Chilean Tax System

1. Institutional Framework

The competent authority on tax matters in Chile is the Internal Revenue Service (SII), a public agency in charge of tax administration and oversight.

More information: www.sii.cl

Below is a general overview of the Chilean tax system.

2. General Principles

Individuals or entities domiciled or resident in Chile: natural persons and legal entities are taxed on their worldwide income, i.e., both income earned in Chile and abroad.

Recently arrived foreigners: during the first three years after acquiring domicile or residence in Chile, they are taxed only on Chilean-source income. This period may be extended by the Regional Director of the SII in qualified cases.

Determination of residence and domicile:

A natural person is presumed domiciled in Chile if there is intent to remain permanently, even if temporarily living abroad but maintaining the main center of business in Chile.
A natural person is considered resident if they remain in Chile for more than 183 days, consecutive or not, within a 12-month period.
A legal entity is considered domiciled in Chile if incorporated under Chilean law.

Taxpayers without domicile or residence in Chile: must pay taxes only on Chilean-source income.

Chilean-source income includes, among others:

Income from assets located in Chile.
Activities carried out within Chilean territory.
Royalties, trademark rights, and other similar payments.
Indirect transfer abroad of certain securities whose value derives from assets located in Chile.
Shares and partnership rights of companies incorporated in Chile.

Reference: Guide for Chileans Abroad – SII

3. Income Tax

Income Tax was established by Decree Law No. 824 (1974). It is a direct tax levied on income and is generally paid through an annual return filed in April of the year following the income year.

Types of Income Tax

First Category Tax: levies income from capital and business activities.
Second Category Tax: levies income from dependent and independent work.
Complementary Global Tax: final tax applicable to individuals domiciled or resident in Chile, levying all their income.
Additional Tax: final tax applicable to Chilean-source income earned by persons without domicile or residence in Chile.

Both the Complementary Global Tax and the Additional Tax are final taxes, meaning that once paid, the tax obligation in Chile is extinguished.

The First Category Tax can be used as a credit against final taxes to avoid double economic taxation in Chile. The credit percentage depends on the chosen tax regime and the existence of double tax treaties.

a) First Category Tax

Levies income from capital sources, such as agriculture, commerce, industry, mining, among others.

Filed annually in April, based on profits as of December 31.

General Regime (semi-integrated):
- Determined according to full accounting.
- Rate: 27%.
- Profits distributed to non-residents are taxed at 35%, with a 65% credit for the first category tax (100% if a treaty applies).
- Maximum tax burden: 35% with treaty; up to 44.45% without treaty.
Pro Pyme Regime: for companies meeting specific capital and revenue requirements.
- Pro Pyme General: 25% rate, 100% credit against final taxes.
- Pro Pyme Transparent: exempt from first category tax; profits are attributed directly to owners and taxed only with final taxes.
Presumed Income Regime: available for agriculture, transport, and mining, subject to legal income and capital limits.
Non-Article 14 taxpayers: foundations, corporations, and other non-profit entities that cannot distribute profits.

b) Second Category Tax

Levies income from dependent work (salaries, pensions, etc.) and independent professionals (fees).

Progressive rate up to 40%.
Withheld and paid monthly by the employer or payer.
Fees: withholding progressively increases from 13.75% in 2024 to 17% in 2028.

More information: Second Category Tax – SII

c) Final Taxes

Complementary Global Tax
- Applies to natural persons domiciled or resident in Chile.
- Filed annually in April, covering all income (domestic and foreign).
- Uses the same progressive scale as the Second Category Tax.
Additional Tax
- Applies to Chilean-source income received by non-residents.
- General rate: 35%, with partial or total credits depending on the regime and treaties.
- Reduced rates for certain items:
  - Royalties: 30% (15% for patents or software).
  - Cinema and TV: 20%.
  - Interest to foreign banks: 4%.
  - Other special cases: engineering, insurance, freight, etc.

Reference: International Treaties – SII

d) Specific Mining Tax

Regulated by Law No. 21.591 (2023).

Includes a 1% ad valorem component on copper sales exceeding 50,000 metric tons.
Progressive rates between 0.4% and 14%, depending on sales volume.

e) Value Added Tax (VAT)

Main consumption tax in Chile.

Rate: 19%.
Applies to regular sales, services provided or used in Chile, and imports.
Exports exempt, with entitlement to VAT credit recovery.
Foreign investors may request VAT exemption on capital goods imports.

f) Other Taxes

Municipal business license: 0.25%–0.5% of equity, capped at 8,000 UTM.
Foreign trade duties: ad valorem tariffs (average 6%, below 1% under FTAs) + VAT and specific taxes.
Stamp tax: applies to credit operations (0.332% to 0.8%).
Inheritance and gift tax: progressive, depending on amount and kinship.
Property tax: levies real estate based on fiscal appraisal (1%–1.4%, with surtaxes in certain cases).
Casino tax: admission (0.07 UTM) and 20% on gross revenues.

4. Tax Filing and Payment

Monthly: Form 29 (VAT, withholdings, PPM). Deadline: 12th of each month, or 20th if filed electronically.
Annual: Form 22 (income tax), in April.

5. Double Tax Treaties

Chile has 37 treaties in force as of 2024 (with countries including Argentina, Brazil, USA, Spain, Japan, Mexico, among others).
These agreements prevent or reduce double taxation and facilitate cooperation between tax administrations.

More information: Ministry of Foreign Affairs – International Treaties and SII

6. Common Tax Procedures

Tax ID registration (RUT): mandatory when acquiring assets in Chile or carrying out income-generating activities. Foreign investors must appoint a representative domiciled in Chile.
Start of activities: sworn statement to the SII when the investment involves engaging in economic activities in Chile.
Stamping of documents: authorization of documents and accounting books by the SII.