ten annual tax units.
For other tax-exempt capital gains, see sections 1.7.3., 1.7.4. and 1.7.9.
1.5. Losses
1.5.1. Ordinary losses
Before 1 January 2017, losses were deductible as an expense against profits of the tax
year and could be set off against undistributed profits. If the profits were not suffi-
cient to offset the losses, the losses could be carried forward indefinitely.
If losses were set off against non-distributed profits, the business income tax paid on
such profits was treated as an advance payment and could be set off against income
taxes (business income tax, individual income tax or non-resident income tax) or
refunded.
16
From 1 January 2017, losses continue to be deductible against profits of the tax year as
an expense. If the profits are not sufficient to offset the losses, the losses can be
carried forward indefinitely. However, the carry-back of losses is no longer available.
Losses incurred by a company before the transfer of its shares or its rights to partici-
pate in the profits may not be set off against the income accrued or received after the
transfer if:
– as a result of the transfer or during the 12 months before or after the transfer, the
company changes its principal business purpose;
– at the time of the transfer, the capital assets or other assets of the company are not
sufficient to carry out the company’s activity;
– the value of the assets is not proportional to the transfer price; or
– the company’s income will be derived only from the participation as a partner or
shareholder in other companies or from the reinvestment of its profits.
Losses arising from the disposal of securities cannot be deducted from taxable income
if gains arising from the disposal of the securities would be excluded from taxable
income.
1.5.2. Capital losses
Generally, there are no special rules for capital losses.
1.6. Rates
1.6.1. Income and capital gains
Law 20,780 provides for an increase of the income tax rate over a 4-year term. Accord-
ingly, income derived or accrued in the following years will be subject to business
income tax (Impuesto de Primera Categoría) at the following tax rates:
– 2014: 21%;
– 2015: 22.5%;
– 2016: 24%;
– 2017: 25% (integrated income tax regime) or 25.5% (partially integrated income tax
regime); and
– 2018: 25% (integrated income tax regime) or 27% (partially integrated income tax
regime).
The rate has fluctuated considerably over the last 10 years: 20% in 2011-2013; 17% in
2004-2010; 16.5% in 2003; 16% in 2002; 15% before 2002.
1.6.2. Withholding taxes on domestic payments
Generally there is no withholding tax system on payments to resident companies. How-
ever, the business income tax must be paid in monthly instalments (see section 1.8.3.).
For withholding tax on payments to non-residents, see section 6.3.
1.7. Incentives
The most relevant incentives are described below.
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1.7.1. Accelerated depreciation

Accelerated depreciation is available with respect to new or imported assets with a
useful life of 3 or more years. Under the accelerated depreciation method, the tax-
payer may calculate depreciation deductions on the basis of a useful life equal to one
third of the normal useful life of the asset. Accelerated depreciation is optional (see
section 1.3.5.).
1.7.2. Foreign Investment
In general, Chile’s legal framework presents features that are very relevant for foreign
direct investments: the Chilean Political Constitution grants the right to non-discrim-
ination between nationals and foreigners; the entry of foreign capitals is not subject to
previous permissions by the Chilean Central Bank or any other public entity; and the
capital of a Chilean company may be 100% held by foreign investors. Furthermore,
foreign investors can have access to all economic sectors (except for some particular
cases in the service sector, i.e. transport and fishing), in the exploitation and treat-
ment of hydrocarbon, lithium, uranium and nuclear energy, as well as in the acquisi-
tion of real estate in borderlands.
For the last 30 years, Chile’s regulation that specifically addressed foreign direct
investment was Decree Law 600, according to which foreign investors could voluntarily
apply for the conclusion of “foreign investments contracts” with the Chilean State.
These contracts granted certain rights and stability clauses for their investments in
Chile. However, pursuant to Law 20,780, Decree Law 600 was abolished with effects
from 1 January 2016.
Foreign direct investment is currently regulated by Law 20,848, which was published in
the Official Gazette of 25 June 2015.
Law 20,848 regulates: (i) the main aspects of a state strategy regarding the promotion
and attraction of foreign investment; (ii) the creation of a new institution specialized
in foreign investment, as well as; (iii) a new legal framework regarding foreign direct
investment in Chile, as explained below:
(1) According to Law 20,848, Chile shall have a state strategy regarding the promo-
tion and attraction of foreign investment that will be approved by the President of
the Republic. This strategy is recommended to the President by a specific Com-
mittee of Ministers, whose permanent members will be the Minister of Economy,
Development and Tourism and the Minister of Finance. This “Committee” shall
invite other Ministries to participate in their meetings depending on the economic
sectors the foreign investment strategy will be focused on.
(2) Law 20,848 creates the Investment Promotion Agency, a 100% public institution
that shall advise the Committee on foreign direct investment matters and which
will be responsible for implementing the foreign investment strategy. In addition,
said “Agency” will convene a public-private council that will provide its advice on
mid and long-term investment objective and will evaluate the activities and ser-
vices provided by the Agency to foreign investors.
(3) Regarding the new legal framework for foreign investment established by Law
20,848, foreign investors may voluntarily apply for a foreign investor certificate
issued by the Investment Promotion Agency if certain legal requirements are met
(e.g. minimum investment amount of USD 5 million). This certificate provides the
investor with an official recognition by the Chilean State of its quality as a foreign
18
investor and explicitly acknowledges the existence of certain rights that are also
granted in the common legal framework:
– access to the “formal” exchange market and the right to repatriate invest-
ment capital and profits, upon the fulfilment of their tax obligations(subject
to Central Bank’s legislation); and
– protection against arbitrary discrimination.
Notwithstanding the above, there are two cases in which obtaining this certificate by
foreign investors is “mandatory” (i.e. a requirement):
– in order to apply for an exemption of VAT on imported capital assets. This exemp-
tion is granted by the Ministry of Finance if certain legal requirements are met; and
– in order to apply for one of the following “tax invariability” contracts that relates
to certain provisions of the abolished Decree Law 600:
(i) invariability of a total effective income tax of 44.45% for a period of 10 years
since the signing date of contract; or
(ii) invariability of the special tax on mining income applicable on the date of
signing of the contract, for a period of 15 years, provided the investment
project is of at least USD 50 million.
These tax invariability contracts can be executed between the Chilean State and a
foreign investor who is entitled to apply for one of these contracts during a 4-years
period beginning on 1 January 2016.
With respect to contracts between the Chilean State and foreign investors under the
abolished Decree Law 600:
– since 1 January 2016, no new foreign investment contracts pursuant the abolished
Decree Lay 600 will be signed; and
– contracts signed before 1 January 2016 remain fully in force and foreign investors’
rights and obligations under those contracts are guaranteed, meaning that the fol-
lowing rights are contractually granted:
(i) access to the formal exchange market;
(ii) free repatriation of capital and profits;
(iii) non-discriminatory legal treatment;
(iv) the option to pay and effective fixed overall tax of 42% on taxable income for
a period of 10 years instead of the general income tax applicable. Decre Law
600 investors, may opt out of this mechanism at any time and pay the general
income tax applicable at that time. The opt-out is, however, irrevocable;
(v) in the case of investments over USD 50 million in mining activities, for a
period of 15 years, foreign investors could apply for the invariability of the
special tax on mining income defined in articles 64bis and 64ter of the income
tax legislation (LIR); and
(vi) the possibility to freeze the existing rate of VAT (for a limited period of time)
for machinery and equipment not manufactured in Chile, imported to Chile in
relation to the specific investment project.
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1.7.3. Capital gains on the alienation of shares

Alienation of shares
Capital gains from the alienation of shares of a resident joint-stock company whose
shares are regularly quoted in the stock exchange are not considered income for tax
purposes when, among others requirements:
– the shares are acquired on the stock exchange (i) through a public offer under Law
18,045, (ii) in a public tender for acquisition of new shares in case of a company’s
incorporation or capital increase, (iii) in an exchange of convertible bonds or (iv)
on a redemption of securities made from a fund;
– the shares are sold on the stock exchange through a public tender under Law
18,045, or through a contribution of securities to a fund.
Institutional investors
Before Law 20,712 (Ley Única de Fondos), article 106 of the LIR established that
capital gains from the alienation of shares and other securities were also exempt from
tax when derived by institutional investors constituted abroad and not domiciled in
Chile and that complied with other legal requirements (e.g. mutual funds or pension
funds), provided that:
– the gains were realized through the alienation of shares of a resident open joint-
stock company whose shares were substantially and regularly traded on a Chilean
recognized stock exchange (presencia bursatil), bonds issued by the central bank,
the Chilean government or Chilean incorporated enterprises; or
– gains were realized from the redemption of units in mutual funds.
The fund should have not had participation in the control of the companies that issued
the securities, must have held less than 10% of their capital and must have been enti-
tled to less than 10% of the profits of those companies.
The transactions must have been made on a Chilean stock exchange or through another
mechanism authorized by the supervisor of securities and insurance.
Law 20,712 abolished this specific tax incentive; however, according to transitional
provision No. 9, institutional investors are still entitled to some tax benefits under
certain conditions.
See also section 1.7.5.
1.7.4. Special regime for income from bonds
According to article 104 of the Income Tax Law (LIR), as amended by Law 20,780 and
Law 20,956, capital gains derived from the placement or disposal of bonds are non-
taxable income if certain requirements are met..
Eligible bonds must:
(i) be issued in Chile;
(ii) be registered in the Register of Securities according to Law 18,045, which implies
that the bond issuer must also be dully registered before the Superintendence of
Securities and Insurance (SVS), among other requirements;
(iii) be explicitly subject to article 104 of the LIR (and declared so in its issuance doc-
umentation); and
(iv) have, besides from the coupon interest rate, a “fiscal interest rate”, calculated
according to a specific formula provided by article 104 of the LIR, in order to
20
determine “accrued interest” for business income tax purposes (under article 20
No. 2 of the LIR).
In addition, other requirements apply to the transfer of the bond and the alienator
(e.g. minimum holding period, acquisition and alienation on a local authorized stock
exchange, authorized intermediaries, etc.).
The SVS keeps a public registry of fiscal interest rates of issued bonds.
Bonds issued by the central bank or the Treasury and listed by the Finance Minister are
also eligible (special rules apply regarding certain requirements).
If the gain from the alienation of bonds does not comply with the legal requirements,
the gain will be subject to tax under the general rules.
Special rules apply for the treatment of advance payment or redemption of eligible
bonds, e.g. the amount received is treated as interest to the extent that it exceeds the
face value of the debt (this interest is accrued in the year of the payment or redemp-
tion).
1.7.5. Funds
Law 20,712 (Ley única de fondos), published in the Official Gazette of 7 January 2014,
systematizes and modernizes the fund administration legislation with the aim to
improve the country’s international competitiveness and to simplify the funds’ tax
treatment.
The Law aims to improve the access to financing for small and medium-sized enter-
prises (SMEs) and the risk capital industry, allowing the positioning of the country as a
regional platform for financial services and fund administration.
The main general features of the Law are as follows:
– it consolidates, in a single law, the legislation applicable to fund administration,
i.e. mutual funds, investment funds, foreign capital investment funds and housing
funds;
– it outlines the general treatment of fund administrators, including their incorpo-
ration and capital structure, requirements to perform this activity, prohibitions
and responsibilities, and the procedure to liquidate the fund administrator and its
funds;
– it improves the private investment funds regulations;
– it increases the requirements to perform the fund administration activity in order
to guarantee a necessary level of technical expertise; and
– it provides more flexibility to fund administrators concerning the product offer, but
at the same time it provides a greater control and regulation power for the Super-
visor of Securities and Insurance in order to protect the investors and to guarantee
principles of transparency, market regulation and equity.
The main tax provisions of the Law are as follows:
– for funds, a final income tax is applicable at a rate of 10% on fund earnings (see
section 1.7.5.1.) remitted to foreign investors in all types of funds constituted
under the new law. Capital gains from the alienation or redemption of fund quotas
is also subject to this 10% final income tax;
– for funds (i) allocating more than 80% of their investments in a foreign country and
(ii) where dividends and other fund earnings derived from domestic investments
must be distributed by the fund and are then subject to the current income tax
21
rules, foreign investors may benefit from a tax exemption with respect to capital
gains derived from the alienation of their fund participating interests, and fund dis-
tributions derived from foreign investments; and
– the provision of fund administration services to foreigners is exempt from VAT (this
exemption does not apply to private investment funds).
The Law 20,712 also introduced an exemption from VAT for the remuneration of the
administrator of a housing fund regulated by Law 19,281.
1.7.5.1. Foreign investment funds
Before Law 20,712, foreign investors could structure their investment through a
foreign investment fund and then be subject to tax at the flat rate of 10% on remit-
tances from the fund. The investment must have been maintained in Chile for at least
5 years to enjoy this benefit. Law 20,712 abolished this tax regime, however according
to a transitional provision, taxpayers that were beneficiaries of this regime can still
enjoy the benefits under certain conditions.
1.7.5.2. Investment funds
According to article 107 of the Income Tax Law (LIR), gains from the alienation, on a
authorized stock exchange, of units in investment funds (purchased after 19 April
2001) regularly quoted on an authorized stock exchange, are excluded from taxable
income under certain other requirements.
Gains from the alienation, on an authorized stock exchange, of units in investment
funds, which are not regularly quoted on a stock exchange, and gains from the
redemption of such units on liquidation or a voluntary reduction in capital, are
excluded from taxable income, provided that the by-laws of the relevant fund require
that at least 90% of the fund’s portfolio is invested in shares regularly quoted on a stock
exchange and other legal requirements are met.
If the units are sold within 90 days from the date on which they cease to be regularly
quoted in the stock exchange, the gain is exempt up to the average price during the
last 90 days in which they were regularly quoted. The remainder of the gain is treated
as ordinary income.
1.7.5.3. Risk capital companies
According to Transitional Article No. 1 of the Law 20,190, as amended by Law 20,712
and Law 20,780, there are certain incentives related to “risk capital companies” (ven-
ture capital companies):
(i) capital gains in excess of certain amount (which is calculated under a specific
formula based on the return rate of the stock market index in Chile), obtained
from the alienation of shares in risk capital companies, are non-taxable income, if
certain requirements are met (e.g. investment made in a joint-stock company
which was not traded on the stock exchange, certain minimum holding period,
alienation between non-related parties, maximum participation threshold, etc.).
This benefit is available to participants in investment funds who invest exclusively
in risk capital companies and comply with other specific requirements provided in
the mentioned legislation; and
(ii) Law 20,190 also provides a benefit for shareholders of risk capital companies in
which such investment funds have at least 25% participation. Accordingly, these
shareholders can consider as their acquisition cost the highest amount paid by one
of such investment funds in the most recent placement of first issue shares by the
company, if certain other conditions are met.
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1.7.6. Business platform regime

The business platform regime enables foreign investors to set up a joint-stock company
(platform or offshore company) in Chile to channel and manage investments in third
countries without paying Chilean income tax on the income from those investments.
Chilean residents may also acquire shares in a platform company subject to certain
limits, in which case they will be subject to income tax according to the rules appli-
cable to shareholders of non-resident companies with respect to these investments.
A platform company must be incorporated under Chilean law as an open joint-stock
company, or as a closed joint-stock company subject to the same regulations as open
joint-stock companies. Platform companies may invest abroad and in Chilean public
joint-stock companies. They may also provide services to non-resident subsidiaries and
associated companies, provided the associated companies are not located in tax
havens (see section 7.1.).
Platform companies are not considered residents and are therefore only subject to
income tax on Chilean-source income. Dividends paid to these companies by Chilean
joint-stock companies are subject to withholding income tax (non-resident income
tax) at the rate of 35%, with a credit for the business income tax paid by the Chilean
joint-stock company. Foreign income from investments, services and capital gains is
not subject to income tax (income derived by the platform company and dividends
paid by the platform company to non-resident shareholders are not subject to income
tax in Chile).
1.7.7. Research and development credit
Law 20,241, as amended by Law 20,270, establishes that business income taxpayers
reporting their taxable income on the basis of full accounting records and investing in
research and development (R&D) may credit amounts invested in R&D against the busi-
ness income tax liability.
The R&D investment must be made under a written R&D contract with a registered
research centre (which must comply with certain conditions) for an amount exceeding
100 monthly tax units (Unidad tributaria mensual, UTM).
The credit is 35% of payments made in the tax year under the R&D contracts. The
annual credit is limited to 15,000 UTMs per year. Payments exceeding the maximum
annual credit are deductible expenses. Any excess credit may be carried forward. Tax-
payers can apply to this tax benefit, complying with the legal procedures, until 31
December 2025.
1.7.8. Credit for investment in tangible fixed assets
Under article 33 bis of the Income Tax Law, business income taxpayers reporting their
taxable income on the basis of full accounting records that acquire, under a lease with
the option to purchase or construct, tangible fixed assets, may receive a credit against
the business income tax of the same year of the acquisition, the take of the lease-
option or the completion of construction, if certain conditions are met. The credit is a
percentage of the value of the assets calculated under various rules. The annual credit
may not exceed 500 UTM. Excessive credit may not be refunded.
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1.7.9. Benefits for reconstruction gifts

Law 20,444, as amended by Law 20,565, grants tax credits and other benefits for gifts
given by residents or non-residents to a national fund for reconstruction in the wake of
natural disasters. The gift must be made within 2 years following a disaster, as speci-
fied by the President. The benefits include:
– taxpayers of business income tax that report their income on a balance sheet and
full accounting records may obtain, if certain requirements are met, a credit
against such tax for an amount equal to the 50% of the value of the gift (in cash of
in kind). The credit only applies against the business income tax of the same year in
which the gift is given. Excess credit cannot be used against other taxes and will
not be refunded. The part of the amount of a gift that is not allowed as a credit may
be deductible against the taxable income of the tax year in which the gift is given.
The legislation also establishes certain limitation of the total benefit available to a
taxpayer per year; and
– non-resident taxpayers of income tax (impuesto adicional) may credit 35% of their
gifts made in cash in the same tax year against the tax levied on dividends, profit
distributions and remittances, under certain requirements and limitations.
In addition, the legislation also provides for tax benefits to specific projects qualified,
under certain conditions, by the Ministry of Finance.
1.7.10. Regional
There are various incentives available in certain regions, such as preferential regimes
and special benefits or exemptions with respect to customs duties or domestic taxes.
1.8. Administration
1.8.1. Taxable period
The tax year is the calendar year, except in special cases (e.g. opening and closing
periods).
The Chilean income tax law uses the term año comercial (financial year) to refer to the
tax year and año tributario (literally, tax year) to refer to the year of assessment.
1.8.2. Tax returns and assessment
The income tax must be computed and paid by taxpayers on a self-assessment basis.
The annual income tax return must be filed in April of the year following the tax year.
1.8.3. Payment of tax
Enterprises are required to make monthly advance tax payments throughout the year,
calculated by applying a certain percentage to gross receipts derived. Advance pay-
ments are creditable against the annual tax liability when filing the annual return. The
rate of advance payments is generally determined so as to match the final business
income tax liability. The advance tax payment for each month must be paid within the
first 12 days of the following month.
Taxpayers who incur a loss in an accounting year, or in any of the first three quarters of
that year, are free from the obligation to make advance payments for the following
quarter, provided that the loss is shown in a profit and loss statement. If the taxpayer
derives a profit in any quarter, he must resume advance payments in respect of
receipts earned as of the following quarter. If an enterprise reports annual losses and
subsequently obtains profits and resumes advance payments, the percentage to be
used until the month in which the next annual income tax return is due for filing is 1%.
24
The final tax liability must be paid upon filing of the annual income tax return in April
of the year following the tax year.
1.8.4. Rulings
The tax administration (SII) is in charge of the interpretation, application and enforce-
ment of tax legislation. The SII’s Commissioner is empowered to give administrative
interpretations of tax law, addressed to officials or taxpayers.
Requests for general guidance on the application of the tax legislation regarding cases
in which the taxpayer has a real interest or which involve specific transaction are
answered. Administrative decisions are published on the SII’s website.
2. Transactions between Resident Companies
2.1. Group treatment
Chilean tax law does not include provisions concerning taxation on a consolidated
basis. Accordingly, losses may only be offset against profits of the company that
incurred them.
2.2. Intercompany dividends
Dividends or other profit distributions are in general not taxed when received by res-
ident companies. Foreign-source dividends are taxed (see section 6.1.1.). For divi-
dends derived by non-residents, see sections 6.2.1. and 6.3.1.).
3. Other Taxes on Income
Generally, there are no other taxes on income in addition to the normal income tax.
However, mining enterprises are subject to a specific tax on income (see section 3.1.).
In addition, there exists a simplified income tax regime for small taxpayers, i.e. micro,
small and medium-sized companies, provided by article 14 ter of the Income Tax Law
(LIR) as amended by Law 20,780. This regime is effective for tax years 2015 and 2016.
Taxpayers that were subject to other income tax regimes on 31 December 2014 (i.e.
regimes provided by articles 14 bis or 14 quarter LIR) could opt to continue to be taxed
under those regimes until 31 December 2016. Effective 1 January 2017, a new special
regime will be effective under a new article 14 ter of the LIR. Under the regime the
taxpayer is basically subject to ordinary income tax on the surplus of receipts over dis-
bursements based on his records and invoices.
There is also a simplified income tax regime on presumptive income for small agricul-
tural, land transport or mining businesses. For this purpose, annual sales or gross
receipts must not exceed specific legal thresholds (under Law 20,780, effective from
2016, new thresholds are applicable). The tax is a percentage of the value of the
immovable properties, vehicles or annual net sales of mining products. Law 20,899
provided that businesses may only be subject to this regime when they are formed
exclusively by individuals during the time the regime is applicable.
Non-deductible expenses (gastos rechazados) are also subject to a special taxation
(see section 1.3.3.2.)
3.1. Special tax on mining income
Income from mining activities is subject to a specific tax on “operational income” in
addition to the general income tax. The tax (impuesto específico a la actividad
minera) is deductible for income tax purposes.
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3.1.1. Taxable persons

Taxable persons are those that have been granted concessions to recover minerals and
sell them at any production stage.
3.1.2. Taxable income
Operational taxable income is equal to the net taxable base for business income tax
with some adjustments, i.e. income, costs or expenses not directly related to the sale
of mining products have to be eliminated, and accelerated depreciation and losses
from previous years are not deductible.
3.1.3. Rates
Tax rates vary with several factors: annual sales of mining products, profit margins, tax
year, outstanding contract with the government and contractual terms.
Mining companies whose annual sales do not exceed the equivalent value of 12,000
metric tons of fine copper are exempt from the special tax on mining income.
Mining companies whose annual sales exceed the equivalent value of 12,000 metric
tons of fine copper and do not exceed the equivalent value of 50,000 metric tons of
fine copper are taxed at progressive rates varying from 0.5% to 4.5%.
Mining companies whose annual sales exceed the value of 50,000 metric tons of fine
copper are taxed at a rate which depends on their “mining operational margin” and
that varies from 5% to 34.5%, with a final bracket of 14% (Law 20,469).
Foreign investors, and enterprises that receive foreign investments, are not subject to
these rules provided they have concluded a contract with the government under the
Foreign Investment Statute (D.L. 600) which provides for the effective fixed overall
tax rate of 42% on taxable income (see section 1.7.2.). However, these investors and
enterprises, and Chilean enterprises, that had concluded a contract with the govern-
ment under Law 20,026, could opt for a 3-year net extension of their contracts with
specific rates. Other taxpayers are subject, during the 6 years, to the new rules of Law
20,469, and thereafter, to rules then in force. Investors and enterprises that do not use
the option explained above are subject to old rules and rates established by Law
20,026 for the remaining term of their contract.
4. Taxes on Payroll
4.1. Payroll tax
Chilean tax law does not include provisions regarding payroll tax.
4.2. Social security contributions
Social security contributions are payable by employees. They are calculated on the
employee remuneration up to a maximum remuneration of 74.3 development units in
2016. Social security contributions are also payable by independent workers (see Indi-
vidual Taxation section 3.).
Employers and employees (in some cases) are also subject to:
– a contribution at the rate of 0.95% to cover work accidents;
– depending on the degree of risk of the activity, an additional contribution at a rate
of up to 3.4%;
26
– contributions for “heavy” work: both the employer and the employee must con-
tribute 2% of the salary to the individual capitalization account (the percentage
may be reduced to 1% in certain circumstances);
– employment insurance: the employer contributes 2.4% of the part of the salary not
exceeding 111.4 development units in 2016 (the employee contributes 0.6% of that
part of the salary with the same cap, and the state contributes 18,816 tax units per
month); and
– premiums for the financing of disability and life insurance: a percentage which is
subject to auction and accordingly may vary from time to time (1.41% from July
2016 until June 2018) . Premiums are payable by employers irrespective of the
number of workers.
5. Taxes on Capital
For other taxes, see section 9.
5.1. Net worth tax
Business licence fees, normally calculated as a percentage of capital, must be paid
annually to the municipalities (patente municipal).
The tax is assessed on the initial capital declared by the taxpayer in case of new activ-
ities or the capital registered in the balance sheet ending on 31 December of the year
preceding the date on which the return must be filed. Capital invested in other busi-
nesses or enterprises, also subject to payment of the licence fees, is deductible. The
total amount of the licence fee due is paid proportionally by each branch, office or
establishment, according to the number of employees.
The tax rate varies according to the municipality and location within the municipality
and ranges from 0.25% to 0.5%. It may not be less than one tax unit nor exceed 8,000
tax units. Taxpayers who are not required to pay their income tax on the basis of a
general balance sheet are liable to an annual licence fee equal to one monthly tax
unit.
5.2. Real estate tax
The immovable property tax (impuesto territorial or contribuciones de bienes raíces)
is levied on an annual basis on urban or rural immovable property. It is administered by
the central government and the revenue is allocated to the municipalities.
Taxable persons are the owners or users of the property.
The taxable base is the official cadastral value. An exemption is granted for properties
whose cadastral value does not exceed a certain limit. The tax is levied on that part of
the cadastral value of each piece of immovable property exceeding the relevant
exempt limit without regard to the number of owners or to the taxpayer’s personal
wealth. For urban property used as dwelling house the rate is progressive and is
divided into three brackets, the limits of which are adjusted every semester for infla-
tion: the first bracket is exempt, the second is taxed at 1% and the third is taxed at
1.2%. Other urban property is taxed at a flat 1.2% rate. Rural land is taxed at a 1% rate.
Farmers and owners or usufructuaries that lease property may credit the tax against
their liability to business income tax. In the case of non-agricultural property, the tax
is creditable. Non-creditable immovable property tax is deductible for income tax pur-
poses. Taxable urban land without buildings or vacant is subject to the property tax
and to a 100% surcharge. Property located in urban expansion areas or in rural areas is
27
exempt from the surcharge. In certain cases (subdivision of land, total demolition fol-
lowing destruction due to causes of which the proprietor or dweller is not responsible)
a 10-year holiday may be granted.
6. International Aspects
6.1. Resident companies
Companies incorporated in Chile are generally treated as residents.
Companies and other legal entities incorporated abroad are treated as non-residents.
Permanent establishments in Chile of non-residents are treated as separate entities
for income tax purposes (i.e. a permanent establishment under domestic legislation is
subject to business income tax which is also granted as credit against the 35% with-
holding tax on remittances to the head office).
6.1.1. Foreign income and capital gains
Resident companies are chargeable to income tax (business income tax) on their
worldwide income.
Foreign dividends and other profit distributions, capital gains, interest and royalties
derived by resident companies are included in the business income tax taxable
income.
Only after-tax foreign-source net income received is considered (excluding income
that is not obtainable for reasons of force majeure, acts of God or legal provisions of
the country of origin). This rule changes when a foreign tax credit is granted. In the
case of permanent establishments located abroad, foreign-source income is computed
on an accrual or received basis, including foreign taxes due or paid (under certain
requirements, foreign tax credit is available). See also section 7.4. on CFC rules.
6.1.2. Foreign losses
Generally, only after-tax foreign-source net income is considered. Losses incurred by
permanent establishments located abroad may be set off in the tax year in which they
are incurred, but may not be carried forward to later years.
6.1.3. Foreign capital
In general, foreign capital is not taxed in Chile. The municipal licence is generally cal-
culated as a percentage of capital, as declared by the taxpayer or registered in the
balance sheet, which may lead to the conclusion that foreign capital declared or reg-
istered is also taxed. On the other hand, the local feature of municipalities, as defined
by the Constitution and other legislation, offers grounds for the idea that a municipal-
ity cannot levy taxes on activities located in other municipalities, let aside on activi-
ties located in other countries.
Foreign-situs immovable property is not subject to immovable property tax in Chile.
6.1.4. Double taxation relief
Chile generally grants unilateral relief using the credit method to prevent double tax-
ation of foreign-source income. The credit is granted with respect to foreign dividends
or profit distributions, royalties and technical assistance fees received, services qual-
ified as exports by Custom Service, on income accrued or remitted by permanent
establishments located abroad and income subject to CFC rules. In respect of other
income, the foreign tax may only be deducted from the foreign-source income.
28
The credit is generally limited to the lesser of the business income tax calculated
(according to a specific formula) on the foreign-source income or the foreign tax
effectively paid.
In respect of taxes paid on dividends and profit distributions, the credit equal to the
lesser of a 32% credit limit calculated (according to a specific formula) on the foreign-
source net income derived by the taxpayer in the tax period or the foreign tax effec-
tively paid.
With respect to dividends and profit distributions, an underlying tax credit is granted.
Furthermore, the income tax paid by companies on the profits distributed to the
company that remits such profits to Chile may also be credited (indirect foreign tax
credit), provided that at least 10% of the capital of the first-mentioned companies is
directly or indirectly owned by the company remitting the profits. Under amendments
introduced by Law 20,899 of 2016, the indirect foreign tax credit is also granted in case
that companies making the distribution to the company that remits such profits to
Chile are resident in a different country, provided this country has a tax treaty or
exchanges information with Chile.
The foreign tax credit can be carried forward. There is no carry-back of the foreign tax
credit.
The ordinary credit method is generally also used in comprehensive tax treaties con-
cluded by Chile. In this case, a credit is granted for an amount which is the lesser of the
foreign tax effectively paid or a 35% credit limit calculated (according to a specific for-
mula) on the foreign-source income with respect to all income referred to in the tax
treaty. For the list of tax treaties in force, see section 6.3.5.
6.2. Non-resident companies
There is no express definition of non-resident companies (see section 6.1.). Generally,
companies that are not considered to be resident are treated as non-resident compa-
nies.
Non-residents are subject to non-resident income tax on their Chilean-source income.
In general, Chilean-source income is income from assets located in Chile or activities
carried out therein. However, the concept of Chilean-source income also covers gains
from the indirect disposal of Chilean assets made between non-residents, under very
specific conditions (see section 7.5.2.).
The following assets are deemed to be located in Chile:
– shares or participation rights in companies incorporated in Chile; and
– bonds and other private or public debt instruments issued in Chile by resident tax-
payers (Law 20,780).
In addition, interest is deemed to arise in Chile:
– where the debtor is domiciled in Chile; or
– in case of debt instruments contracted or issued by a permanent establishment
located abroad, where the head office is in Chile (Law 20,780).
6.2.1. Taxes on income and capital gains
Permanent establishments of non-residents
for income tax purposes.
29
A permanent establishment (PE) of a non-resident person operating in Chile is subject

to income tax on its worldwide income (previously, PEs were subject to tax only on
Chilean-source income). Only the income originating from activities of the PE, or from
assets assigned to, or used by, the PE, is attributed to the PE.
The PE’s results are determined based on a balance sheet and complete accounting
records.
The PE is considered as an enterprise fully separated and independent from its head
office in respect of transactions made with it, with PEs thereof, with enterprises
related to the head office or with other independent parties. However, some specific
rules apply, e.g. in case of banks that are not incorporated as Chilean companies, the
tax administration may disallow, as deductible interest, non-arm’s length amounts
paid or due by the PE to its foreign head office (this is also applicable to commissions
or any other payments relating to financial activities).
Income is generally subject to business income tax under general rules and to non-res-
ident income tax on remittances abroad at the general rate (except with respect to
interest, see below). The business income tax paid is credited against the non-resident
income tax. These permanent establishments are also subject to the municipal
licence.
Non-residents without a permanent establishment
Non-residents without a permanent establishment in Chile are subject to non-resident
income tax on Chilean-source income. The tax is generally levied as a final withholding
income tax at the general rate of 35% on the gross amount derived (impuesto adicio-
nal). There are various specific non-resident income tax rates, depending on the type
of income (see section 6.3.).
The business income tax previously paid with respect to the income, if any, is credited
against the non-resident income tax. In this case, to calculate the non-resident income
tax, an amount equivalent to the business income tax paid corresponding to the
income distributed or remitted is included in the tax base and the income is thus
grossed up. The rate of non-resident income tax is applied on the grossed-up income
and the business income tax may be deducted from the tax due as a credit (see section
1.1.).
Income derived by non-residents from immovable property situated in Chile is gener-
ally subject to business income tax under the same rules applicable to residents. The
income is also subject to non-resident income tax at the general rate with a credit for
the business income tax paid.
Capital gains derived by non-residents are generally subject to tax under the rules dis-
cussed in sections 1.4. and 1.7.
Dividends and other profit distributions from resident companies derived by non-resi-
dents are subject to non-resident income tax at the general rate. The business income
tax paid by the resident company paying the dividends or making the distribution is
creditable against the non-resident income tax. For dividends derived by residents,
see section 2.2.
Interest derived by non-residents is subject to withholding tax (non-resident income
tax) at the general rate on the gross amount derived. However, in case of certain inter-
est that fulfils the requirements defined by law, the non-resident income tax rate is
levied at a reduced rate or the interest is exempt from tax.
30
Royalties derived by non-residents are subject to non-resident income tax (for specific
rates, see section 6.3.3.).
6.2.2. Taxes on capital
Non-resident companies are subject to immovable property tax (see section 5.2.) in
respect of their immovable property located in Chile.
6.2.3. Administration
Non-resident taxpayers with a permanent establishment in Chile must file an annual
income tax return and self-assess their own income tax liability. They must generally
appoint a legal representative in Chile, obtain a tax identification number (RUT) and
make a sworn statement to the SII with respect to the start-up of a business.
Non-resident companies without a permanent establishment in Chile, but deriving
Chilean-source income, are generally subject to final withholding taxes.
See also section 1.8.
6.3. Withholding taxes on payments to non-resident companies
Chilean-source income derived by non-residents without a permanent establishment in
Chile is generally subject to a final withholding tax at the rate of 35% on the gross
amount. However, different rates apply, depending on the type of income.
For reduced rates under tax treaties, see section 6.3.5.
6.3.1. Dividends
Dividends and other profit distributions derived by non-residents are subject to a final
withholding tax (non-resident income tax) at the rate of 35% on the gross amount. The
business income tax previously paid is creditable against the non-resident income tax.
6.3.2. Interest
Interest derived by non-residents is normally subject to final non-resident income tax
at the general rate on the gross amount. Nevertheless, the following special rules
apply:
– interest paid to foreign or international banks or to foreign or international financ-
ing institutions by a financial institution incorporated in Chile is exempt from
income tax, provided the credit on which the interest is paid is used to grant loans
abroad; and
– the following categories of interest are subject to a rate of 4% on the gross amount:
– interest paid on current accounts and term deposits placed with an authorized
institution;
– interest on loans granted by authorized foreign or international banks or finan-
cial institutions;
– interest to finance imports;
– interest on Chilean or foreign-currency bonds issued by Chilean companies;
– interest on Chilean or foreign-currency bonds issued by the state and the
central bank; and
– interest on Latin American Banking Acceptances (ALADI Ablas).
31
However, according to the thin capitalization rules, interest paid in excess of the
allowed ratio is taxed at the higher rate of 35% (for thin capitalization provisions,
see section 7.3.):
6.3.3. Royalties
Payments made to non-residents for the use of, the right to use (goce) or the exploita-
tion of trademarks, patents, formulas and other similar assets are subject to withhold-
ing tax (non-resident income tax) at the rate of 30% on the gross amount.
tion of discovery patents, utility models, industrial drawings and designs, sketches
(esquemas de trazado) or topographies of integrated circuits and new vegetal varieties
are subject to withholding tax (non-resident income tax) at the rate of 15% on the
gross amount.
tion of software (computer programs) are subject to withholding tax (non-resident
income tax) at the rate of 15% on the gross amount. However, payments made for the
following software are not subject to tax:
– basic programs, which are defined as those indispensable for the functioning of the
equipment or machine without which it cannot operate as such; and
– shrink-wrap software, the transferred rights of which are limited to the use of the
program, and not its commercial exploitation, its reproduction or modification
made for any purpose other than its use (Law 20,630).
However, in respect of the two previous paragraphs, the rate is 30% if the creditor or
beneficiary of the payment is incorporated, domiciled or resident in a country
included in the tax haven list or qualifies as a preferential tax jurisdiction according to
certain general criteria provided by the legislation (see section 7.5.1.).
Payments to foreign producers or distributors for material to be shown in cinemas or in
television broadcasts are subject to withholding tax (non-resident income tax) at the
rate of 20% on the gross amount.
Payments for the use of copyright or authors’ rights are subject to withholding tax
(non-resident income tax) at the rate of 15% on the gross amount.
6.3.4. Other
Income from services supplied abroad is generally subject to withholding tax (non-
resident income tax) at the rate of 35% on the gross amount. However, payments
made abroad are exempt in the case of freight services, loading and unloading
charges, storage, weigh-in, product sampling and analysis, insurance and reinsur-
ance operations, commissions, international telecommunications and for smelting,
refining, and other special treatments of Chilean products. The exemption also
applies to amounts paid in the case of exportable goods and services, advertising and
promotion, market analysis, scientific and technological research, legal advice, and
legal defence before the administrative, arbitration or judicial authorities of the
country in which the services are supplied.
Remuneration paid to non-residents for engineering and technical works or profes-
sional or technical works supplied through an advice, report or draft (plano), carried
out in Chile or abroad, is subject to withholding tax at the rate of 15%. However, the
rate is 20% if the creditor or beneficiary of the payment is incorporated, domiciled or
32
resident in a country included in the tax haven list or qualifies as a preferential tax
jurisdiction according to certain general criteria provided by the legislation (see
section 7.5.1.).
Premiums on insurance of any type, taken out with companies not established in Chile,
for goods permanently located in the country or against the material loss of goods in
Chile subject to temporary admission or in transit, as well as premiums on insurance
for persons domiciled or resident in Chile, are subject to tax at the rate of 22% or at
the rate of 2% in the case of reinsurance premiums.
Income is subject to a withholding tax at the rate of 5% when derived from maritime
transport to and from Chilean ports supplied by foreign companies. Withholding tax at
the rate of 20% applies to income from the rental, sub-rental, chartering, sub-char-
tering, usufruct or any other right to the use or temporary employment of foreign ships
that are destined to or used for coastal services, or when the respective contracts
allow or do not forbid the ship’s use for coastal services.
Income from a rental contract, with or without a purchase option, for imported capital
goods that are entitled to a deferral of payment of customs duties, is subject to with-
holding tax at the rate of 35% on the profit or interest arising from the operation,
which, for this purpose, is legally assumed to amount to 5% of each instalment paid
under the contract.
6.3.5. Withholding tax rates chart
The following chart contains the withholding tax rates that are applicable to interest
and royalty payments by Chilean companies to non-residents under the tax treaties in
force as at the date of review. Where, in a particular case, a treaty rate is higher than
the domestic rate, the latter is applicable.
A reduced treaty rate may be applied at source if the appropriate residence certificate
has been presented to the withholding agent making the payment.
With respect to dividends, tax treaties do not limit the application of the non-resident
income tax (35%) payable in Chile, provided that the business income tax is creditable
in computing the amount of the non-resident income tax. Therefore, the rates
referred to in tax treaties concluded by Chile are only applicable in the case of divi-
dends paid from the other country to Chile.
Dividends Interest Royalties

Individuals, Qualifying
companies companies1
(%) (%) (%) (%)
Domestic Rates
Companies: 35 35 0/4/35 0/15/20/30
Individuals: 35 n/a 4/35 15/20/30
Treaty Rates
Treaty With:
Argentina 15 10 4/12/152,3 3/10/154
Australia 15 55 5/106,7 5/108,9
Austria 15 15 5/156,10 5/108,10
Belgium 15 011 5/1512,13 5/108,13
Brazil 15 10 15 15
33
Dividends Interest Royalties

Individuals, Qualifying
companies companies1
(%) (%) (%) (%)
Canada 15 5/1014 10/1515 10/1516
China (People’s Rep.) 10 10 4/106,17 2/108
Colombia 7 0 5/1518 1019
Croatia 15 520 5/1518 5/108
Czech Republic 15 15 5/1518 5/108
Denmark 15 5 5/1521 5/10/1522
Ecuador 15 5 5/1523 10/1524
France 15 15 5/10/1512,25 5/108,26
Ireland 15 520 5/1512,27 5/108,27
Italy 10 5 4/5/10/1528,29 2/5/1030
31
Japan 0/15 0/532 4/10/1533,34 2/108,33
Korea (Rep.) 10 5 5/10/1535 5/10/1536
Malaysia 15 520 1537 10
Mexico 10 520 5/10/1538 10/1539
New Zealand 15 15 10/1518,40 5/1041
Norway 15 5 5/1542 5/10/1543
Paraguay 10 10 10/1518,44 1544
Peru 15 10 15 10/1545
Poland 15 520 5/1546 5/10/1547
Portugal 15 10 5/10/1548,49 5/108
Russia 10 5 15 5/108
South Africa 15 5 5/156 10/158
Spain 10 520 5/1512,50 5/108,50
Sweden 10 520 5/1518,51 5/108,18,51
Switzerland 15 15 5/1512,52 5/108,52
Thailand 10 10 10/1518 10/1553
United Kingdom 15 520 5/1512,54 5/108,54
1. Unless stated otherwise, the rate generally applies with respect to participations of at least 25% of
voting power or capital, as the case may be.
2. A The 4% rate applies on interest from a sale on credit paid by the purchaser of machinery and equip-
ment to a beneficial owner that is the seller of the machinery and equipment and the 12% rate on
interest derived from loans granted by banks and insurance companies and bonds or securities that are
regularly and substantially traded on a recognised securities market.
3. A most favoured nation clause may be applicable with respect to interest.
4. The 3% rate applies to news-related royalties and the 10% rate applies to copyright royalties (other
than royalties related to films or tapes), patents, trademarks, know-how, certain lease-related roy-
alties and technical assistance.
5. The 5% rate applies with respect to participations of at least 10% of the voting power.
6. The lower rate applies to interest derived by financial institutions.
8. The lower rate applies to royalties from the use of, or right to use, any industrial, commercial or sci-
entific equipment.
9. A most favoured nation clause may be applicable with respect to royalties.
10. A most favoured nation clause may be applicable with respect to interest and royalties.
11. The 0% rate applies with respect to participations of at least 10% of the capital.
34
12. The lower rate applies to interest from loans granted by banks and insurance companies, bonds or
securities that are regularly and substantially traded on a recognized securities market, and to inter-
est in relation to sales on credit.
14. The rate under the treaty is 10%. However, by virtue of a most favoured nation clause, the rate is
reduced to 5% with respect to participations of at least 25% of voting power. Under the Chile-Mexico
treaty, the rate is 5%.
15. The general rate under the treaty is 15%. However, by virtue of a most favoured nation clause, the rate
is reduced to 10% with respect to the following types of interest:
– loans granted by banks and insurance companies;
– bonds or securities that are regularly and substantially traded on a recognized securities market;
and
– sale on credit paid by the purchaser of machinery and equipment to a beneficial owner that is the
seller of the machinery and equipment.
Under the Chile-Spain treaty, the rate for such interest is 5%. However, due to a restriction in the MFN
clause, the rate cannot be reduced below 10%.
reduced to 10%. Under the Chile-Spain treaty, the general rate is 10%.
18. The lower rate applies to interest derived by banks and insurance companies from certain transac-
tions.
20. The rate applies with respect to participations of at least 20% of voting power or capital, as the case
may be.
reduced to 5% with respect to certain types of interests:
(a) interest derived by a financial institution which is unrelated to and dealing wholly independently
with the payer. Under the Australia-Chile treaty, the rate for such interest is 5%;
(b) for all the other types of interest, see n. 12. Under the Chile-Spain treaty, the rate for such inter-
est is 5%.
22. The 5% rate applies to royalties from the use of, or right to use, any industrial, commercial or scien-
tific equipment. The general rate under the treaty is 15%. However, by virtue of a most favoured
nation clause, the rate is reduced to 10%. Under the Chile-Spain treaty, the general rate is 10%.
reduced to 5% with respect to certain types of interests:
est is 5%.
24. The 10% rate applies to royalties from the use of, or right to use, any industrial, commercial or sci-
entific equipment. The general rate under the treaty is 15%. However, by virtue of a most favoured
25. The general rate under the treaty is 15%. However, by virtue of a most favoured nation clause, the rate
is reduced to 10%. Under the Australia and Chile treaty, the rate for such interest is 10%.
28. The 5% rate applies to interest derived from loans granted by banks and insurance companies, bonds
and securities regularly and substantially traded on a recognized securities market and qualifying
sales on credit of machinery and equipment.
29. The rates under the treaty are 5% and 15%. However, by virtue of a most favoured nation clause, the
rates are reduced to:
(a) 4% for interest paid to a bank, an insurance company, a lending or finance business, an enterprise
selling machinery or equipment on credit, or any other enterprise, provided that in the three
taxable years preceding the taxable year in which the interest is paid, the enterprise derives
more than 50% of its liabilities from the issuance of bonds in the financial markets or from taking
deposits at interest, and more than 50% of the assets of the enterprise consist of debt-claims
against unrelated persons, and
(b) 10% for interest paid as part of an arrangement involving back-to-back loans, or other arrange-
ments that are economically equivalent and intended to have a similar effect.
Under the Chile and Japan treaty, the rate for such interest is 4% and 10%. Furthermore, under the
Chile and Japan treaty, the general rate of 15% shall be reduced to 10% from 1 January 2019.
35
tific equipment. However, by virtue of a most favoured nation clause, the rate is reduced to 2% for
such royalties. Under the Chile and Japan treaty, the rate for such royalties is 2%.
31. There is no withholding tax if the beneficial owner of the dividends is a pension fund, provided that
such dividends are not derived from the carrying on of a business by such pension fund or through an
associated enterprise.
32. 5% applies if the beneficial owner is a company that has owned directly, for the period of six months
ending on the date on which entitlement to the dividends is determined, at least 25% of the voting
power in the dividend-paying company. There is no withholding tax if the beneficial owner of the div-
idends is a pension fund, provided that such dividends are not derived from the carrying on of a busi-
ness by such pension fund or through an associated enterprise.
33. A most favoured nation clause may be applicable with respect to interest and royalties. The MFN
clause states that if Chile concludes a convention with another state with a lower rate, the contract-
ing states, at the request of Japan, shall consult with a view to amending the treaty in order to incor-
porate such lower rates.
34. A general rate of 15% applies up to 31 December 2018, and thereafter a general rate of 10% applies.
The rate of 4% applies to interest paid to a bank, an insurance company, a lending or finance business,
an enterprise selling machinery or equipment on credit, or any other enterprise, provided that in the
three taxable years preceding the taxable year in which the interest is paid, the enterprise derives
more than 50% of its liabilities from the issuance of bonds in the financial markets or from taking
deposits at interest, and more than 50% of the assets of the enterprise consist of debt-claims against
unrelated persons. Nevertheless, the rate of 10% applies (instead of 4%) if the interest is paid as part
of an arrangement involving back-to-back loans, or other arrangements that are economically equiv-
alent and intended to have a similar effect.
35. The rates under the treaty are 10% and 15%. However, by virtue of a most favoured nation clause, the
rate is reduced to 5% with respect to certain types of interest:
est is 5%.
tific equipment. The general rate under the treaty is 15%. However, by virtue of a most favoured
38. The rate under the treaty is 15%. However, by virtue of a most favoured nation clause , the rate is
reduced to 5% for interest from loans granted by banks; also 5% for interest derived by a financial insti-
tution which is unrelated to and dealing wholly independently with the payer and to 10% for interest
from loans granted by insurance companies, from bonds or securities regularly and substantially
traded on a recognized securities market, and for interest in relation to sales on credit of machinery
and equipment. Under the Chile-Spain and Australia-Chile treaties, the rate for such interest is 5%.
However, due to a restriction in the MFN clause, the rate for certain types of interest cannot be
reduced below 10%.
39. The general rate under the treaty is 15%. However, by virtue of amost favoured nation clause, the rate
is reduced to 10%. Under the Chile-Spain treaty, the general rate is 10%.
41. The general rate under the treaty is 10%. However, by virtue of amost favoured nation clause the rate
is reduced to 5% with respect to royalties which are paid for the use of, or the right to use, any indus-
trial, scientific or commercial equipment. Under the Australia-New Zealand treaty, the rate is 5% for
such royalties.
reduced to 5% with respect to certain types of interest:
est is 5%.
tific equipment. The general rate under the treaty is 15%. However, by virtue of amost favoured nation
clause, the rate is reduced to 10%. Under the Chile-Spain treaty, the general rate is 10%.
36
reduced to 10%. Under the Chile-New Zealand treaty the rate is 10%.
reduced to 5% with respect to certain types of interest:
est is 5%.
tific equipment. The general rate under the treaty is 15%. However, by virtue of amost favoured nation
clause, the rate is reduced to 10%. Under the Chile-Spain treaty, the general rate is 10%.
48. The 5% rate applies to interest from bonds or securities regularly and substantially traded on a rec-
ognized securities market and the 10% rate to interest from loans granted by banks and insurance com-
panies, and sales on credit of machinery and equipment where the beneficial owner is the seller.
53. The 10% rate applies to royalties from the use of, or the right to use, any copyright of literary, artistic
or scientific work, or for the use of, or the right to use, industrial, commercial or scientific equipment.
7. Anti-Avoidance
7.1. General
Effective from 30 September 2015, general anti-avoidance rules (GAARs) are intro-
duced by Law 20,780 of 2014, which are based on the “abuse of right” and the “con-
tract simulation principles”. The GAARs are applicable to facts, acts or transactions,
taking place as from that date. The tax administration must prove the avoidance or
simulation in the relevant procedures. However, where there is a special anti-avoid-
ance provision, that provision will prevail, e.g. provisions that allow the tax authority
to assess prices or values of certain transactions.
The main features of these rules are as follows:
Tax obligations arise and are due in accordance with the legal nature of facts, acts or
legal agreements, irrespective of the form or names given by interested parties. There
is no taxpayer’s good faith when taxable events are avoided through juridical acts or
transactions.
Taxable events cannot be avoided by abusing the legal forms. An abuse will be deemed
to occur where:
– the taxable event is fully or partially avoided; or
– the taxable amount or the tax obligations are reduced or postponed;
by means of juridical acts or transactions that, individually or in the aggregate,
produce no legal or economic results or effects of relevance for the taxpayer or for
another person other than those of a tax nature.
The reasonable choice of conducts and alternative conducts contemplated in tax law is
legitimate. Consequently, the result of a lower tax or deferred tax is not treated as an
abuse, provided that these effects are consequences provided by the tax law.
37
There is also abuse in the form of simulated acts or transactions. In these cases, taxes
must be levied on the facts effectively carried out by the parties, independently of the
simulated acts or transactions. For tax purposes, there is “simulation” when legal acts
and transactions dissimulate the taxable event or the elements of the tax obligation or
its real amount or the date on which it arises.
The existence of abuse or simulation must be declared by the Tax and Customs Court
upon request of the Commissioner of the tax administration. This request is limited to
cases involving amounts exceeding 250 monthly tax units upon the date of the request.
Before filing the request, the tax administration must notify the taxpayer and give him
the opportunity to be heard in advance. The request to the court must be filed within
9 months following the taxpayer’s response or, if there is no response, within 9 months
from the notification referred to. Exceptionally, where the remaining period of the
statute of limitations for a tax audit is lower than 9 months, such request to the court
must be filed within that remaining period. During the court proceedings, the course of
the statute of limitations is suspended.
Under Law 20,899 of 2016, the GAARs are applicable to acts or transactions (or a group
or series of acts or transactions) carried out or concluded after 30 September 2015.
Therefore, acts or transactions concluded before that date may not be affected by the
GAARs, this is the case where the features or elements of those acts or transactions,
which determine a specific tax treatment, are established before that date, even if
they continue to have tax effects afterwards. If features or elements of acts or trans-
actions are modified after 30 September 2015, the GAARs apply only to the particular
consequences of the modified acts or transactions.
7.2. Transfer pricing
Transfer pricing rules are applicable to:
– transactions between related parties;
– dealings between PEs and head offices or other PEs of the same enterprise; and
– business restructurings and company reorganizations that imply the transfer
abroad of any title of assets and activities that could generate taxable income in
Chile (before Law 20,780, the rules were applicable only in case of transfers of
assets and activities to tax havens or low-tax jurisdictions).
The rules are based on the arm’s length principle and cover definition of related par-
ties, transfer pricing methods, studies, adjustments by the tax administration, report
obligations, advanced price agreements (APAs) and corresponding adjustments.
The taxpayer has to substantiate to the satisfaction of the tax administration that its
operations are carried on at arm’s length. If this is not the case, the tax administration
is empowered to make transfer pricing adjustments. The increase of the taxable base
is subject to a final tax at the rate of 35%. In addition, a fine equal to 5% of the balance
is imposed.
Arm’s length principle: The prices, values or profitability of cross border transactions
and reorganizations or restructures of enterprises entered into by residents with
foreign related parties must be agreed upon under the arm’s length principle.
Related parties are considered to constitute the following:
– if one person participates (directly or indirectly) in the management, control or
capital of the other person;
38
– if the same person(s) participate(s) directly or indirectly in the management, con-

trol, capital, profits or receipts of two parties;
– a PE, with respect to its head office and other PEs of the same enterprise;
– parties in a transaction entered into with a party resident, established or consti-
tuted in a country or territory listed as a tax haven, unless such jurisdiction has a
tax information exchange agreement with Chile;
– a party concluding transaction(s) with any third person, who concludes transac-
tion(s), directly or indirectly, with a party who is related to the first one; and
– close relatives.
Transfer pricing methods. The following methods may be used by the taxpayers and
the tax administration:
– comparable uncontrolled price;
– resale price;
– cost-plus;
– profit split;
– comparable profit split; and
– residual methods.
The taxpayer must use the most appropriate method considering its particular case.
With respect to the deduction of expenses, royalty payments made to non-resident
related parties are in general deductible up to 4% of receipts from sales or services.
This limitation does not apply when those payments are subject to income tax in the
country where the beneficiary is domiciled at a rate of at least 30%.
7.3. Thin capitalization
Effective from 1 January 2015, thin capitalization rules are governed by new article 41
F of the LIR.
Chilean income tax law contains specific thin capitalization provisions with respect to
certain interest payments to non-resident related parties, i.e. interest from loans
granted by foreign or international banks or financial institutions; interest to finance
imports; and interest on Chilean or foreign-currency bonds issued by Chilean compa-
nies. For this purpose, related persons are specifically defined by the same provisions
and include beneficiaries established or resident in countries or territories listed as tax
havens.
Under domestic law, interest payments are subject to a withholding tax at the general
rate of 35%; but various categories of interest are subject to a specific reduced rate of
4%. However, when the total annual debt/equity ratio exceeds the 3:1 threshold at the
end of the taxable year, the excessive amount of interest is subject to final tax at the
rate of 35% (i.e. the excessive interest amount is not recharacterized as dividends, but
subject to a special tax). This is a tax levied on the resident or domiciled taxpayer
that is the payer of the interest or similar payment.
The difference between the 4% withholding tax rate and the 35% tax rate, on the inter-
est paid in excess of the threshold, is payable by the debtor and is deductible from his
taxable income.
39
Thin capitalization rates are generally not applicable to banks, insurance companies,
credit card companies and other financial entities authorized to operate by law and
subject to the supervision of the Supervisor of Banks and Financial Institutions, Super-
visor of Securities and Insurances or the Supervisor of Social Security.
According to Law 20,899 of 2016:
– the taxable base of the 35% tax includes the (i) interest that was subject to the 4%
rate; and (ii) the interest that was subject to any rate lower than 35% or that was
exempt from tax, under specific domestic law or a tax treaty in force;
– for the calculation of the debt/equity ratio, the total annual debt excludes the
debt contracted with non-related parties for a maturity period of 90 days or less;
and
– financial entities qualified as such by the Ministry of Finance are excluded from the
scope of the thin capitalization rules, provided that, inter alia, at least 90% of the
assets of such entities are loans granted to non-related persons for at least 330 days
(which will be determined at the end of each commercial year) and debts with
related and non-related parties do not exceed 120% of the total loans during the
commercial year.
The thin capitalization rules do not apply to income paid or remitted by financial enti-
ties approved by the Ministry of Finance or to multilateral international financial
bodies.
7.4. Controlled foreign company
Law 20,780 of 2014 introduced CFC legislation (article 41 G of the LIR) effective from
1 January 2016. Main features of these provisions, as amended by Law 20,899 of 2016,
are as follows:
Resident companies or individuals are deemed to have received or accrued passive
income derived by a foreign controlled entity.
The net passive income (excluding losses) is deemed to be received or accrued at the
end of the tax period in proportion to the participation’s rights and then it is subject to
the business income tax.
If the passive income derived by the foreign controlled entity is more than 80% of its
total profits, 100% profits are deemed to be passive income.
Taxpayers are granted the foreign tax credit for the foreign taxes paid or due with
respect to the passive income under the general rules (which distinguish whether a tax
treaty is applicable).
The CFC rules do not apply if:
– the passive income is less than 10% of the total profits;
– the value of the assets of the foreign controlled entity that may generate passive
income do not exceed 20% of the total value of its assets; or
– the passive income of the controlled entity was subject to income tax at an effec-
tive rate of at least 30% in the country of domicile, the country of incorporation or
where the entity is established.
Passive income includes: dividends and other profit distributions; interest; royalties
and similar income; rents from immovable property; and capital gains from immovable
property and from rights that generate passive income (certain exceptions apply).
40
The expression “resident companies or individuals” includes any entities and “patri-
monies of affectation” constituted, domiciled or established in Chile.
A foreign controlled entity is any entity or “patrimony of affectation” that:
– is not resident, domiciled, or established in Chile (excluding foreign permanent
establishments of resident enterprises); and
– is directly or indirectly controlled by entities, individuals or patrimonies resident,
domiciled or constituted in Chile as follows:
– they owned or controlled more than 50% of the foreign entity’s capital, profits
or voting power;
– they have the power to elect the majority of directors or administrators of the
foreign entity; or
– they have the unilateral power to amend the foreign entity’s by-laws, or to
change the majority of its directors or administrators.
In addition, a foreign controlled entity is also an entity controlled by a foreign con-
trolled entity as described in the previous paragraph.
A foreign entity is deemed to be a “foreign controlled entity” (legal presumption)
where:
– it is resident, domiciled or established in a low-tax jurisdiction as defined in article
41H of the LIR; or
– a resident company or individual has directly or indirectly a purchase option with
respect to the foreign entity for 50% or more of its capital, profits or voting power.
If an entity is resident, domiciled or established in a low-tax jurisdiction, the entity is
also presumed to derive net passive income, and additional information requirements
are applicable.
Under article 41H of the LIR, a preferential tax jurisdiction is a jurisdiction (excluding
OECD member countries) that satisfies two of the following conditions:
– it has an effective tax rate on foreign-source income lower than 17.5%;
– it does not have an exchange of information agreement with Chile;
– it does not have transfer pricing legislation that allows its tax authorities to deter-
mine transfer pricing based on the guidance from the OECD or the UN;
– it has preferential regimes which is inconsistent with the standards of the OECD;
– it has a territorial system of taxation; or
– it is not considered compliant or largely compliant with the international standards
on transparency and exchange of information by the OECD.
7.5. Other anti-avoidance rules
7.5.1. Low-tax jurisdictions
The Finance Ministry provides a list of countries considered tax havens or low-tax juris-
dictions and article 41H of the income tax law also provides for criteria to qualify as a
preferential tax jurisdiction (see section 7.4.). Various provisions apply and others are
restricted with respect to taxpayers carrying out transactions with countries that
appear on this list, including the following (see also sections 6.3.3. and 6.3.4.):
– according to “the business platform regime” (for this special offshore company
regime, see section 1.7.5.), which enables foreign investors to set up a platform
company in Chile for channelling and managing investments in third countries
41
without having to pay Chilean tax on income from these overseas investments, (i)
shareholders holding at least 10% of the capital or profits of business platform com-
panies must not be residents of countries included on the list; and (ii) business plat-
form companies may provide services to subsidiaries and associated companies,
provided they are not located in countries included on the list;
– with respect to the application of the transfer pricing provisions (see section 7.2.),
parties are presumed to be related when resident enterprises carry out transac-
tions with enterprises incorporated in the countries included on the list or with
preferential tax jurisdictions that qualify under article 41H;
– certain withholding tax rates increase if the non-resident is resident of a listed tax
haven or qualifies as a preferential tax jurisdiction under the general criteria of
article 41H (see sections 6.3.3. and 6.3.4.);
– under CFC rules there are certain legal presumptions of “control” and “passive
income” applicable to entities resident in preferential tax jurisdictions under the
general criteria of article 41H or included in the list of tax havens;
– in the application of the thin capitalization provisions (see section 7.3.), parties
are considered to be related if the financial transaction is carried out with persons
resident or domiciled in the countries included on the list or with preferential tax
jurisdictions that qualifies under article 41H; and
– non-residents trading in shares of joint-stock companies, whether or not quoted on
a Chilean stock exchange, may obtain the tax registration number (RUT) necessary
to carry out these transactions from an institution acting as an intermediary or
from a Chilean stockbroker (withholding agent), but foreign investors are not eli-
gible for this benefit if their country of residence is included on the list.
7.5.2. Other anti-avoidance provisions
Income from the alienation of shares, corporate rights or other rights representing the
capital of a legal entity established abroad, which derives their value directly or indi-
rectly from underlying assets located in Chile (e.g. participations in resident entities,
movable or immovable property in Chile), where certain specific conditions and
thresholds are met, is considered Chilean-source income. This income is subject to a
withholding tax at the rate of 35%.
Certain non-deductible amounts must be added to the net income of a company that
pays its tax on actual income and are deemed to be distributed at the end of a tax
period. These amounts include: withdrawals in kind; amounts representing cash dis-
bursements not corresponding to the value or cost of assets, loans made by limited lia-
bility companies to their individual partners or to non-resident taxpayers; and, in the
case of the use or enjoyment of assets belonging to the company by the partner, his
spouse, his dependent children or a shareholder, an amount equal to a percentage of
the asset’s value.
8. Value Added Tax
8.1. General
VAT is levied on domestic taxable supplies of movable property, immovable property
(excluding land), and services made by a taxable person, as well as on imports of
goods. Exports of goods and some services are zero-rated. Some specified transactions
are exempt without credit for previously paid VAT.
VAT applies to all stages of production and distribution processes.
42

Taxable persons are: persons habitually engaged in selling movable property and
immovable property (excluding land); persons furnishing services, habitually or other-
wise; and in general persons carrying out transactions subject to VAT, including con-
struction enterprises, importers, whether importing on an habitual basis or not,
beneficiaries of services when the person that rendered them is a non-resident, etc.
VAT also applies to public institutions, semi-public institutions, autonomous state insti-
tutions, local councils, and to companies that belong to these entities, or in which they
have a stake.
8.3. Taxable events
Taxable transactions are, in general, sales, services and imports. Sales are transactions
for consideration involving the transfer of tangible goods, immovable property
(excluding land) or the transfer of rights with respect to those goods, provided that the
vendor perfoms this type of operations on a regular basis. Services are those provided
for consideration, furnished in the exercise of business activities, and rendered or
used in Chile. Imports are taxable transactions, whether habitual or otherwise.
Other specific taxable transactions include contributions of tangible goods to a
company by persons habitually engaged in the sale of similar goods and transactions
with respect to the use or the right to use trademarks, patents, know-how and similar
transactions.
8.4. Taxable amount
In general, the taxable amount is the total consideration charged, including:
– amounts derived from the indexation of debts for inflation, interest and financing
expenses of sales on credit, including interest for arrears accrued or collected in
the tax period;
– the value of containers and deposits made to secure their restitution, unless the
tax administration, in special cases, permits their exclusion; and
– taxes, excluding VAT and other similar taxes.
In computing the tax liability, input VAT may be credited against output VAT, so that in
practice only the value added to the taxpayer’s supplies is taxed.
With respect to imports, the taxable amount is the customs or c.i.f. value plus customs
duties.
Regarding immovable property, the taxable amount is the total consideration charged
minus the total amount, or the corresponding proportion of the acquisition value of
the land included in the transaction.
8.5. Rates
VAT is levied at a single rate of 19%.
8.6. Exemptions
Exports of goods and services are zero-rated. Services rendered in Chile to non-resi-
dents are treated as exports of services, provided they are characterized as such by
the customs authorities. In addition, some persons are treated as exporters and thus
have a right to obtain a refund of the VAT invoiced to them, e.g. taxpayers carrying out
international transport and related activities; services rendered and used abroad
under certain conditions; hotel enterprises providing services to foreign tourism,
43
certain port enterprises; certain enterprises and scientific organizations in respect to

trips to the Antarctic; enterprises not established in Chile that exploit fishing boats or
factory ships, etc.
Exempt transactions without deduction for previously paid VAT include:
– interest originating from financial transactions and documents, inclusive of com-
missions corresponding to endorsements or bails granted by financial institutions,
except for interest originating from instalment sales;
– premiums in the case of life insurance, insurance covering risks from earthquakes
and insurance covering transportation risks for imports and exports, ships, risks for
foreign-situs goods, and reinsurance, and insurance paid by Chilean commercial
airlines;
– news services rendered by news agencies;
– imports by investors or other persons, as defined by the law for direct foreign
investment, of capital good destined to specific projects, provided:
– the investment amounts to USD 5 million or more;
– the project generates taxable, non-taxable or exempt receipts after 12 months
as from the import, acquisition or other specific events; and
– the investor requests the exemption to the Ministry of Finance;
– goods imported by specific governmental entities, foreign embassies and consul-
ates, and other specific entities (e.g. specific imports by the fire brigade);
– Chilean raw materials used with the approval of the tax administration to produce
products that will be exported;
– transport of passengers provided by transportation enterprises;
– earnings of professionals, self-employed workers and directors of corporations;
– receipts not considered income or representing items of income specifically
subject to non-resident income tax (e.g. royalties, payments for technical services
or for services rendered abroad, insurance premiums);
– receipts in foreign currency derived by hotel enterprises registered with the tax
administration for services rendered to foreign tourists in Chile;
– commissions charged for the administration of voluntary pension contributions and
deposits in authorized voluntary pension saving schemes;
– sales or transfers of immovable property concluded before 1 January 2016, or for
which a corresponding legal promise was entered into before that date;
– sales or transfers of immovable property through leasing agreements with purchase
option concluded before 1 January 2016, and instalments paid under such lease
contract;
– sales of immovable property where the building permit was granted before 1
January 2016 and the transaction was concluded before 1 January 2017;
– sales of immovable property (including sales through lease agreements), where the
construction project was granted before 1 January 2016 and municipal approval of
the building is requested before 1 April 2017. This exemption applies only to the
first sale to a person that is not habitually engaged in the sale of immovable prop-
erty; and
– sales of dwellings to the beneficiaries of government subsidies granted for this pur-
pose, including constructions contracts and leasing contracts with purchase option
that were financed by the subsidies.
44
8.7. Non-residents
No refund scheme is available for non-resident persons.
9. Miscellaneous Taxes
9.1. Capital duty
No capital duty is levied in Chile upon the formation of companies or expansion of cap-
ital.
9.2. Transfer tax
There is no transfer tax in Chile with respect to the transfer of immovable property.
For the taxation of capital gains, see section 1.4.
9.2.2. Shares, bonds and other securities
There is no transfer tax in Chile with respect to the transfer of securities. For the tax-
ation of capital gains, see sections 1.4. and 1.7.
9.3. Stamp duty
Stamp duty (impuesto de timbres y estampillas) is imposed on certain specified acts.
It has a limited scope and is basically applied only with respect to documents repre-
senting a debt claim (e.g. bills of exchange or promissory notes). The taxable base is
the amount of the capital specified in the document. The tax rate varies depending on
the period of the loan.
The rate is 0.066% from 1 January 2016 of the value of the document for each month of
the loan’s term, up to a maximum of 0.8%.
In respect of documents representing debt-claim transactions without maturity, i.e.
payable on sight (e.g. bank credit lines), the tax rate is 0.332% from 1 January 2016 of
their value, and in respect of documents that contain a loan payable at sight or
without maturity term, the rate is 0.066% from 1 January 2017.
9.4. Customs duty
Customs duties are levied on the customs value of imports (determined on the basis of
the agreement concerning the application of the GATT Art. VII of 1994 and including
transfer expenses and insurance) at the general rate of 6%. Free trade and comple-
mentary economic agreements contain reduced tariff rates. There are no export
duties.
9.5. Excise duty
In addition to VAT, excise or sales taxes apply on the sale and/or importation of specific
goods. The taxable base is the same as for VAT purposes. The following examples of
taxable goods and the related tax rates can be given:
– alcoholic and non-alcoholic beverages and similar goods, whether sold or imported
habitually or otherwise, are subject to tax at various rates, i.e. from 10% to 31.5%,
depending on the alcohol content (article 42 of the VAT Law as amended by Law
20,780). Previously, the tax rates varied from 13% to 27%; and
– luxury goods (e.g. gold, platinum, ivory, jewels, etc.) are subject to tax at a rate of
15% (depending on the product, the tax may be applicable only to the first sale or
import, or also to subsequent transactions).
45
Excise duties may also apply on a taxable base that is calculated under specific for-
mulas, such as:
– tobacco is subject to tax at different rates depending on the product, i.e. cigars:
52.6% on the selling price to the consumer; cigarettes: 0.0010304240 monthly tax
units per cigarette plus 30% on sale price to customer inclusive of taxes; and pro-
cessed tobacco: 59.7% on the selling price to the consumer (articles 3 to 5 of
Decree Law 828 of 1974 as amended by Law 20,780);
– a fuel tax is levied on the first sale or import of automobile gasoline and diesel. Bio-
diesel and bioethanol are not subject to this specific tax; and
– new motor vehicles, and small and medium-sized motor vehicles are subject to a
single additional tax denominated in UTMs which is calculated under specific for-
mulas (in addition to VAT).
46
INDIVIDUAL TAXATION DOING BUSINESS IN CHILE 2017
CHILE
This chapter is based on information available up to 2 February 2017.
Introduction
Individuals are subject to income tax. An inheritance and gift tax is also levied. There
is no individual net wealth tax. Employees must make social security contributions.
The tax system is applicable throughout the entire Chilean territory.
The tax administration is the Servicio de Impuestos Internos (SII).
The currency is the peso (CLP).
Chilean tax system provides a comprehensive system of monetary adjustments to
offset the effects of inflation.
The “monthly tax unit” is a tax adjustment index and its value is adjusted monthly by
the tax administration in accordance with inflation. The “annual tax unit” is equal to
12 monthly tax units. The “tax unit” is used, inter alia, to determine certain applicable
tax rates, in some cases whether or not the income or gain is taxable, and the amount
of fines.
years (see Corporate Taxation section 1.1.). On 8 February 2016, Law 20,899 was pub-
lished in the Official Gazette introducing further amendments to the tax system,
including also the new income tax regime. Several regulations and administrative
interpretation concerning this law have been published. In this survey, amendments
introduced by Law 20,780 and Law 20,899 are reflected as they become effective.
1. Individual Income Tax
Residents and persons domiciled in Chile are subject to income tax. Residents are indi-
viduals present in Chile for more than 6 months in either 1 calendar year or in 2 con-
secutive calendar years. Domiciled persons are individuals that have the intention to
stay in Chile on a permanent basis, which can be assumed from the person’s circum-
stances (e.g. employment contract, the person’s family residence, children’s school,
etc.).
Estates of deceased persons may be considered taxable persons for 3 calendar years.
With respect to married couples, in general each spouse must submit a tax return sep-
arately, reporting their own income. However, married couples may be required to file
a joint income tax return, e.g. where they have joint ownership of their property or a
spouse administers the goods of the other.
Generally, there are no fiscally transparent persons in Chile.
1.2. Taxable income
1.2.1. General
Residents or domiciled persons are liable to income tax on their worldwide income.
47
DOING BUSINESS IN CHILE 2017 INDIVIDUAL TAXATION
Non-residents or non-domiciled individuals are liable to income tax only on their

Chilean-source income. Foreigners that establish domicile or residence in Chile are
liable to income tax only on their Chilean-source income during the first 3 years in the
country (this period may be extended by the tax administration in special cases). In
general, Chilean-source income is income from assets located in Chile or activities
carried out therein.
Income tax is assessed according to a schedular system, based on the nature of its
source:
– business income tax (impuesto de primera categoría) is levied on business income
under the rules described in Corporate Taxation;
– employment income tax (impuesto de segunda categoría) is levied on employment
income (see section 1.3.);
– individual income tax (impuesto global complementario) is levied on the total
taxable income derived by individuals resident or domiciled in Chile, including
income liable to business income tax or employment income tax, at progressive
marginal rates (see section 1.9.). Business income tax and employment income tax
may be creditable against the individual income tax (see section 1.1.);
– non-resident income tax (impuesto adicional) is levied on Chilean-source income
derived by persons who are non-residents and are not domiciled in Chile, generally
when the income is made available.
1.2.2. Exempt income
Income tax law provides that some receipts (ingresos no renta) are not considered to
be income for tax purposes and thus are not subject to income tax and are not included
in tax returns. These exempt items of income include:
– indemnity payments received for effective material damages, and for non-material
damages declared by the Courts;
– compensations between spouses established in a public deed or agreement con-
cluded before a Court or by a Court decision;
– compensation received under labour legislation;
– the distribution of profits and of accumulated reserves by joint-stock companies to
their shareholders in the form of stock dividends, or any increase in the par value
of the shares realized by capitalization of the company’s profits or reserves;
– dividends paid by joint-stock companies out of profits not considered to be taxable
income;
– the refund of capital by Chilean companies and revaluations thereof authorized by
law, provided that the revaluations do not pertain to capitalized profits subject to
income tax upon distribution;
– the repatriation of capital invested abroad. In the case that the investment was not
timely registered with the tax administration, the amount of the capital must be
evidenced with the relevant documentation;
– pensions from foreign sources;
– up to 31 December 2016 capital gains from the alienation of immovable property
derived by persons that are not subject to business income tax on actual income,
provided that the property has been held for more than 1 year and the transaction
is not habitual or between related parties. As from 1 January 2017, capital gains
from the alienation of immovable property located in Chile and acquired after 1
January 2004, obtained by individuals that are not taxpayers of business income tax
48
on actual income, are not considered income for income tax purposes up to 8,000
indexed units (unidades de fomento, UF), provided that certain specific require-
ments are met. Any capital gains above the 8,000 UF is taxable with the individual
income tax or by a 10% final tax upon taxpayer´s choice (when the taxpayer is res-
ident or domiciled in Chile); or to the non-resident income tax when the taxpayer
is not resident or domiciled in Chile. The 8,000 UF is determined per each individ-
ual during his entire life (not per alienation). For capital gains arising from the
alienation of immovable property acquired before 1 January 2004, not being con-
sidered income for income tax purposes, legislation existing prior Law 20,780
applies;
– capital gains from the alienation of shares acquired before 31 January 1984;
– other capital gains from the alienation of shares and securities (see Corporate Tax-
ation sections 1.4. and 1.7.);
– rents derived from non-luxury residences not exceeding 140 square metres, con-
structed under Decree with Force of Law 2 of 1959 are excluded from any income
taxation under certain conditions. The same applies to rents from leasing with a
purchase option, provided that the house has not been constructed by the lessor;
and
– capital gains from the alienation of shares when derived by persons that are not
subject to business income tax on actual net income, provided that the gains do not
exceed 10 annual tax units and the transaction does not take place between
related parties.
With respect to exempt income, various exemptions are generally granted to employ-
ees and other taxpayers in respect of Chilean-source income, provided that the recip-
ient has no other income or activity. These exemptions include:
– income from movable capital (e.g. interest) is exempt from individual income tax,
provided that it does not exceed, in the aggregate, 20 monthly tax units;
– capital gains derived from the alienation of shares in joint-stock companies are
exempt from business income tax and individual income tax, provided that they do
not exceed, in the aggregate, 20 monthly tax units;
– up to 31 December 2016, capital gains from the alienation of shares when derived
by persons that are not subject to business income tax on actual net income, pro-
vided that the gains did not exceed 10 monthly tax units and 10 annual tax units. As
from 1 January 2017, provided that certain requirements are met, capital gains are
not considered income for income tax purposes; and
– capital gains derived from the redemption of shares in mutual funds are exempt
from individual income tax, provided that they do not exceed 30 monthly tax units.
Exempt income is included in taxable income for determining the applicable progres-
sive tax rates.
In addition, there is a deferral of income tax on capital gains from the redemption of
interests (“units”) in mutual funds. Such redemption is not considered a “redemp-
tion”, and thus is not taxable if the interests in the mutual fund are sold to reinvest the
proceeds in other mutual funds administered by the same or a different managing
company.
49
1.3. Employment income

1.3.1. Salary
Employment income derived by residents or domiciled individuals is subject to the
employment income tax (second category tax). This tax is levied at the same progres-
sive income tax rates as the individual income tax (thus employment income and
income from the provision of independent personal services are taxed at the same
level).
Employment income includes all items of income from dependent personal services
(i.e. salaries, wages and other remuneration).
There are no deductions for costs directly related to employment income (e.g. com-
muting costs or moving costs).
Employment income is subject to monthly withholding tax. The tax is final unless the
employee has other income, in which case employment income is included in the indi-
vidual income tax taxable base (see section 1.9.2.).
1.3.2. Benefits in kind
Benefits in kind are taxable income.
1.3.3. Pension income
Pensions are taxable income.
Pension contributions are deductible in the computation of the employee’s income
tax.
See also sections 1.7., 3. and 6.1.1.
1.3.4. Directors’ remuneration
Fees and other remuneration earned by residents in their capacity as a member of a
board of directors or other advisory body are subject to individual income tax.
This income is subject to monthly withholding tax (see section 1.9.2.).
1.4. Business and professional income
Income from independent professional activities or any other personal activities
carried on by residents is subject to individual income tax on net income. Expenses
deemed necessary to generate the income and voluntary pension contributions (up to
certain limit) are generally deductible. Alternatively, taxpayers may choose to deduct
30% of gross income as notional expenses.
A withholding tax or a prepayment, both creditable against the final liability, is levied
on this income at a rate of 10%.
Business income derived by individuals or sole proprietorships is generally subject to
business income tax according to the rules described in Corporate Taxation section
1.3. Generally, the same income is subject to individual income tax upon withdrawal;
however, effective from 2017, this will depend on the type of income tax regime
chosen (as from 1 January 2017, the business income tax regime was replaced by two
income tax regimes; see Corporate Taxation section 1.1.).
There is a simplified income tax regime for small taxpayers, i.e. micro, small and
medium-sized companies, provided by article 14 ter of the Income Tax Law (LIR) as
amended by Law 20,780. Taxpayers that were subject to other income tax regimes on
50
31 December 2014 (i.e. regimes provided by articles 14 bis or 14 quarter LIR) could opt
to continue to be taxed under those regimes until 31 December 2016. Effective 1
January 2017, a new special regime will be effective under a new article 14 ter of the
LIR. Under the regime the taxpayer is basically subject to ordinary income tax on the
surplus of receipts over disbursements based on his records and invoices.
There is also a simplified income tax regime on presumptive income for small agricul-
tural, land transport or mining businesses. For this purpose, annual sales or gross
receipts must not exceed specific legal thresholds. The tax base is a percentage of the
value of the immovable properties, vehicles or annual net sales of mining products.
Under Law 20,899, businesses may only be subject to this regime when they are
formed exclusively by individuals during the time the regime is applicable.
Companies formed by professionals performing exclusively professional services or
consultancy may choose, within the first 3 months of the commercial year, to report
their income under business income tax rules. Once made, the election is irrevocable.
This option permits and is used (under general rules) to postpone taxation until income
withdrawal. Effective from 2017, this will depend on the type of income tax regime
chosen (see Corporate Taxation section 1.1.).
1.5. Investment income
Investment income derived by resident or domiciled individuals is generally subject to
individual income tax.
Under Law 20,780 of 2014, interest, dividends and other income derived from term
deposits, savings accounts, mutual funds quotas and other financial instruments, as
determined by the Ministry of Finance, issued by entities subject to control by specific
governmental entities (e.g. Supervisor of Banks and Financial Institutions), will not be
deemed to be derived by the individuals for individual income tax purposes until that
income is “withdrawn” by the taxpayer, i.e. the income is not subject to individual
income tax during the time it is saved or invested in these financial instruments. At any
time the taxpayer may opt to renounce this benefit and then he must include the total
amount of interest, dividends or other income pending of taxation in the taxable base
of the individual income tax. The total amount saved or invested under this benefit
may not exceed 100 annual tax units (unidad tributaria anual – UTA) per year (article
54 bis of the Income Tax Law).
1.5.1. Dividends
Up to 31 December 2016, dividends and other profit distributions were included in the
individual income tax taxable base. However, business income tax paid by the
company on the underlying profits was creditable against the tax imposed on the dis-
tributions. The income was grossed up when computing the tax, i.e. the business
income tax paid on the business income out of which dividends and profits were dis-
tributed was also included in the taxable base. The tax rate was applied on total
income and the business income tax was credited against the tax due. Pursuant to Law
20,780, effective as from 1 January 2017, dividends and other profit distributions are
still included in the individual income taxable base and the business income tax paid by
the company on the underlying profits is still creditable against the tax imposed on
distributions. The amount of credit available will depend however on the type of
income tax regime chosen (i.e. for integrated income tax regime, the full credit
amount, while for partially integrated tax regime, a credit limited to 65% of the rate of
business income tax levied).
51
Dividends and other profit distributions paid by Chilean companies out of receipts not
considered to be income are not subject to individual income tax or non-resident
income tax (see Corporate Taxation section 1.1.).
Law 20,780 eliminated, as of 1 January 2017, the reinvestment benefit according to
which individual income tax or non-resident income tax was deferrable under certain
circumstances. According to said reinvestment benefit, sole proprietorships, non-res-
idents or non-domiciled persons with a permanent establishment in Chile and partners
of companies (except joint-stock companies) deriving profit distributions from such
enterprises, permanent establishments or companies, and that reinvested them in
another enterprise within 20 days were not subject to individual income tax or non-
resident income tax (until subsequent distribution by the receiving enterprise). Tran-
sitional provisions of Law 20,780 allowed the reinvestment mechanism for years 2015
and 2016 under more restrictive conditions.
1.5.2. Interest
Interest received by residents is included in taxable income.
1.5.3. Royalties
Royalties are normally treated as business income (see section 1.3.).
1.5.4. Income from immovable property
Pursuant to Law 20,780, up to 31 December 2015, income from agricultural immovable
property was subject to business income tax under general rules. The owner or usu-
fructuary could deduct the immovable property tax paid from the business income tax.
Under certain circumstances business income tax could be paid on estimated income.
Income from non-agricultural immovable property exceeding 11% of the cadastral
value in the tax year, or derived by persons other than the owner or usufructuary of the
property, was subject to business income tax and individual income tax under the
general rules. Income was exempt from business income tax, but subject to individual
income tax, if it did not exceed the 11% threshold and was derived by the owner or usu-
fructuary. In this case, income was presumed to be 7% of the cadastral value, but the
taxpayer could choose to be taxed on actual net income.
Effective as from 1 January 2016, notwithstanding the existence of a simplified income
tax regime on presumptive income for small agricultural businesses, income from
immovable property, whether agricultural or non-agricultural, is taxed on actual
income. Generally, the owner or usufructuary of the immovable property may deduct
the immovable property tax from the business income tax. Actual income derived from
non-agricultural immovable property by individuals is exempt from business income
tax.
1.6. Capital gains
Capital gains are generally considered ordinary income and are thus subject to busi-
ness income tax (and, subsequently, to individual income tax or non-resident income
tax with a credit for the business income tax paid) when realized, i.e. in the case of a
sale or disposition of fixed assets or in the case of “habitual” transactions as defined by
the law.
Capital gains may also be subject to special taxation, i.e. subject to a final tax, or not
considered to be taxable income. For tax-exempt capital gains, see section 1.2.2. and
Corporate Taxation sections 1.4. and 1.7.
52

Up to 31 December 2016, capital gains arising from the alienation of immovable prop-
erty that was part of the assets of a person subject to business income tax on actual
net income were subject to tax under the general rules.
Capital gains arising from the alienation of immovable property, other than that men-
tioned above, were exempt from tax (receipts not considered income) provided that:
– the property had been owned for more than a year (before the alienation);
– the alienator did not habitually buy and sell properties (transactions are always
considered “habitual”, inter alia, when included in the company’s deed of incor-
poration as part of the business); and
– transactions were not carried out between related parties (i.e. shareholders of an
open joint-stock company, owning 10% or more of the shares, or shareholders of a
closed company limited by shares, and the joint-stock company or a company in
which they have an interest).
If this was not the case, capital gains were subject to tax (business income tax and
individual income tax or non-resident income tax) under the general rules.
As from 1 January 2017, capital gains arising from the alienation of immovable prop-
erty by taxpayers not subject to business income tax on actual income are subject to
individual income tax (resident individuals) or non-resident income tax (non-resident
individuals). Capital gains from the alienation of immovable property by taxpayers
subject to business income tax on actual income are subject to business income tax as
ordinary income and are subsequently subject to individual income tax (or non-resi-
dent income tax) upon attribution or distribution (depending on the tax regime) under
general rules (i.e. business income tax is a credit against individual income tax or non-
resident income tax).
However, capital gains arising from the alienation of immovable property located in
Chile and acquired after 1 January 2004, obtained by individuals not subject to busi-
ness income tax on actual income are not considered income for income tax purposes
up to 8,000 indexed units (UF), provided that certain specific requirements are met.
Any capital gain above the referred to 8,000 UF is taxable with the individual income
tax or to a 10% final tax (upon taxpayer´s choice when the taxpayer is domiciled or res-
ident in Chile) or, subject to the non-resident income tax when the taxpayer is not res-
ident or domiciled in Chile. The 8,000 UF threshold is determined per each individual
during his entire life (not per alienation).
For capital gains arising from the alienation of immovable property acquired before 1
January 2004, in order for not being considered income for income tax purposes, leg-
islation existing prior Law 20,780 applies as explained in the paragraphs above. Capital
gains arising from the alienation of such immovable property by taxpayers subject to
business income tax on actual income are subject to business income tax under general
rules.
1.6.2. Shares
Up to 31 December 2016, capital gains from the alienation of shares were subject to
business income tax, and subsequently to individual income tax or non-resident
income tax with a credit for the business income tax paid, where:
– shares had been owned for less than a year before the alienation;
53
– the alienator habitually bought and sold shares (transactions were always consid-
ered “habitual” when included in the company’s deed of incorporation as part of
the business); or
– transactions were carried out by shareholders of an open joint-stock company,
shares, or members of other companies, or in the case of transactions between the
above shareholders or members and the joint-stock company or a company in
which they had an interest (related parties).
If none of the above circumstances applied, capital gains from the alienation of shares
were subject to a flat tax at the rate of 20% (impuesto único a la renta) and the income
was not subject to any further individual income tax or non-resident income tax.
However, capital gains from the alienation of shares acquired before 31 January 1984
were not considered income for tax purposes and, thus, were not subject to income
tax.
In addition, capital gains from the alienation of shares were exempt from tax when
derived by persons that were not subject to business income tax on actual net income,
provided that the gains did not exceed ten monthly tax units or ten annual tax units.
As from 1 January 2017, the flat tax regime no longer applies. Therefore, capital gains
obtained from the alienation of shares by taxpayers not subject to business income tax
on actual income are subject to individual income tax (resident individuals) or non-res-
ident income tax (non-residents). Capital gains from the alienation of shares obtained
by taxpayers subject to business income tax on actual income are subject to business
income tax as ordinary income and are subsequently subject to individual income tax
or non-resident income tax upon attribution or distribution (depending on the tax
regime) under general rules (i.e. business income tax is a credit against individual
income tax or non-resident income tax).
The income tax regime for capital gains from the alienation of shares acquired before
31 January 1984, remains in force.
Capital gains from the alienation of shares are not considered income for income tax
purposes when derived by individuals not subject to business income tax on actual
income, provided that the gains do not exceed 10 annual tax units (UTA) per year and
the transaction does not take place between related parties.
For other tax-exempt capital gains, see Corporate Taxation sections 1.7.3., 1.7.4. and
1.7.9.
1.7. Personal deductions, allowances and credits
1.7.1. Deductions
Employees and individual income tax taxpayers may deduct from their taxable income
interest paid during the taxable year on mortgages for the acquisition or construction
of dwellings up to a maximum amount which varies depending on the annual gross
income of the person.
Taxpayers may also deduct voluntary pension savings from their taxable income
(within certain limits).
1.7.2. Allowances
Generally, there are no basic or other allowances.
54
1.7.3. Credits
Taxpayer participants in mutual funds holding investments in shares may credit a
certain percentage of the gains obtained from the redemption of quotas in such mutual
funds and of gifts made for cultural or sporting purposes.
Taxpayers may credit the amount of education expenses for children (up to 25 years
old) up to a maximum of 4.4 development units per child, provided the total income of
both father and mother does not exceed 792 development units.
This section is not applicable to non-residents, see section 6.3.1.
1.8. Losses
Generally, losses may not be set off, except in the case of taxpayers deriving business
income subject to business income tax on actual income. If this is the case, losses are
deductible and up to 31 December 2016 could also be set off against profits that had
not been distributed. If the profits are not sufficient to offset the losses, the losses
may be carried forward indefinitely. When losses could be set off against non-distrib-
uted profits, the business income tax paid on such profits was treated as an advance
payment and could be set off against income taxes (business income tax, individual
income tax or non-resident income tax) or refunded. As from 1 January 2017, losses
can no longer be set off against non-distributed profits.
There are no special rules for capital losses. However, individual income tax taxpayers
are specifically authorized to offset certain investment income (e.g. dividends, inter-
est and life annuities) and capital gains against capital losses incurred in the same kind
of investment or transaction. Such losses may not be carried forward.
1.9. Rates
1.9.1. Income and capital gains
Annual individual income tax and employment income tax is levied at the following
rates as of 1 January 2017:
Tax base (annual tax units) Rate (%)

Up to 13.5 0
13.5 – 30 4
30 – 50 8
50 – 70 13.5
70 – 90 23
90 – 120 30.4
Over 120 35
Neither surtaxes nor surcharges apply.

1.9.2. Withholding taxes
Income from employment is normally subject to a final monthly tax withheld by the
employer. In case the employee has income other than employment income (except
income from specific investments) or income from other employment, he must recal-
culate the tax and declare his income by filing an annual income tax return. In such
cases, the monthly withholding tax on employment income is credited against the final
income tax liability.
55
Income from an individual’s independent activities (e.g. professional income) is

subject to withholding tax or to monthly provisional payments made by the individual
at the rate of 10%, both of which are creditable against final individual income tax lia-
bility.
Fees and participations in profits derived by a member of a board of directors or advi-
sory board are subject to withholding tax at a rate of 10%, which is creditable against
the final individual income tax liability.
For withholding rates on amounts paid to non-domiciled individuals, see section 6.3.
1.10. Administration
1.10.1. Taxable period
The tax period (año comercial) is the calendar year, except in special cases, i.e.
opening and closing periods of businesses. Chilean income tax law uses the term año
comercial (financial year) to refer to the tax year and año tributario (literally, tax
year) to refer to the year of assessment.
1.10.2. Tax returns and assessment
Employees with only one employer and no other income in the tax year are not
required to submit an annual tax return. Employees deriving income from more than
one employer or other income must file an annual return.
Individuals deriving income subject to individual income tax must file an annual tax
return. Individual income tax is computed by the taxpayer on a self-assessment basis.
The annual income tax return must be filed in April of the year following the tax year.
1.10.3. Payment of tax
With respect to salaries and other taxable benefits earned by employees, the employer
withholds the tax on a monthly basis. With respect to professional income, there are
two possibilities: either the tax is withheld by the payer, or, if this is not the case, the
tax must be paid as an advance payment (“monthly provisional payment”) by the
person deriving the income.
Final payment of the tax liability for the current year must be effected in a single pay-
ment, within the term for filing the return and along with it (April of the year following
the tax year).
1.10.4. Rulings
The SII’s Commissioner is empowered to give administrative interpretations of the law
to taxpayers. Requests regarding specific cases in which the taxpayer has a real inter-
est, or specific transactions about which there is a need for certainty, are answered.
2. Other Taxes on Income
Chile does not levy any other tax on income.
3. Social Security Contributions
All resident or domiciled employees must pay monthly contributions to the social secu-
rity system, based on individual accounts.
Compulsory social security contributions are deductible for individual income tax pur-
poses. Voluntary deposits or contributions to the private social security system are also
deductible up to a certain amount.
56
3.1. Employed
Social security contributions are computed as a percentage of the employee’s total
monthly remuneration (i.e. salary, benefits in kind, bonuses, etc.). The maximum base
for the computation is 75.7 UF for 2017.
The rates for employee social security contributions are as follows:
– 10% of salaries (pension contribution);
– a percentage commission fee charged by the pension fund administrator for man-
agement services (this ranges approximately from 0.47% to 1.54%); and
– 7% for health insurance.
In addition, employees may also be subject to:
– contribution for “heavy” work: both the employer and the employee must contrib-
ute 2% of the salary (the percentage may be reduced to 1%); and
– employment insurance: the employer (2.4% of the part of the salary not exceeding
113.5 UF in 2017), the employee (0.6% of that part of salary with the same cap or
0% in of work contract for a fixed period) and the state (18,816 tax units per month)
must each contribute to finance this insurance.
Employers must withhold and pay the contributions.
In addition, employers must pay, inter alia, the premium for the disability and life
insurance irrespective of the number of workers, which is currently 1.41% (from July
2016 until June 2018).
3.2. Self-employed
Social security are compulsory for self-employed persons (pension contribution,
administration commission fee, disability and life insurance, and other labour law con-
tributions). The contributions are computed at ordinary rates on 80% of gross income
from independent personal services arising in the calendar year preceding the year in
which the income tax return is due for filing. The computation basis cannot be less
than the minimum salary nor exceed 74.3 development units. Effective 1 January
2018, health contributions (7%) are also compulsory without exception.
4. Taxes on Capital
4.1. Net wealth tax
Chile does not levy net wealth tax on individuals.
Domiciled individual entrepreneurs are subject to an annual municipal business
licence fee, normally calculated as a percentage of capital. The tax rate varies accord-
ing to the municipality and location within the municipality and ranges from 0.25% to
0.5%. It may not be less than one tax unit nor exceed 8,000 tax units. Taxpayers who
are not required to pay their income tax on the basis of a general balance sheet are
liable to an annual licence fee equal to one monthly tax unit.
4.2. Real estate tax
An immovable property tax (impuesto territorial or contribuciones de bienes raíces) is
levied on an annual basis on urban or rural immovable property. It is administered by
the central government and the revenue is allocated to the municipalities. Taxable
persons are the owners or users of the property.
57
The taxable base is the official cadastral value. An exemption is granted for properties
whose cadastral value does not exceed a certain limit. The tax is levied on that part of
the cadastral value of each piece of immovable property exceeding the relevant
exempt limit without regard to the number of owners or to the taxpayer’s personal
wealth. For urban property used as dwelling house the rate is progressive and is
divided into three brackets, the limits of which are adjusted every semester for infla-
tion: the first bracket is exempt, the second is taxed at 0.980% and the third is taxed
at 1.143%. Other urban property is taxed at a flat 1.143% rate. Rural land is taxed at a
1% rate.
Owners or usufructuaries that lease agricultural property may credit the tax against
their liability to business income tax. In the case of non-agricultural property, up to 31
December 2015, the tax was creditable only if the rent belonged to a joint-stock
company or the property was leased for an annual rent representing in the aggregate
at least 11% of the cadastral value. Pursuant to Law 20,780, effective as from 1
January 2016, in the case of lease of non-agricultural property the immovable property
tax is creditable against business income tax provided that (i) the taxpayer is subject
to business income tax on actual income not determined according to full accounting
records and (ii) that the transaction does not take place between related parties. Non-
creditable immovable property tax is deductible for income tax purposes.
Taxable urban land without buildings or vacant is subject to the property tax and to a
100% surcharge. Property located in urban expansion areas or in rural areas is exempt
from the surcharge. In certain cases (subdivision of land, total demolition following
destruction due to causes of which the proprietor or dweller are not responsible) a 10-
year holiday may be granted.
5. Inheritance and Gift Taxes
Chile levies inheritance and gift tax (impuesto a las herencias, asignaciones y dona-
ciones) on the net value of transfers of property upon death or inter vivos gifts at pro-
gressive rates.
Tax is imposed on the recipient of taxable property, i.e. heir or legatee of an inheri-
tance or bequest, or the donee of a gift.
5.2. Taxable base
Taxable property is the property of the decedent’s gross estate for purposes of its
apportionment to the recipients, or the specific gift. The value of taxable property
must be assessed by the taxpayer under rules provided in the law to calculate its
taxable value.
Taxable property includes:
– any Chilean-situs property of a decedent or donor, regardless of the nationality or
residence of the transferor and recipient;
– any foreign-situs property of a Chilean decedent or donor; and
– any foreign-situs property of a foreign decedent or donor who acquired that prop-
erty with Chilean-source resources.
58
Exempt property includes: bequests and gifts to the central or local government and,
generally, to non-profit entities with a charitable or similar purpose; re-adjustable
savings bonds of the central bank and long-term state bonds; and wages due to a dece-
dent employee.
5.3. Personal allowances
The tax is levied on each recipient’s taxable base. The taxable base is calculated as the
amount of the estate or gift apportioned to each recipient, reduced by a specific
amount depending on the recipient’s relationship with the decedent:
Recipient’s relationship Exemption

Category I – 50 tax units (in case of decedent’s recipient)
(spouse; a direct/adoptivedescen- – 5 tax units (in case of donor’s recipient)
dant/ascendant)
Category II – 5 tax units (in case of decedent’s recipient)
(brother/sister; nephew/niece; uncle/aunt; – no deduction in case of donor’s recipient
first cousin)
Category III no deduction
(other persons)
5.4. Rates
Rates are progressive and also depend on the relationship with the decedent or donor
(see categories above).
Taxable base I II III

(annual tax units) (%) (%) (%)
Up to 80 1 1.2 1.4
80 – 160 2.5 3 3.5
160 – 320 5 6 7
320 – 480 7.5 9 10.5
480 – 640 10 12 14
640 – 800 15 18 21
800 – 1,200 20 24 28
Over 1,200 25 30 35
5.5. Double taxation relief

An ordinary tax credit is granted for the foreign tax paid with respect to property sit-
uated abroad.
6. International Aspects
6.1. Resident individuals
For the concept of resident or domiciled individuals, see section 1.1.
6.1.1. Foreign income and capital gains
Resident or domiciled persons are subject to income tax on their worldwide income
(see section 1.2.1.).
Foreign-source income and capital gains are, in general, fully taxable. Only net income
is considered; income is excluded if it is not available for reasons of force majeure or
legal provisions of the country of origin.
Foreign pensions are not considered income.
59
6.1.2. Foreign capital

Chile does not levy net wealth tax on individuals.
Foreign-situs immovable property is not subject to immovable property tax in Chile.
6.1.3. Double taxation relief
As a unilateral measure for the avoidance of double taxation in relation to foreign-
source income, Chile uses the ordinary tax credit method. The credit is granted with
respect to foreign dividends or profit distributions, royalties, technical assistance fees
received, fees for services qualified as an export by the Customs Service , on income
accrued or remitted by permanent establishments located abroad and on income
subject to the CFC rules.
In respect of other income, the foreign tax may only be deducted from the foreign-
source income.
The credit is generally limited to the lesser of the business income tax calculated
(according to a specific formula) on the foreign-source income or the foreign tax effec-
tively paid.
In respect of taxes paid on dividends and profit distributions, the credit equals the
lesser of: (i) a 32% credit limit calculated (according to a specific formula) on the
foreign-source net income derived by the taxpayer in the tax period, or (ii) the foreign
tax effectively paid.
With respect to dividends and profit distributions, an underlying tax credit is granted.
Furthermore, the income tax paid by companies on the profits distributed to the
company that remits such profits to Chile may also be credited (indirect foreign tax
credit), provided that at least 10% of the capital of the first-mentioned companies is
directly or indirectly owned by the company remitting the profits. Under amendments
introduced by Law 20,899 of 2016, the indirect foreign tax credit is also granted in case
that the companies making the distribution to the company that remits such profits to
Chile are resident in a different country, provided this country has a tax treaty or
exchanges information with Chile.
The ordinary credit method is generally also used in comprehensive tax treaties con-
cluded by Chile. In this case, a credit is granted for an amount which is the lesser of:
(i) the foreign tax effectively paid, or (ii) 35% credit limit calculated (according to a
specific formula) on the foreign source income with respect to all income referred to
in the tax treaty. For a list of tax treaties in force, see Corporate Taxation section
6.3.5.
The foreign tax credit can be carried forward. There is no carry-back of the foreign tax
credit.
6.2. Expatriate individuals
6.2.1. Inward expatriates
There is no special expatriate regime in Chile. A foreign individual rendering depen-
dent or independent personal services in Chile without acquiring Chilean domicile or
resident status is treated as a non-resident or non-domiciled individual (see section
6.3.).
60
However, a foreign individual that acquires Chilean domicile or residence is liable to

income tax only on his Chilean-source income during the first 3 years in the country
(this period may be extended by the tax administration in special cases).
A foreign technician (as well as his employer) is exempt from Chilean social security
obligations, provided that the foreign individual is included in a social security scheme
outside Chile and that he expresses a desire to continue under that scheme in the
employment contract. The exemption does not cover contributions for an insurance
that covers work accidents and professional illness.
6.2.2. Outward expatriates
A resident or domiciled individual that moves abroad remains subject to tax in Chile on
a worldwide basis until the domicile and/or resident status expires. Domicile in Chile
is not lost through temporary absences or lack of residence. Consequently, an individ-
ual who does not actually reside in the country is considered to be domiciled for tax
purposes if he leaves the country but retains the principal seat of his business in Chile,
either as a sole proprietor or as a member of a body of persons (which is treated as a
legal entity).
6.3. Non-resident individuals
Individuals are non-residents if they are not resident or domiciled in Chile. For the
concept of resident or domiciled individuals, see section 1.1.
6.3.1. Taxes on income and capital gains
In general, non-residents deriving Chilean-source income are subject to a final with-
holding tax at the general rate of 35% on the gross amount derived (non-resident
income tax, impuesto adicional).
Chilean-source income is generally income from assets located in Chile or activities
carried out therein. However, the concept of Chilean-source income also covers gains
from the indirect disposal of Chilean assets made between non-residents (article 10 of
the Income Tax Law, ITL).
The following assets are deemed to be located in Chile (article 11 of the ITL):
– shares or participation rights in companies incorporated in Chile; and
– bonds and other private or public debt instruments issued in Chile by taxpayers
domiciled, resident or established in the country (Law 20,780 of 2014).
In addition, interest is deemed to arise in Chile where:
– the debtor is domiciled in Chile; or
– the head office is in Chile, regarding debt instruments contracted or issued by a
permanent establishment located abroad (Law 20,780 of 2014).
Any business income tax previously paid with respect to the income is credited against
the non-resident income tax. In this case, to calculate the non-resident income tax, an
amount equivalent to the business income tax paid corresponding to the income dis-
tributed or remitted is included in the tax base and the income is thus grossed up. The
rate of non-resident income tax is applied on the grossed-up income and the business
income tax may be deducted from the tax due as a credit (see example in section
1.5.1.). New income tax regimes are effective from 2017 (see Corporate Taxation
section 1.1.).
61
However, there are various specific non-resident income tax rates, depending on the
type of income.
6.3.1.1. Employment income
See section 6.3.1.2.
Director’s remuneration derived by non-residents is subject to withholding tax at the
rate of 35% on the gross amount.
6.3.1.2. Business and professional income
Generally, income from services is subject to withholding tax (non-resident income
tax) at the rate of 35% on the gross amount.
However, remuneration paid to non-residents for engineering and technical works, or
professional or technical works supplied in the form of an advice, report or draft
(plano), whether carried out in Chile or abroad, is subject to withholding tax at the
rate of 15%. The rate is increased to 20% if the creditor or beneficiary of the payment
is incorporated, domiciled or resident in a country included in the tax haven list or in
a preferential tax jurisdiction according to article 41H of the Income Tax Law. The
increase used to be applicable also for payments between related parties, but this was
repealed by Law 20,956.
Under Law 20,780 of 2014, income derived by all non-resident individuals from scien-
tific, cultural or sporting activities in Chile, arising exclusively from their work or
skills, is subject to non-resident income tax at the rate of 20% on the gross amount
(previously, this tax rate was applicable only to foreign individuals; article 60, para-
graph 2 of the ITL).
The treatment of Chilean-source business income derived by non-residents depends on
whether or not the non-resident has a permanent establishment in Chile.
for income tax purposes. A permanent establishment (PE) of a non-resident person
operating in Chile is subject to income tax on its attributable worldwide income (pre-
viously, PEs were considered non-residents subject to tax on Chilean-source income).
Only the income originating from activities of the PE, or from assets assigned to, or
used by, the PE, is attributed to the PE.
The PE is considered an enterprise fully separated and independent from its head
office in respect of transactions made between the PE and enterprises related to the
head office or with other independent parties. However, some specific rules apply.
Income is generally subject to business income tax under general rules and to non-res-
ident income tax on remittances abroad at the general rate (except with respect to
interest). The business income tax paid is credited against the non-resident income
tax. Permanent establishments are also subject to the municipal licence.
Non-resident companies without a permanent establishment in Chile are subject to
non-resident income tax on their Chilean-source income, with a credit for the business
income tax paid with respect to that income.
62
6.3.1.3. Investment income

Dividends and other profit distributions derived by non-residents are subject to a final
withholding tax (non-resident income tax) at the rate of 35% on the gross amount. Any
business income tax previously paid by the company paying the dividend or profit dis-
tribution is creditable against the non-resident income tax. New income tax regimes
are effective from 2017 (see Corporate Taxation section 1.1.).
Interest derived by non-residents is subject to withholding tax (non-resident income
tax) at the general rate on the gross amount derived. However, in case of certain inter-
est that fulfils the requirements defined by law, the non-resident income tax rate is
4%; this reduced rate applies to, e.g., interest paid on current accounts and term
deposits placed with an authorized institution; interest to finance imports; interest on
Chilean or foreign-currency bonds issued by Chilean companies; and interest on
Chilean or foreign-currency bonds issued by the state and the central bank.
tion of trademarks, patents, formulas and other similar supplies are subject to with-
holding tax (non-resident income tax) at the rate of 30% on the gross amount.
tion of discovery patents, utility models, industrial drawings and designs, sketches
(esquemas de trazado) or topographies of integrated circuits and new vegetal varieties
are subject to withholding tax (non-resident income tax) at the rate of 15% on the
gross amount.
tion of computer programs are subject to withholding tax (non-resident income tax) at
the rate of 15% on the gross amount.
However, in respect of the two previous paragraphs, the rate is 30% if the creditor or
beneficiary of the payment is incorporated, domiciled or resident in a country
included in the tax haven list or a preferential tax jurisdiction according to article 41H
of the Income Tax Law.
Payments for the use of copyright or authors’ rights are subject to withholding tax
(non-resident income tax) at the rate of 15% on the gross amount.
For other withholding tax rates see Corporate Taxation. For withholding tax rates
under tax treaties, see Corporate Taxation section 6.3.5.
6.3.1.4. Capital gains
Capital gains derived by non-residents are generally subject to non-resident income
tax at the rate of 35% following the rules discussed in section 1.6.
6.3.2. Taxes on capital
There is no net wealth tax on individuals.
Non-domiciled taxpayers are liable to immovable property tax levied on Chilean-situs
immovable property (see section 4.2.).
6.3.3. Inheritance and gift taxes
Chile levies inheritance or gift tax upon non-resident beneficiaries or donees (see
section 5.).
63
6.3.4. Administration
Non-residents deriving Chilean-source income directly are subject to final withholding
tax separately in respect of each item of income and capital gains, and thus are not
generally required to file tax returns. However, there are exceptions for non-residents
deriving certain types of Chilean-source income. Non-residents carrying on their activ-
ities through a permanent establishment in Chile and certain other non-residents must
file income tax returns and make a self-assessment of the tax due.
64
KEY FEATURES
Last reviewed:14 February 2017
A. General information
Sources of tax law Income Tax Law (Ley sobre Impuesto a la Renta,LIR)
VAT Law (Ley sobre Impuesto a las Ventas y Servicios,IVA)
Tax Code (Código Tributario)
Real Property Tax Law (Ley sobre Impuesto Territorial)
Stamp Tax Law (Ley sobre Impuesto de Timbres y
Estampillas)
Main types of business entities Joint-stock company (sociedad anónima,SA)
Simplified joint-stock company (sociedad por
acciones,SpA)
Limited liability company (sociedad de responsabilidad
limitada,SRL)
Accounting principles IFRS
Currency Chilean peso (CLP)
Foreign exchange control No
Official websites Tax Administration
http://www.sii.cl/
Ministry of Finance
http://www.minhda.cl/
Congress Library
http://www.bcn.cl/
Treasury
http://www.tesoreria.cl/web/index.jsp
B. Direct taxation: Companies
1. Resident companies
Residence A company is resident in Chile if it is incorporated in
Chile
Tax base Worldwide
Corporate tax rates 25% or 25.5%
Alternative minimum tax No
Capital gains Yes, part of business income
Listed shares exempt (under conditions)
Loss carry-forward Yes, indefinitely
Loss carry-back No
Unilateral double taxation relief Yes, ordinary tax credit method (with restrictions) and
deduction method
2. Non-resident companies
Corporate tax rates 35% (business income tax paid is creditable)
25% or 25.5% for PEs of non-resident companies
Capital gains on sale of shares in Yes, part of business income (also subject to non-
resident companies resident income tax, but business income tax paid is
creditable)
Listed shares exempt (under conditions)
65
DOING BUSINESS IN CHILE 2017 KEY FEATURES
Capital gains on sale of Part of business income if immovable property forms

immovable property part of business assets
Otherwise, not taxable
Withholding tax rates
Branch profits Yes, 35% (business income tax paid is creditable)
Dividends 35% (business income tax paid is creditable)
Interest 35%; 4%; 0% (interest paid by Chilean banks to foreign
banks)
Royalties 30%, 20%, 15%, 0%
Fees (technical) 15% (20% under certain conditions)
Fees (management) 15% (20% under certain conditions)
3. Specific issues
Participation relief Inbound dividends: no
Outbound dividends: no
Group treatment No
Incentives Foreign investment statute
Foreign institutional investors
Business platform regime
Foreign investment funds
Several exemptions from taxation of capital gains
Special regime for income from bonds
Research and development credit
Regional incentives
Anti-avoidance
Transfer pricing legislation Yes
Thin capitalization legislation Yes
Controlled foreign company Yes
legislation
General anti-avoidance rule Yes
(GAAR)
Other anti-avoidance Tax haven legislation
legislation
C. Direct taxation: Individuals
1. Resident individuals
Residence Individuals present in Chile for more than 6 months in
one calendar year or 2 consecutive calendar years are
residents. Persons domiciled in Chile (individuals that
have the intention to stay in Chile on a permanent basis)
are also subject to tax as residents
Taxable income Worldwide
Income tax rates Progressive
Top rate 35% (over 120 annual tax units)
Alternative minimum tax No
Capital gains Yes, part of business income (with credit for business
income tax paid)
Special final tax or exemption (under conditions)
66
KEY FEATURES DOING BUSINESS IN CHILE 2017
Unilateral double taxation relief Yes, ordinary tax credit method (with restrictions) and
deduction method
Social security contributions 10% of salaries for pensions plus commission fee for
pension fund management services
7% for health services
2. Non-resident individuals
Income tax rates 35% (business income tax paid is creditable)
Capital gains on sale of shares in 35% (business income tax paid is creditable)
resident companies tax exemption under conditions
Capital gains on sale of 35% (business income tax paid is creditable)
immovable property tax exemption under conditions
Withholding tax rates
Employment income 35%, 20%, 15%
Dividends 35% (business income tax paid is creditable)
Interest 35%, 4%
Royalties 30%, 20%, 15%
Fees (technical) 15% (20% under certain conditions)
Fees (directors) 15% (20% under certain conditions)
D. Indirect taxation: Value added tax (VAT)/Goods and services tax (GST)
Taxable events Supply of goods, supply of services, importation
VAT/GST (standard) 19%
VAT/GST (reduced) No
VAT/GST (increased) No
Registration/deregistration No
threshold
VAT group No
E. Other taxes
Inheritance and gift taxes Yes
Net wealth tax (individual) No
Net wealth tax (corporate) No, but annual business licence fee as percentage of
capital
Real estate taxes Yes
Capital duty No, but annual business licence fee as percentage of
capital
Transfer tax No
Stamp duty Yes
Excise duties Yes
Other main taxes Special tax on mining income
67
DOING BUSINESS IN CHILE 2017 KEY FEATURES
68
This publication has been carefully prepared, but should be seen as general
CONTACT guidance only and cannot address the particular needs of any individual or entity.
The information contained within it is based upon information available up to the
BDO Auditores & Consultores LTDA dates mentioned at the heading of each chapter. While every reasonable effort has
Av. Américo Vespucio Sur 100 been taken by the IBFD and BDO to ensure the accuracy of the matter contained in
Piso 11 this publication, you should not act upon it without obtaining specific professional
Las Condes advice: the information contained herein should not be regarded as a substitute for
7580150 Santiago such. Please contact BDO to discuss these matters in the context of your particular
CHILE circumstances. The IBFD and BDO accept no responsibility for any loss incurred as a
Tel. +56 2 2729 5000 result of acting on information in this publication.
www.bdo.cl
BDO is an international network of public accounting, tax and advisory firms, the
International Tax Coordinator: BDO Member Firms, which perform professional services under the name of BDO.
Rodrigo Benitez Each BDO Member Firm is a member of BDO International Limited, a UK company
E-mail: rbenitez@bdo.cl limited by guarantee that is the governing entity of the international BDO network.
Service provision within the BDO network is coordinated by Brussels Worldwide
Services BVBA, a limited liability company incorporated in Belgium with its statutory
seat in Zaventem.
Each of BDO International Limited, Brussels Worldwide Services BVBA and the
member firms of the BDO network is a separate legal entity and has no liability for
another such entity’s acts or omissions. Nothing in the arrangements or rules of
the BDO network shall constitute or imply an agency relationship or a partnership
between BDO International Limited, Brussels Worldwide Services BVBA and/or the
member firms of the BDO network.
BDO is the brand name for the BDO network and for each of the BDO Member Firms.
www.bdo.global

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DOING BUSINESS IN CHILE

Africa: Ridha Hamzaoui, Emily Muyaa, Mei-June Soo

Tel.: 31-20-554 0100

4. TAXES ON PAYROLL ............................................................................ 26

1.2. TAXABLE INCOME ............................................................................ 47

6.3.1.2. Business and professional income ................................ 62

regimes are permanent establishments of non-resident enterprises and enterprises

Accelerated depreciation is available with respect to new or imported assets with a

Type of asset Years

1.7.1. Accelerated depreciation

1.7.3. Capital gains on the alienation of shares

1.7.6. Business platform regime

1.7.9. Benefits for reconstruction gifts

3.1.1. Taxable persons

A permanent establishment (PE) of a non-resident person operating in Chile is subject

Dividends Interest Royalties

Dividends Interest Royalties

– if the same person(s) participate(s) directly or indirectly in the management, con-

8.2. Taxable persons

certain port enterprises; certain enterprises and scientific organizations in respect to

Non-residents or non-domiciled individuals are liable to income tax only on their

1.3. Employment income

1.6.1. Immovable property

Tax base (annual tax units) Rate (%)

Neither surtaxes nor surcharges apply.

Income from an individual’s independent activities (e.g. professional income) is

Recipient’s relationship Exemption

Taxable base I II III

5.5. Double taxation relief

6.1.2. Foreign capital

However, a foreign individual that acquires Chilean domicile or residence is liable to

6.3.1.3. Investment income

Capital gains on sale of Part of business income if immovable property forms

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