SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory changes during the past year.
TERRITORIALITY AND RESIDENCE
Chile taxes its citizens resident or domiciled in Chile on worldwide income. Domicile is physical presence with the intent to remain in the country. Residence is mere physical presence.Foreigners working in Chile are subject to taxation only on their Chilean-source income during their first three years in Chile, after which their worldwide income is taxed. In special cases, the three-year period can be extended.
Residence for tax purposes is acquired upon remaining six consecutive months in the country in one calendar year, or more than six months, whether consecutive or not, in two consecutive calendar years. If domicile is acquired before residence and the intention is to stay in Chile permanently or for a long period of time, normal taxation applies as of the date of entry into the country. While residence is being acquired, when applicable, a flat 20% tax normally is levied.
GROSS INCOME
Employee gross income/Resident or nonresident foreigners are taxed on their salary, deducting social security contributions.
Such items as reimbursement of travel expenses and housing provided in the employer’s interest, moving expenses, and a reasonable relocation allowance are considered nontaxable income and are excluded from the tax calculation.Such items as cost-of-living allowance, area allowances, car allowance,
vacation travel expenses, and utilities are taxable.
Capital gains and investment income/There is no capital gains tax. Capital gains are taxed as normal income, unless qualified by the law as being nontaxable income. Investment income is also taxed as normal income. However, in the case of
interest, only “real interest” is taxed, that is, interest effectively paid less cost-of-living increase.
DEDUCTIONS
Business deductions/ In general, all expenses incurred that are in the employer’s interest, provided they are duly documented, are deductible. Among these are travel and lodging expenses and documented entertainment. No blanket or standard deductions, such as representation allowances, are allowed.
Nonbusiness expenses/ Except for social security contributions and a percentage of certain investments in shares and time deposits, no nonbusiness deductions are allowed.
Personal allowances/ Personal allowances are minimal. However, all employees have a monthly tax credit of approximately US$5.01.
TAX CREDITS
The income Tax Law allows a tax credit for taxes paid abroad by
individuals domiciled or resident in Chile, provided there is a tax treaty in force with the foreign country. Personal allowances are in the form of a tax credit (see above). No other tax credit is available.
OTHER TAXES
Social security taxes / Foreign individuals may be exempt from local social security payments, provided they belong to a foreign social security entity covering at least pension, disability, illness, and death. Foreigners who are not covered abroad and local individuals must contribute to the Chilean
social security system on salaries up to approximately US$1,680 monthly. The contribution rate is 20.2%. The excess is not subject to contributions.As noted above, social security contributions are deductible in determining taxable income.
Local taxes on income / There are no local income taxes to be paid, only central government taxes.
TAX ADMINISTRATION
Returns/ Yearly tax returns need not be filed if the employee receives only salary income. If taxable income from another source is received, such as interest income, a yearly return must be filed.Husband and wife must file separate returns if each has separate income. The tax year is the calendar year.
Payment of tax/ In the case of employees, there is mandatory monthly withholding by the employer.
TAX RATES
Second category tax rates/Tax rates applied to this category are shown below.
Tax units (1)
From To Factor Deduction
0 C$
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