ChileTax Obligations Detailed

In Chile, employers face various tax obligations related to employee compensation and social security.

Income Tax

• Withholding: Employers must withhold income tax from employee salaries monthly, remitting it to the Servicio de Impuestos Internos (SII). The tax rate is progressive, ranging from 0% to 40% based on the employee's income level.
• Annual Statement: Employers must file an annual income tax statement (Form 22) for each employee by April of the following year, detailing all income and deductions. This is due in April of the year following the income year.
• Form 1887: By March 28th, employers submit Form 1887, a certificate detailing employee wages and withholdings for the previous year.

Social Security Contributions

• Employee Portion: Employers withhold employee social security contributions, which include 7% for health insurance and 10% for the pension fund. These contributions are subject to a cap, adjusted regularly.
• Employer Portion: Employers contribute to unemployment insurance. Specific rates and caps may apply.

Other Taxes

• VAT: Employers are generally responsible for collecting and remitting Value Added Tax (VAT) on applicable goods and services.
• Municipal License Fee: Businesses must pay an annual municipal license fee, although the amount varies based on the municipality and the nature of the business.

Additional Considerations for Foreign Workers

• Residency: Tax residency is determined by the number of days spent in Chile. Individuals present for more than 183 days in a calendar year or any 12-month period are considered residents and taxed on worldwide income. Non-residents are taxed only on Chilean-sourced income.
• Monthly Tax Returns: Foreign workers paid through a foreign payroll, without a Chilean "shadow payroll", may need to file monthly income tax returns and self-withhold taxes.
• RUT: All foreign workers must obtain a Chilean National Tax ID (RUT) to fulfill their tax obligations.

Note: This information is current as of February 5, 2025, and might be subject to changes in Chilean tax legislation. Consulting with a tax advisor is recommended for the most up-to-date information.

In Chile, employee tax deductions encompass income tax, mandatory social security contributions, and voluntary pension contributions.

Income Tax

Income tax is levied progressively, ranging from 0% to 40% based on income brackets defined in Unidades de Fomento (UF), a unit adjusted daily for inflation. Tax is withheld monthly by the employer. For 2025, some general brackets include:

• 0%: Up to 13.5 UF
• 4%: 13.5 UF - 30 UF
• 8%: 30 UF - 50 UF
• 40%: over 310 UF and above

Social Security Contributions

Employees contribute approximately 17.6% of their salary to social security, covering:

• Pension (approximately 10%)
• Health insurance
• Disability and survivor's insurance

Voluntary Pension Contributions (APV)

Employees can make voluntary contributions to a private pension fund (APV) up to a limit of 50 UF monthly or 600 UF annually. These contributions are deductible from taxable income. Withdrawals are subject to a 15% tax.

Other Deductions

• Mortgage Interest: Residents can deduct mortgage interest up to 8 UF annually, subject to income limitations. This deduction phases out for incomes above 150 UF annually.

Deadlines and Procedures

• Annual Tax Return: Due by April 30th of the following year. Employees file using Form 22.
• Monthly Payroll Deductions: Employers withhold taxes and social security monthly. Monthly declarations of payroll taxes are due by the 12th of the following month.

It is important to note that this information is current as of today February 5, 2025, and might be subject to change due to legal or regulatory updates. Consulting with a tax professional for the most current information is advised.

In Chile, the Value Added Tax (VAT, known locally as IVA) is a consumption tax applied to most goods and services.

VAT Rates

• Standard Rate: 19% (As of February 5, 2025. This rate applies to most goods and services.)
• Exempt: Certain goods and services are exempt from VAT, including:
  • Exports of goods
  • Entrance to sporting and cultural events
  • Real estate
  • Freight services
  • Used cars and lorries
  • International passenger transport
  • Education
  • Healthcare
  • Public passenger transport
  • Financial Services
  • Newspapers

VAT Registration

• Threshold: There is no registration threshold. Any business making a taxable supply in Chile must register for VAT. This includes non-resident businesses providing digital services to Chilean consumers.
• Process: Businesses register with the Chilean Tax Administration (SII) and obtain a tax identification number (RUT). A simplified online registration process is available for non-resident digital service providers. Form 4415 is used and needs to be filed with the SII. Required documents may include a certificate of incorporation, director identification, and potentially a power of attorney.

VAT Filing and Payment

• Returns: VAT-registered businesses must file monthly returns. The returns and payment are generally due by the 12th of the following month.
• Electronic Returns: Filing and payment of electronic returns are permitted until the 20th of the following month.
• Simplified Regime for Digital Services: Non-resident providers of digital services can choose between monthly or quarterly filing under a simplified regime.
• Nil Returns: If there are no taxable supplies in a given period for non-resident providers under the simplified regime for digital services, a nil return is not required.
• Payment Currency: VAT liabilities can be paid in Chilean pesos, USD, or Euros.
• Sworn Statements: Large taxpayers and exporters are subject to additional filing requirements, including semi-annual sworn statements listing taxable transactions.

VAT Invoices

VAT invoices must include:

• Clear identification as a VAT invoice
• Vendor's name and RUT
• Customer's name and RUT (if applicable)
• Unique invoice number
• Invoice date
• Gross, VAT, and net amounts
• Foreign currency amounts translated at Central Bank rates (if applicable)
• Amounts in Chilean pesos (except export invoices)

Record Keeping

Businesses must maintain detailed accounting records, including control books, ledgers (general, inventory, sales, and purchases), payroll records, and cash books, for at least six years.

Other Indirect Taxes

Chile levies several other indirect taxes in addition to VAT. These include:

• Stamp Tax: Applies to credit operations.
• Excise Taxes: Levied on specific goods such as luxury items, alcoholic beverages, non-alcoholic beverages (with higher rates for high-sugar content), gasoline, diesel, and tobacco.
• Emissions Tax: A one-time tax on new, lightweight, and medium motor vehicles.

Recent Changes and Upcoming Regulations

• Low-Value Imports: From October 2025, the VAT exemption for low-value imports (previously under USD 41) will be eliminated. VAT will then be due on all imported goods.
• Customs Duty Exemption: Starting November 2024, a customs duty exemption is implemented for imports up to USD 500, along with new VAT rules impacting online marketplaces and remote sellers.
• Digital Platforms as Deemed Suppliers: From 2025, digital platforms facilitating sales to Chilean consumers may be deemed suppliers and have increased responsibility for VAT collection and remittance.

This information is for general guidance only and is current as of February 5, 2025. It is crucial to consult with a tax advisor for specific advice related to your situation as tax regulations can be complex and subject to change.

Chile offers various tax incentives to promote investment, innovation, and development. These incentives target specific sectors and regions, and include tax credits, deductions, exemptions, and other benefits. As of today, February 5, 2025, the landscape of tax incentives is evolving, and some changes are anticipated during the year.

Research and Development (R&D)

• Enhanced R&D Incentives: The tax credit against corporate tax for R&D expenses may increase from 35% to 50%. The maximum credit amount might also see adjustments, increasing from 15,000 to 45,000 Monthly Tax Units (MTU). SMEs may be able to request refunds for excess credits instead of carrying them forward.

Investment Promotion

• Tax Incentives for Private Investment: The Chilean government has implemented a plan with tax incentives aimed at stimulating private investment.
• Investment and Working Capital Guarantees: Guarantees are provided to lending institutions by the Chilean Economic Development Agency (CORFO) to improve access to financing for investment projects and working capital needs.
• VAT Exemption for Capital Goods: Projects with a minimum investment of US$5 million can apply for a tax credit on imported capital goods.
• Regional Incentives: Tax credits and grants are available for projects located in specific remote areas, including the northernmost and southernmost regions of Chile.

Other Incentives

• Training Tax Franchise: Businesses investing in employee training can deduct these expenses from their taxes, up to 1% of taxable salaries.
• Free Trade Zones: Special benefits, such as exemptions from customs duties, VAT, and corporate income tax, apply to businesses operating within designated Free Trade Zones. Similar benefits may also apply to businesses located in specific provinces, including Tocopilla, Isla Navarino, and Tierra del Fuego.
• Mining Incentives: Tax credits may be available for mining projects that focus on emission reduction and hydraulic efficiency. Similar incentives may apply to lithium projects with direct extraction technologies and value chain extension.
• Renewable Energy and Green Hydrogen: Tax credits may be applicable to new renewable energy projects and innovative green hydrogen initiatives.

Tax Compliance and Enforcement

The Chilean government is focusing on strengthening tax compliance and aims to increase revenue through improved enforcement measures. These may include stricter regulations and increased scrutiny of tax reporting. Changes to the income tax system may also be implemented to support these objectives.

It's important to note that tax regulations and incentive programs can change. Staying informed about the latest updates from official government sources is crucial. Consulting with a tax advisor is also recommended to receive tailored advice based on specific circumstances.