INCOME TAX IN CHILE

Corporate Taxes

Tax Base For Resident and Foreign CompaniesA corporation is considered resident or domiciled in Chile if it is incorporated in the country. To determine whether an entity is considered having a permanent establishment in Chile or not, the substance-over-form principle applies, meaning even though domestic requirements are not met, the taxpayer corporation may choose to be treated as a local PE in order to be allowed to deduct its business expenses.

Tax Rate

Attributed Income System (AIS): under this regime the income received or accrued by a company is annually attributed to its shareholders or partners, regardless of the effective dividend distributions.	25% (under the fully integrated regime)
Partially Integrated System (PIS): under this regime the shareholders or partners are taxed only on the actual distribution of dividends or profits by the company.	27%

Tax Rate For Foreign Companies

Resident companies are taxed on their worldwide income, whereas non-domiciled or non-resident companies are taxed only on their Chilean-sourced income.

Capital Gains Taxation

Capital gains are subject to standard corporate tax but may be exempt based on certain criteria: the length of time the shares are held, the usual or occasional nature of the purchase or resale of shares and the relationship between the seller and the buyer.

Main Allowable Deductions and Tax Credits

Expenses are deductible for depreciation and depletion, net operating losses, payments to foreign affiliates, taxes (not including income taxes). Subject to some conditions set forth by the Income Tax Law, interest expenses can be deducted. Under certain circumstances, bad debts and charitable donations (up to 5% of the company's net taxable income) can be deductible. The deductibility of payments made abroad for the use of trademarks, patents, formulas, and consulting and other similar services is limited to a maximum of 4% of the income derived from sales and services in the corresponding year. A tax deduction is available for investments in research and development up to 35% of expenses, and Chile also offers an accelerated depreciation for R&D capital. Start-up expenses can be amortised over a six-year period. Losses can be carried forward indefinitely, while carrybacks are not allowed.

Other Corporate Taxes

There is also a stamp tax (maximum 0.8%), municipal license fee, real property tax (1% for property in rural areas, two separate rates and a surcharge apply to real estate in urban areas: 0.98% on the cadastral value up to CLP 76 800 583, 1.143% for values above, surcharge of 0.025%), social security contributions (2.4% over the worker’s gross salary).

Country Comparison For Corporate Taxation

	Chile	Latin America & Caribbean	United States	Germany
Number of Payments of Taxes per Year	7.0	28.9	10.6	9.0
Time Taken For Administrative Formalities (Hours)	296.0	342.6	175.0	218.0
Total Share of Taxes (% of Profit)	34.0	46.3	43.8	49.0

Accounting System

Accounting Standards

Chile has adopted the IFRS (International Financial Reporting Standards) (for public companies and financial entities between 2009 and 2012 and for SMEs in 2013)Accounting Regulation BodiesMinistry of Finance

Accounting Law

The accounting rules are defined in the Código Tributario.

Difference Between National and International Standards (IAS/IFRS):- IFRS Standards are adopted as the national accounting standards of Chile.

Accounting Practices

Tax Year

The fiscal year begins on 1 January and ends on 31 December of the same year (calendar year).

Accounting Reports

The basic financial statements include the balance sheet, the statement of income, the statement of cash flows and notes to the financial statements.

Consumption Taxes

Nature of the Tax

Impuesto al Valor Agregado o IVA (Value-Added Tax or VAT, in English).

Standard Rate:- 19%

Reduced Tax Rate No reduced rates apply

However, certain products/services are exempt of VAT.

Exclusion From Taxation

Certain products and services are exempt, such as: (a) exports; (b) interest on loans and other financial operations (though, in the case of deferred payment of a sales price, interest charged is subject to VAT); (c) international freight, both by air and sea; (d) personal services; and (e) services subjected to additional tax, unless the services are provided in Chile or are those that enjoy a specific tax exemption under Chilean law or by double taxation treaties; (f) revenues which are not considered profit. Exporters are exempted from the VAT on their foreign sales and have a right to a reimboursement for the VAT paid on goods and services acquired as part of their export activities.

Method of Calculation, Declaration and Settlement

VAT is charged on domestic supplies of goods and services, and on the import of goods. Declarations must be made monthly calculating the difference between the tax paid and tax credit, and payment of VAT must be made within the first 12 days of the month following the month in which the transaction took place. If the credit is higher, the difference can be carried forward.

Other Consumption Taxes

Certain imported goods qualified as “luxury” are subject to a 15% tax, including: beer, chicha, cider, wine and champagne; gold, platinum, and white ivory articles; jewelry and natural or synthetic precious stones; fine furs; mobile home trailers; caviar conserves and their derivatives; pyrotechnic articles not intended for industrial, mining or agricultural use; electric vehicles; and fine carpets. Other liquors, such as grape pisco, whisky, aguardiente have a higher rate (31.5%); while wines, sparkling wine cider and beer are taxed at a 20.5% rate. Tobacco products, such as cigarettes, cigars and processed tobacco, are subject to additional 61%, 51% and 57.9% taxes, respectively.

Publication Requirements

Companies have to produce their annual financial statement to the shareholders of the company. The account books must be published in Spanish and use the Chilean currency as reference.

Individual Taxes

Tax Base For Residents and Non-ResidentsResidence for tax purposes is acquired upon remaining six consecutive months in the country in one calendar year, or for more than six months in total over two consecutive tax years. If domicile is acquired before residence and the intention is to remain in Chile permanently or for a significant period of time, normal taxation applies as of the date of entry into the country.

Tax Rate:

Personal Income tax (employment income)	The rate depends on monthly units of levy. The value of a unit in CLP is revalued each month. Progressive rates up to 35.5% (monthly values for April 2019, in UCL)
From 0 up to 652,765.50	0% or exempt from paying individual taxes
From 652,765.51 up to 1.450.590	4%
From 1.450.591 up to 2.417.650	8%
From 2.417.651 up to 3.384.710	13.5%
From 3.384.711 up to 4.351.770	23%
From 4.351.771 up to 5.802.360	30.4%
Beyond 5.802.360	35.5%

Allowable Deductions and Tax Credits

In general, all expenses incurred in the employer’s sole interest are duly deductible (for example travel and lodging expenses and documented entertainment). Individuals resident in the country may deduct the interest paid for mortgage loans destined to the purchase or construction of one or more dwellings (capped at 8 annual tax units). A deduction for voluntary pension contributions is also applicable, within a limit of 600 annual tax units. Furthermore, parents are granted a tax credit against their personal taxes for expenses related to the primary and high school studies of their children.

Special Expatriate Tax Regime

Foreigners working in Chile are subject to taxation only on their Chilean-source income during the first three years in Chile, after which worldwide income is taxed.

Resident foreigners are taxed on their salary, deducting social security contributions. Non-resident foreigners cannot deduct social security contributions before acquiring Chilean residence. Foreign individuals may be exempt from some local social security payments, provided they belong to a foreign social security entity system covering at least pension, disability, illness, and death. A non-resident flat tax can also apply for technical or engineering work or professional services that an individual renders through a report, advice, or plan development, at a rate of 15%.

Capital Tax Rate

Capital gains are generally taxed as ordinary income. Gains on the sale of various assets may be tax-exempt or subject to a reduced rate if certain conditions are met. A 1.2% property tax is imposed on property in urban areas and 1% in rural areas. Nonrural residential property is also subject to an annual rate of 0.98% on the cadastral value (up to approximately USD 120,000, and 1.143% on the excess).