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1. General principle

Persons resident or domiciled in Chile are subject to income tax on their world-wide income.

However an individual taking up domicile or residency in Chile is taxed only on Chilean source income for the first 3 years, on application this may be extended.

Persons without domicile nor residency in Chile are taxed on their Chilean source income.

A person is deemed to be domiciled or resident in Chile if:

  • It may be assumed from the activities that he/she wishes to stay in the country on a permanent basis (domicile).

  • If he/she spends more than six months in the country in a given calendar year or over a period of two years (resident).

Chilean source income is defined as income arising out of:

  • Goods or assets located within Chilean territory

  • Activities performed in Chilean territory

2.Time limits

The Tax Administration ("Servicio de Impuestos Internos" in future "SII") has a three year time limit to revise, amend or rectify any tax return filed by a tax payer. The time limit is calculated from the time the taxpayer filed the return.

For taxes that need to be declared or included in a filing of a return, the time limit mentioned above is six years if the declaration was not presented or if it was maliciously false.

The same time limits are applicable for the collection of taxes, interest or any other payments for which the taxpayer is responsible. The Administration in charge of the collection and payments is the "Tesorería General de la República" the General Treasury of the Republic, which is an independent administration from the "SII".


Income taxes are paid annually at the time of submitting the tax return. In some cases estimated partial payments must be paid monthly. The excess payments, if any, over the final tax liability is reimbursed normally within the month subsequent to the filing of income tax returns.

4. The Chilean income tax system affects:

  • Business income ("Impuesto de Primer Categoría" - First Category Tax - FCT)

  • Salaries and remuneration ("Impuesto Unico de Segunda Categoría" - Second Category Tax - SCT)

  • Other personal income ("Impuesto Global Complementario" - Complementary Global Tax - CGT)

  • Income obtained by non residents ("Impuesto Adicional" - Additional tax - AT)


1. Rate and tax base

The FCT's rate is 15%. It is applied on an annual basis, January 1 to December 31 (calendar year).

Income is assessed on a received or accruals basis. A special ledger known as FUT -"Fondo Utilidad Tributario" is required to keep track of retained earnings and their corresponding tax situation.

The tax base is arrived at by adjusting financial accounts in accordance with regulations in the Income Tax Act. Loss carry back and forward is not limited in time.

The Income Tax Act "Ley de la Renta" establishes, for example, what constitutes deductible expenses or how the accelerated depreciation works. Tangible assets may be depreciated over their useful life as established by the "SII". However an accelerated depreciation is available at the option of the taxpayer for new or imported assets which useful life is equal or more than 5 years. In this case the depreciation is calculated over 1/3 of their normal useful life. Exploration costs and other preparatory costs may at the option of the taxpayer be deducted in the first tax year or amortised over a period of the first 6 years of the project.

Royalty payments to persons non-resident or non-domiciled in Chile are deductible expenses but no more than the 4% of the total income from sales and services in that year. This limit is will not applicable if:

a) the taxpayer can demonstrate before the "SII" that there is or was no capital, control or management relationship, either directly or indirectly, between the taxpayer and the beneficiary of the payments, or

b) if the State of residence of the beneficiary apply a tax rate over this kind of income of 30% or more.

For some activities the tax base may at the option of the taxpayer be based on deemed income (small scale farming/agriculture, small scale mining and land transportation).

2. Internal Credits

FCT is creditable against both CGT or AT, as the case may be. Even if the enterprise responsible for paying the FCT to the Tax administration fails to pay the tax the shareholder/owner is never liable to pay the FCT.

Inter-company dividends or profits are not taxed in the receiving company. The tax credit of 15% follow the distribution and will be available as a credit when it is finally distributed to an individual resident in Chile subject to personal tax or to a non-resident subject to the Additional tax.

See below Examples 1 and 2 in part IV Complementary Global Tax.

3. Branches and permanent establishments

Branches and permanent establishments of foreign entities or persons are subject to FCT (15% on an accrued income) as a Chilean entity.

Any distribution or remittance of earnings is subject to tax (see part V Additional Tax).


The SCT is a progressive tax with rates ranging from 0% to 45%. It is calculated on gross salary and work compensations less social security payments. The tax is withheld by the employer.

An employee that do not obtain any other income in a tax year, is not required to submit a tax return.



The CGT is a progressive tax with rates ranging from 0% to 45%.

2. Tax base and calculation

The CGT is applied on an annual basis and income of all sources is included in the calculation of the tax base.

Income corresponding to dividends or withdrawals of profits are added and computed according to the following general rules:

  • Dividends or withdrawals of profits must first be attributed to taxable profits, so that exempt income can be distributed only after retained taxable income has been exhausted;

  • Distributions of profits must begin by the oldest retained earnings (FIFO);

  • FCT corresponding to the taxable profits is added to the taxable basis (grossed up) and then deducted as a credit from the determined GCT. It should be mentioned that the rate of FCT has differed over time. In 1989 the FCT was 0 in which case, when profits related to that year is distributed there is no gross up and no credit. In a case where profits from 1997 is distributed it works as follows:

Example 1

Gross income   1.000
FCT (15%)   (150)
Dividend received   850
FCT to be added back   150
Personal tax basis   1.000
Tax rate 45% (maximum) 450  
FCT credit (150)  
CGT payable 300  
  • A typical managerial monthly salary in 2000 of US$ 4800 would pay US$ 342 in social security and US$ 541 in tax.


1. Main features

Additional tax applies to remittances or payments of income abroad or, in general, when money is made available from Chile to a non-resident or non-domiciled person. The tax is withheld by the payer and paid over to the tax authority. This withholding is final and the non-resident recipient is not obliged to file a tax return.

2. Rates

The Additional tax is withheld at source at the rate of 35%. In some specific cases the rates are as follows:

  • Interest payments is 35%, but if the debt is registered with the Central Bank, it is 4%;

  • Employment income would be taxed at 35% on gross earnings except when the work may be characterised as engineering services or technical assistance when it will be taxed at 20%;

  • Any payment for services rendered abroad 35%. However some payments are exempt such as transport services completed totally abroad.

  • Foreign entities that engage in maritime transport and related services to and from Chile are subject to a 5% withholding, in many cases this tax is exempt due to reciprocal treatment;

  • Lease and rent leasing of assets qualifying for accelerated depreciation, 1,75%;

  • Payments to insurance companies not established in Chile for insuring equipment or other goods in Chile or for life or medical insurance of persons resident or domiciled in Chile, 22% and 2% for reinsurance;

  • Remittances of profits and dividends 35%;

  • Royalty payments 30%, if the payment refers to a film to be used in television or cinema the withholding is reduced to 20% and if the payment refers to copyright of any literary work the withholding is reduced to 15%.

3. Calculation

Dividends or withdrawals of profits must be first attributed to taxable profits, so that exempt income can be distributed only after retained taxable income has been exhausted.

Distributions of profits (and credits) must be accounted for by beginning with the oldest retained earnings - FIFO method.

FCT corresponding to the taxable profits is added to the taxable basis (grossed up) and then deducted as credit from the determined Additional tax, in the same way as if the recipient of the income is a Chilean resident and subject to personal tax in Chile. The calculation for a 1997 distribution is as follows:

Example 2

Taxable profits in Chile   1.000
FCT (15%)   (150)
Distributed profits   850
Dividend received by non-resident   850
FCT to be added back   150
Additional tax basis   1.000
Additional tax (35%) 350  
FCT credit (150)  
Tax to be paid on distribution   200

4. Branches and permanent establishments

Income from the business activities of the branch and any other Chilean source income is subject to AT when remitted abroad. The branch is entitled to the FCT credit against AT, which is equivalent to the rate of the FCT for the year from which it is distributed. It is calculated in the same way as showed before (see above example 2).


Foreign taxes may be credited against domestic taxes or treated as a deductible cost. Unilateral tax credits up to 15% are allowed on some foreign source income. With a tax treaty a credit of up to 30% is allowed. Excess credits may be carried forward.

See the following examples of a credit calculation with and without tax treaty:

Example 3

Foreign enterprise      

Profit before tax

Corporate tax (30%)     (300)
To be remitted     700
Remittance tax (10%)     (70)
Net dividend     630
Chilean enterprise 

No tax treaty

  With tax treaty

Net dividend

   630     630
Gross-up of foreign tax   1111     2702
First Cat. Tax base 741     900  
First Category tax (15%) (111)     (135)  
Foreign tax credit 111     135   
To pay   0     0
Income to be distributed           

to an individual

  630     630

Residual foreign tax credit

0       135
First Category tax credit 111     135  
Personal tax base . 741     900  
Personal tax (35% marginal) (259)     (315)  
Residual foreign tax credit 0     135  
First Category tax credit 111     135  
To pay (148)     (45)  
Income to be received 482     585  


As a general rule, capital gains are considered normal income and the gain is subject to FCT and CGT or AT as the case may be, but only when it has been realised, i.e. a sale or disposition of an asset. Some exceptions to this rule apply, most important of which are commented below:

Capital gains on transfer or sale of shares of Chilean corporations may be subject to a flat tax of 15% (set at the same level as FCT) if:

a) the shares have been held for more than one year,

b) the seller is not recurrent in the trade of shares, and

c) the buyer is not a related party to the seller.

Capital gains on the sale or transfer of real estate by persons (not subject to full accounting to determine their income tax) is tax free if:

a) the property has been held for more than one year,

b) the seller is not recurrent in the business of buying and selling real estate properties, and

c) the buyer is not a related party to the seller.

If the property does not fall within any of the above mentioned exceptions the gains are taxed as any other business profits.


1. Foreign Investment Statute

Under the Foreign Investment Statute (DL 600), the foreign investor may choose to pay a higher tax of 42% instead of the AT of 35%. The rate is fixed for a period of 10 years, which may in certain circumstances be extended to a maximum period of 20 years. The investor may opt out of the special regime and thereby pay the AT, but once opted out may no go back.

Example 4

Taxable profits 1.000
FCT (15%) (150)
Distributable profits 850
Tax on remittance (27%) (270)
To be remitted 580

2. Foreign Capital Investment Fund

Under the Investment Fund legislation the foreign investor may also be eligible for a special reduced tax, notably the requisite for this benefit is an obligation to maintain the investment in Chile for at least 5 years. The fund is taxed at a flat rate of 10% on its remittances, however any initial capital remitted is not subject to any tax.

Example 5

Taxable profits 1,000
FCT (15%) (150)
Dividend received by investment fund 850
Tax on remittance (10%) (85)
To be remitted 765

3. Other special regimes for certain regions

  • The Easter Island has a special tax regime which exempts any property or income from tax as long as the taxpayer is a resident of the island.

  • The towns of Iquique and Punta Arenas have a tax free zone. In these zones the FCT is not payable, however any Additional tax or personal tax applicable is not exempt and as FCT has not been paid there is no credit for FCT when profits or dividends are remitted.

  • The Navarino area, at the far end of the continent and the Porvenir and Primavera county also have a special tax regime in that FCT is not payable but is available as a credit for any Additional or personal tax as the case may be.

  • The provinces of Arica and Parinacota, in the north of Chile, have a special deduction available in that 20% of qualifying investment are credited against any FCT liability.


The Income Tax Act has established a comprehensive system of monetary adjustments to offset the effects of inflation (Corrección Monetaria) in accordance with a method that restates the historical balance sheet items at units of constant purchasing power with offsetting debits or credits to income.

Enterprises must keep their accounting records in Chilean currency, but if all or most of the capital contributed or the business is performed in a foreign currency, it may be authorised by the "SII" to maintain accounting records in the foreign currency.

Alimony payments do not constitute income for the recipient if the payer is obliged to pay them by law. For the payer, the payments are not a deductible expense.

Directors' fees or participation derived by directors or members of a CLS´s board are subject to CGT or AT as the case may be.

Deductions of royalty payments:

Payments of royalties made to beneficiaries of other countries are deductible as expenses with a limit of 4% of the income from sales and services of the business.

The limit does not apply if :

-Between the taxpayer and the beneficial owner of the payment there is no direct or indirect capital control or management relationship; or

- The beneficial owner is taxed with a rate of 30% or more.

July 2000