Law 20.848 was recently passed and it created a new set of rules for direct foreign investment (FDI) in Chile. Therefore, it is convenient to analyze from a legal point of view the options that foreign investors have if they want to invest in Chile.
WAYS TO ENTER CAPITAL
For investments between USD$5,000,000, and USD$10,000 the following rules established on Chapter XIV of the Compendium of International Exchange Regulations of the Central Bank of Chile are applicable. The aforementioned Chapter establishes that all loans, deposits, investments and capital contributions that exceed USD$10,000, made though the formal exchange market, must be informed to the Central Bank.
This law applies to foreign investors that intend to invest more than USD$5,000,000. The commencement of the law was January 1, 2016. These investors can request InvestChile for a Certificate that endorses their status as foreign investors, which allows to remit the liquidated earnings and the invested capital, allows access to the formal exchange market for the purchase of foreign currency, gives them the right to be treated as nationals and allows the import of capital goods, complying with specific prerequisites, and exempts the payment of VAT. The request form can be downloaded here: Solicitud de Certificado de Inversionista Extranjero
Investments that equal or exceed USD$5,000,000 can opt for a fixed tax rate for 4 years, that is, until the year 2020, as it existed on the old FDI regulation, known as DL 600. For these purposes, investors can opt for an invariable tax rate of 42% for the remittance of earnings to foreign countries. Up to this date, the additional tax rate, which is imposed for the remittal of earnings to foreign countries, is 35%.
Mining investments exceeding USD$50.000.000 can opt for the regulations contained on article 11 ter of the now abolished DL600, which allows them not be affected by any new tax, including royalties, charges or other similar levies specific to mining activity; to be exempted to changes to the amount or way to calculate exploration and exploitation patents and to be unaffected by changes to the regulations regarding the Specific Tax for Mining Activities.
Regarding the way of doing business
If the investor is a natural person, he or she must request the unique Tax ID for investors. This Tax ID is used simply to apply the corresponding taxes when the earnings of the company are sent to foreign countries.
In the case of a foreign company, it must draft a power of attorney to a person in order request the Tax ID and to sign the articles of association. The Tax ID is used for the same purpose as with natural persons. The person designated can be a Chilean or a foreigner, even without residence in Chile. The power of attorney must be duly legalized in accordance with Chilean Law. It is convenient that the power of attorney is signed at the Consulate of Chile on the corresponding country. Obtaining the Tax ID only takes a couple of hours on the Chilean Internal Revenue Service.
The administrator of the company must be a Chilean or a foreigner with a work visa or temporary/permanent residency.
There is no minimum capital in Chile for companies. Forming a company in Chile takes approximately a month.
Taxes applied on investments in Chile are the following:
Chilean companies are subject to income tax, which levies the earnings of each fiscal period with a tax rate of 24%. Furthermore, partners or shareholders of this companies will only pay taxes at the time they withdraw their earnings, and will be subject to income tax for the effectively withdrawn amount if they are natural persons domiciled or residents of Chile. Foreign investors are levied with additional tax, with a tax rate of 35% over the remittance of earnings. It is important to note that the partners or shareholders of the company, be them nationals or foreigners, can apply as credit the income tax paid by the company over the amounts that were distributed to its shareholders or partners.