Chile provides several options for foreign companies to establish a local presence, including stock corporations, limited liability companies (LLCs), and branches of foreign corporations. Stock corporations require a minimum of two shareholders, while LLCs require a minimum of two partners. Both structures allow for fully foreign ownership. Branches represent the locally registered office of a foreign corporation. Chilean law requires companies to maintain accounting books and records. Financial statements include a balance sheet, income statement, cash flow statement, and notes. Non-monetary assets must be restated for inflation. Corporations and branches pay corporate income tax of 24% on worldwide income. Individuals pay progressive personal income tax up to 40% on worldwide income after the first

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CHILE 2016

3. GEOGRAPHY AND POPULATION
CAPITAL: SANTIAGO
POPULATION: 17,3 MILLION
POLITICAL SYSTEM: REPUBLIC
CURRENCY: CHILEAN PESO (CLP)

4. The principal legal alternatives to constitute a local presence in Chile are the following:
 Stock corporation
A Stock Corporation is defined as a juridical entity formed by a common fund provided by
shareholders who are responsible only for their respective capital contributions and managed by a
Board of Directors whose members are essentially revocable. In order to form a corporation, two
shareholders are needed, as Chilean legislation does not allow wholly owned corporations. The
shareholders can be either individuals or legal entities, Chilean or foreign, whether or not domiciled in
Chile, and there is no requirement of a maximum or minimum capital. The total capital must be issued
and paid within three years. If not, the capital is reduced by law to the amount effectively issued and
paid.
 Limited liability companies (LLC)
This type of companies is defined as a contract whereby two or more parties agree to make a
contribution in common with the purpose of dividing the proceeds arising there from. Each partner’s
liability is limited to the amount of his capital contribution or to a greater amount specified in the
companies deed. Both the stock corporation and the LLC may be formed with exclusively foreign
partners or shareholders. Likewise, directors or managers may also be foreigners, without any other
limitation that there must be sufficient directors in Chile so that the Board can operate or, in the case
of LLC, an attorney with sufficient powers to represent the companies. The referred persons are not
legally obliged to live in Chile. If the corporation or the LLC are constituted through attorneys, they
must be granted sufficient power for said purpose. When issued abroad, this power must be signed
before a Notary Public and legalized at a Chilean consulate.
FORMS OF BUSINESS ORGANIZATIONS

5.  Branch of a foreign corporation
The Chilean commercial law considers a branch as the locally registered office of a foreign
corporation. Its formation implies the acquisition in Chile of a fiscal, legal and commercial
presence, and the assets of the branch remain subject to Chilean law, especially to cover its local
liabilities. The branch is considered to be the same juridical entity as the head office. However, it
is a permanent establishment, which has autonomy and legal capacity to become a partner or
shareholder of local companies or corporations. No minimum capital is required to establish a
branch, unless its capital is registered under a foreign investment regime. Branches must publish
their yearly balance sheet in a local newspaper within the four months following the closing of
the financial period.
The formation of a branch is relatively simple and requires the registration, at a Notary Public in
Chile. Unlike LLC and stock corporations, the branch may not be established jointly by two
different legal entities since, as it is the local office of one foreign corporation and thus, by law,
its capital pertains exclusively (100%) to the head office.

6. Except for some authorized exceptions, accounting records must be carried in Chilean pesos and
there are several legal formalities that must be fulfilled. Authorization to use foreign currencies can
be granted by the IRS and depends on a clear demonstration of that being the functional currency.
The basic financial statements include the following:
• Balance sheet
• Statement of income
• Statement of cash flows
• Notes to the financial statements.
Valuation of assets
In accordance with the accounting bulletins issued by the Chilean Institute of Accountants, and
with certain modifications to the Income Tax Law, non-monetary assets and liabilities, and
shareholders equity must be restated in accordance with the local Consumer Price Index by charge
or credit to income. Income statement accounts are restated to year end values.
Books and records
Companies are required by law to keep the following bound books, which must be stamped by the
Internal Revenue Service (IRS).
ACCOUNTING

7. • Journal General ledger
• Inventory and balances book
• Wages and salaries income tax-withholding ledger
• Purchases and sales ledgers (VAT register)
• Register of goods in stock
• Register of retained taxable profits
The IRS authorizes the use of computerized accounting systems.

8. Chilean resident corporations and branches of foreign entities are subject to income tax on their
worldwide income. A resident corporation is one that is incorporated in Chile. The corporate
income tax is applied to accrued net income, with the exception of foreign-source income, which
is computed on a cash basis.
The corporate income tax rate is 24%. The corporate tax paid by the company is fully creditable
against the tax applicable to the distribution of profits to nonresident partners or shareholders,
or to resident individual partners or shareholders. Dividends. Dividends or profit distributions
between resident entities are not subject to tax. Dividends received from foreign subsidiaries are
taxed as ordinary income. A foreign tax credit is available with respect to such dividends.
Mining tax
A special tax on mining activities is imposed on individuals or legal entities that extract minerals
subject to concession and sell these minerals in any state of production. The tax is imposed at
progressive rates ranging from 0% to 14%, depending on the amount of the sales and the
operational margin of the taxpayer. The tax base is corporate income with certain adjustments.
Sales made by related mining entities are attributed to the taxpayer for purposes of determining
the tax rate. The mining tax is imposed in addition to the income tax. However, the mining tax
may be deducted as an expense for income tax purposes for the year in which the tax is due.
CORPORATE TAXATION

9. All individuals domiciled or resident in Chile are subject to personal income tax on their worldwide
income. However, during their first three years of residence, foreign nationals are subject to tax on
Chilean-source income only. Nonresidents are taxed on Chilean-source income only. Income earned
for services rendered in Chile or for activities performed in the country is considered to be Chilean-
source income, regardless of where it is paid. A person present in Chile for longer than six months in
one calendar year or for longer than a total of six months within two consecutive tax years is
considered a resident of Chile. Domicile is defined as residence in a particular place with the
intention of staying there. The intention is proved through facts and circumstances, such as
employment within the country or moving one’s family into the country.
Employment income
Personal income tax is levied on a progressive scale. The income brackets are adjusted monthly in
accordance with the consumer price index variation expressed through a unit called a Monthly
Taxable Unit (MTU). An MTU is equivalent to approximately USD68. The Annual Taxable Unit (ATU) is
equal to one Monthly Taxable Unit multiplied by 12. The following table presents the personal
income tax brackets and corresponding rates for 2016.
INDIVIDUAL TAXATION

10. TAXABLE INCOME
In accordance to the tax reform approved in 2014, the highest marginal rate will be reduced to
35%, effective from 1 January 2017.
Nonresidents
Individuals working in Chile for periods not exceeding six months in a year or for a total of six
months within two consecutive tax years are considered nonresidents. However, a person may
be treated as a resident from the first day of his or her stay in Chile if evidence of an intention to
establish a domicile in Chile exists.
Nonresidents are subject to an Additional Tax on their Chilean-source income, which is income
earned for services rendered in Chile or activities performed in the country, at flat rates of 15%,
20% or 35%.
EXEEDING NOT
EXCEEDING
RATE
MTU MTU %
0 13,5 0
13,5 30 4
30 50 8
50 70 13,5
70 90 23
90 120 30,4
120 150 35,5
150 --- 40

11. In Chile, the VAT rate is 19%. No reduced or higher rates apply. However, additional taxes ranging
from 10% to 50% may be imposed under the VAT law on the provision of specific items. Under
the amendments introduced by the tax reform in October 2014, some of the taxed items and
applicable rates are jewelry (15%); alcoholic beverages (from 20.5% for fermented to 31.5% for
distilled); soft drinks with high sugar content (18%); other natural or artificial soft drinks,
including energy or hypertonic drinks (10%); and 50% over the first sale or import of pyrotechnic
items. In addition, transactions made by certain entities are exempt from VAT. In addition,
transactions made by certain entities are exempt from VAT. Exempt supplies are those supplies
of goods and services that are not liable to VAT. Exempt supplies do not give rise to a right of an
input tax deduction.
DOUBLE TAX TREATIES
Chile has signed double taxation agreement with 25 countries.
VAT

12. This publication must not be regarded as offering a complete explanation of the taxation and
corporate matters that are contained within this publication.
This publication has been prepared on the express terms and understanding that the publishers are
not responsible for the results of any actions which are undertaken on the basis of the information
which is contained within this publication.
The publishers and the authors expressly disclaim all and any liability and responsability to any person,
entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any
part of the contents of this publication.
Accordingly no person, entity or corporation should act or rely upon any matter or information as
contained or implied within this publication without first obtaining advice from an appropriately
qualified professional person, and ensuring that such edvice specifically relates to their particular
needs.
DISCLAIMER