Tax Law

Iquique Customs-Free Zone in Chile and its Regulation

To encourage investment on the extreme north and south of Chile, customs-free zones were created in Arica, Iquique and Punta Arenas. They are defined as an area, perfectly delimitated and close to a seaport or airport, which is presumed by law to be outside of the country for Customs proposes.

Any kind of goods can enter the Customs-Free Zones, except for weapons and related goods and other items that go against public decency, public health, animal and vegetal health, and the Country’s security.

1. Regulation of items entered into Iquique’s Customs-Free Zone

Items entered into customs-free zones do not pay any customs fees, taxes or any other levy, as long as they remain on them. They can also be re-exported to other countries, on which case they must pay those countries’ customs fees and applicable taxes; be imported to Chile, in which case they are levied with the usual customs fee and taxed for items imported into the country; be sold in the same territory or be transformed, packed, labeled, divided, among other licit operations.

However, goods imported from abroad are levied with a unique tax rate of 0,52% , calculated on the CIF price of the goods. This tax can then be used as credit when the goods are imported into the country and is retained by the users of the Customs-Free Zone. This tax does not apply to goods assembled, made or manufactured on the Customs-Free Zone with foreign raw materials or parts, for which the taxes and levies regarding their import will only apply to the bits and pieces used that come from abroad, except when they have been nationalized.

However, to avoid misuse of the benefits conferred to the goods entered into customs-free zones, there is a complex administrative procedure, defined by the Chilean Customs Service, that differs depending on the intended destination of the items entered. The goods can be commercialized on the Industrial Zone or on the Exhibition and Sale modules of the Customs Free-Zone, transferred to the extended customs-free zone, imported to the rest of the country, or re-exported, and each operation has its own Customs procedure, regulated by the “Customs-Free Zones Manual”. To enter goods to any Customs-Free Zone, they must be guaranteed, either by a one-time payment that covers the fees, taxes and other levies generated by each import or a global guarantee that applies to every operation within the Customs office, which by the time this document was drafted rose up to US$100,000.

2. Tax benefits for companies operating on a Customs-Free Zone

The main benefits conferred to companies that operate on this Zones are:

i. Income Tax Exemption

Companies that operate on a Customs-Free Zone are exempt from paying income tax for the revenue generated on them. However, they must still keep complete accounting records.

Additionally, foreign shareholders will only pay 22,5% income tax instead of the usual 35%.

ii. VAT Tax Exemption

Transactions made inside the Zones don’t pay Value-Added Tax. The sale of national or nationalized goods to the Customs-Free Zone is considered an export, and as such are exempt from the VAT, and the seller can request a refund of the tax paid for this items.

iii. Bonus for local workforce

Until 2025, companies operating on the extreme regions of Chile (which include Iquique, Arica and Punta Arenas, the three of which have a Customs-Free Zone) will receive a bonus from the Government in an amount of 17% of the workers’ salary. This amount paid cannot exceed CLP$182,000 for each worker’s salary. The workers must live and work in the extreme regions covered by this bonus, and the salary must be higher than at least 20% the minimum salary, but should not be higher than 60 UF (approx. $1,320,000).

The payment of this bonus is done by the Chilean Treasury, via direct deposit on the employer’s bank account or check.
 

3. How to become an Iquique’s Zona Franca Operator

In order to be able to operate from Iquique’s Zona Franca, the company will have to sign an agreement with the administrator of Iquique’s Zona Franca. The company shall have a paid capital of at least 5,000,000 CLP, i.e. about USD 9,000, to be able to sign the agreement. The company has to deliver previously a series of documents including a description of the project the company wants to develop at Zona Franca, a certificate about the origin of the capital of the company and police record of the legal representative and shareholders of the company. The company has to also register at www.uaf.cl to inform about its operations to avoid money laundering.

The signing in fee is about USD 300 and also a monthly fee of about USD 40 has to be paid as well as a guarantee in an amount of about USD 2,000.

The company will sign an agreement with Zona Franca, that will allow him to use that address for the purposes of opening a branch in Iquique and paying the county taxes.

Afterward, the company has to register the valid signature at the Customs Authorities and give them the guarantee of USD100,000 mentioned before.

The company also has to hire the services of the online system used by Zona Franca to control the entrance and exit of the goods in Zona Franca.

All the process takes about 40 days.

Last modified: 12/09/2019