| Chile Income Tax Rates Chile tax rate is progressive from 0% to 40%. This tax rate depends on monthly units of levy (the value of a unit in CLP is revalued each month):
Tax Unit / Tax Rate %
Lower than 13,5 units 0%
13,5 - 30 units 5%
30 - 50 units 10%
50 - 70 units 15%
70 - 90 units 25%
90 - 120 units 32%
120 - 150 units 37%
Beyond 150 units 40%
Persons resident or domiciled in Chile are subject to income tax on their worldwide income. However, an individual taking up domicile or residency in Chile is taxed only on Chilean source income for the first 3 years, on application this may be extended. Persons without domicile nor residency in Chile are taxed on their Chilean source income.
A person is deemed to be domiciled or resident in Chile if:
- It may be assumed from the activities that he/she wishes to stay in the country on a permanent basis (domicile).
- If he/she spends more than six months in the country in a given calendar year or over a period of two years (resident).
Chilean source income is defined as income arising out of:
- Goods or assets located within Chilean territory
- Activities performed in Chilean territory
All individuals, domiciled or resident in Chile, are subject to taxes on income whatever its source. Non-domiciled or non-resident individuals in Chile are subject to taxes on their Chilean-source income. For tax purposes, a person is deemed to be non-resident when staying in Chile less than six months in two consecutive tax years.
During the first three years of residence in the country, foreigners who establish domicile or residence in Chile pay income taxes only on their Chilean-source income. This term may be extended by the tax authorities for an additional three years after which they are taxed on their worldwide income.
All remuneration for personal services as well as income derived from other services is included in gross income. All forms of remuneration are included in taxable salary. The only deduction is for social security contributions.
Such items as reimbursement of travel expenses, housing provided for the sole interest of the employer, moving expenses, and reasonable relocation allowances are considered non taxable income and are excluded from the tax calculation. Such items as cost of living allowance, area allowance, car allowance, vacation travel, and utilities are taxable.
Capital gains of individuals are treated as any normal income, subject to First Category tax and complementary tax. However, certain capital gains, when they do not represent customary operations, or, in other terms, when they are occasional, and provided that the goods or rights have been held at least one-year, are exempt from all taxes up to the restated acquisition price. As an example, if shares were acquired at 100 and, between the acquisition date and the date of selling, there has been a 60% inflation, up to 160 there is no tax whatsoever. Nevertheless, any excess over the restated acquisition price is taxed with the 17% First Category tax as a sole tax. No complementary tax or additional tax is applicable in this case.
Necessary business expenses incurred on behalf of others are reimbursable and exempt from taxes, provided that they are duly proven. Professionals can deduct their effective expenses or standard deduction.
The only deductible non-business expenses are social security contributions, on a voluntary basis where maximum amounts are determined in the same way as it is applicable to employees. (Employees must pay a variable percentage for pension plans of around 12% and 7% for health insurance, applicable on a maximum of up to 60 Development Units (US $ 2,284). On a voluntary basis, employees are allowed to make additional contributions to the pension fund of up to 50 Development Units (US $1,903), also deductible from salaries for tax purposes.) Tax computation for individuals varies depending on the type of income.
Basically, the following categories exist:
(1) Professionals - working as independent consultants must compute all their yearly income less the expenses necessary to produce such income or presumed expense of up to 30% of the annual gross income with a top limit equivalent to 15 yearly tax units (US $ 11,944). They can also deduct the social security contributions with equal caps applicable to employees.
(2) Employees - taxable income is the salary minus social security contributions either mandatory or voluntary (see 'Personal tax' above). No other deductions from taxable income are allowed. The tax applicable is the Sole Second Category income tax, mandatory withheld by the employer on a monthly basis.
(3) Combined income - income received by individuals such as dividends, profits in partnerships or derived from personal business is subject to complementary tax. In the case of dividends and profits distributed by a First Category taxpayer, the individual has a 17% credit originated in the payment of the First Category tax. In the case of employment income, the individual has a credit for the payment of the sole second category income tax.
(4) Professionals and employees domiciled or resident in Chile subject to Sole Second Category tax or Complementary Tax have a credit equivalent to foreign tax levied on their income they have made from countries that have a double taxation treaty with Chile as professionals or employees. There is a cap of 30% on the gross income.
Tax Year: Chile tax year is the calendar year.
Inheritance Tax / Estate Tax in Chile: An inheritance tax is levied on the net value of assets transferred at death.
Net Wealth Tax / Net Worth Tax in Chile: There is no net wealth tax / net worth tax in Chile.
Real Property Tax in Chile: A real estate tax is imposed on urban property at an annual tax rate of 1.4%. The tax rate is 1% on rural property and 1.2% on the cadastral value of a dwelling.
Chile Corporate Tax Chile corporate tax rates are progressive between 0-40%, with a 17% rate for first category tax. There are different tax categories for business income, which are: First category tax, second category tax, complementary tax, additional tax, special tax of Article 21° of the income tax law, and specific tax on operational mining income.
The income tax legislation of Chile provides for a scheduler system as follows:
First Category Tax: First Category tax is due on income derived from commercial, industrial and agricultural activities in Chile; mining, fishing and other extractive activities; investment; and real estate. All income not specifically taxed under another category and not tax exempt is included. The tax rate is 17% and affects all taxpayers which carry out these activities. Capital gains are included in gross income subject to First Category tax with certain exceptions which include:
(a) gain on the sale of shares in corporations, provided that the shares have been held at least one year, unless the sales represent customary operations of the taxpayer
(b) sale of mining rights up to the amount represented by the variation in the cost of living index between the date of purchase and that of sale, provided that such transactions do not form part of the taxpayers' normal activities
(c) sale of real estate other than that included in the assets of a taxpayer subject to First Category tax.
Second Category Tax: Second Category gross taxable income refers to that arising from wages, salaries, overtime payments, bonuses, fees, gratuities, profit sharing and any other form of remuneration. It is a progressive tax, the highest of which is 40%, applicable on a monthly basis to the excess of 150 monthly tax units (US$9,950).
Complementary Tax (Impuesto global complementario): This is a progressive tax assessed on individuals resident or domiciled in Chile with respect to income received or withdrawn in the preceding year. Its highest rate is 40%, applicable to the excess of 150 yearly tax units (US$119,400).
Additional Tax (Impuesto adicional): This tax affects, among others, the Chilean-source income withdrawn or remitted abroad to nonresidents or non-domiciled individuals and of companies or juridical entities organised abroad with or without a permanent establishment in Chile in the form of branches, offices, agents or representatives. This tax also affects foreign payments such as royalties, technical assistance and others at different rates.
Special Tax of Article 21° of the Income Tax Law: This special tax affects corporations and permanent establishments of non-resident entities. It is applied with a 35% rate on all the amounts that are disallowed as an expense, when they represent disallowed actual disbursements or withdrawals of assets, regardless of the way in which they may have been accounted for.
Specific Tax on Operational Mining Income: From 2006, there will be a specific tax on the operational income of the mining activity obtained by a mining operator. This progressive tax rate ranges from 0.5%, if the value of the annual sales exceeds the amount equivalent of over 12,000 metric tons of fine copper, up to a 5% sole fixed rate if the annual sales exceed the value of 50,000 metric tons. The operational taxable income on which this tax is applied is determined in a special way. Certain expenses such as losses from past periods, accelerated depreciation of fixed assets, etc are not allowed for this purpose.
Chile Classes of Taxpayers: Any person or entity domiciled or resident in Chile must pay tax on income, whatever its origin, whether its source is located in Chile or abroad. Non-residents are subject to tax on income, the source of which is located within Chile. An individual is considered resident when remaining in Chile for more than six consecutive months in the calendar year or for more than a total of six months within two consecutive calendar years. Foreigners working in Chile are only subject to tax on their Chilean-source income during the first three years of domicile or residence period which may be extended. After this period, they are subject to tax on their worldwide income.
Thus the income tax system covers individuals and juridical persons, resident or non-resident, foreign or national, whose income source is located in Chile and also, in the case of resident's income, from abroad. For example, partnerships and corporations are subject to a 17% First Category tax on an accrued basis.
The amounts distributed or remitted to non-resident or non-domiciled partners or shareholders are subject to a 35% additional tax payable on distribution or remittance with a credit of a 17% First Category tax. If partners or shareholders are domiciled or resident in Chile, the amounts distributed by the entity are subject to complementary tax, which is a progressive tax. These shareholders also have 17% credit.
Chile Withholding Tax on Dividends: Profits repatriated to a parent company abroad are subject to a 35% additional tax in Chile, against which the 17% first category tax paid at the corporate level may be used as a credit.
Chile Withholding Tax on Interest: Interest is subject to a 35% withholding tax on the gross amount. A 4% reduced tax rate applies to interest derived from loans granted by foreign banks and financial institutions, provided the lender and borrower are unrelated to each other. If the parties are related, the thin capitalization rules must be observed.
Chile Withholding Tax on Royalties: Royalty payments for the use, enjoyment and exploitation of trademarks, patents, formulas and other similar services are subject to a 30% withholding tax in Chile. Payments for the use, enjoyment, or exploitation of invention patents, useful models, industrial designs and drawings, blueprints or topography or integrated circuits, and of new vegetable varieties, are subject to a 15% withholding tax. The 15% tax rate also applies to payments for the use, enjoyment and axploitation of computer programs. The withholding tax rate increases to 30% if the parties are related and/or if the beneficiary is resident in a tax haven jurisdiction, as provided on a list issued by the Chilean Treasury Ministry.
Tax Rate on Branches - Branch Remittance Tax: A 35% additional withholding tax applies to a remittance of profits against which the 17% first category tax paid at the branch level may be used as a tax credit.
Real Property Tax in Chile: A real estate tax is imposed on urban property at an annual tax rate of 1.4%. The tax rate is 1% on rural property and 1.2% on the cadastral value of a dwelling.
Chile Payroll Tax: There's no payroll tax in Chile.
Chile VAT rates (Value Added Tax)Standard rate of VAT in Chile is 19%.
Reduced VAT rates: Reduced VAT rates are exempted of VAT exports, certain financial services, insurance, news services, technical services, consultancy and transport.
For imports, the taxable basis is the customs value or CIF value, including customs duties. Certain capital goods forming part of capital contributions may be exempt from tax. Import of raw materials used in the production, processing or manufacturing of goods for export may be exempt from VAT, subject to approval by the Internal Revenue Service.
The value of services rendered plus finance charges, etc are generally subject to VAT.
Exports of all products are exempt for purposes of VAT. VAT paid on imports and on local sales and services may be deducted from VAT surcharged on sales or services rendered.
VAT paid on importation and on acquisition or services received, when accessory to operations exempt from VAT (unless they are exports) or not related directly to the activities of the seller, is not recoverable.
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