taxable for the beneficiary if a stock option plan is included in an individual or collective employment agreement; if not, it is taxable at exercise. The above applies regardless of the taxation that may be imposed on the subsequent sale of the shares or the dividends on such shares. This treatment applies to stock option plans exclusively and not to other types of equity plans.
Capital gains. Capital gains derived from sales of personal property, including automobiles and household furniture, not used in connection with a trade or business, are exempt from tax. Since 1 January 2017, capital gains derived from sales of local real estate are taxable income, with an overall non-taxable amount of UF8,000 (approximately USD319,000), which is applied if the sale meets certain criteria. The cap is determined on the accumulated results of sales of real estate. The UF is an inflation-indexed unit expressed in Chilean pesos that varies according to the consumer price index.
Gains derived from transfers of personal property and real property used in a trade or business are treated as ordinary income and are subject to tax at the regular rates (see Rates).
Capital gains arising from the sale of shares are subject to the general tax regime. However, for residents complying with certain requirements, the tax paid can be allocated to the number of years during which the shares were held by the owner, up to a maximum of 10 years. Alternatively, the taxpayer may choose to pay a 10% flat rate on the amount of the capital gains. Also, capital gains arising from the sale of shares traded in the Chilean stock exchange are taxed at a flat rate of 10%.
Deductions
Personal deductions and allowances Individuals may deduct from their taxable income their social security contributions paid, up to certain limits. Subject to certain limitations, amounts invested in pension or insurance funds may be fully deductible from taxable income. Mortgage interest paid may be deducted from the tax base, subject to certain limitations.
In addition, child education expenses incurred during the year are eligible for a tax credit against personal taxes if the parents’ total yearly income does not exceed UF792 (approximately USD31,500). The maximum annual tax credit per child is UF4.4 (approximately USD175).
Business deductions. Deductible expenses consist of expenses necessary to produce taxable income.
Instead of accounting for actual expenses, individual professionals and independent workers may take a standard deduction equivalent to 30% of gross income, limited to 15 Annual Tax Units (ATUs, see Rates).
Rates
Employment income. Personal income tax is levied on a progressive scale. The income brackets are adjusted monthly in accordance with the consumer price index variation expressed through a unit called a Monthly Taxable Unit (MTU). An MTU is equivalent to approximately USD70. The Annual Taxable Unit (ATU) is equal to one Monthly Taxable Unit multiplied by 12.
The following table presents the personal income tax brackets and corresponding rates.
Employment income taxpayers may voluntarily file an annual tax return to recalculate the monthly taxes paid on an annual basis.
Self-employment and business income. Tax is calculated on an annual basis rather than the monthly basis used by dependent employees. The brackets and rates are the same as those indicated above, except that the MTU is replaced by the ATU, which is equivalent to 12 MTUs for the month of December.
For 2024, sole proprietors are subject to the First Category Tax at a rate of 25% or 27%, depending on the corporate tax regime chosen by them.
Self-employed taxpayers are subject to provisional tax at a rate of 13.75% (applicable tax rate during 2024) of gross fees or receipts. In certain cases, the provisional tax is withheld by the payer or otherwise the taxpayer is obligated to pay the monthly provisional tax. The provisional tax withheld or paid during the year is credited against the final tax. This applies to independent workers, professionals and individuals in professional partnerships who are not subject to the First Category Tax.
Nonresidents. Individuals working in Chile for periods not exceeding 183 days, regardless of whether these periods are uninterrupted, within any 12-month period are considered nonresidents. However, a person may be treated as domiciled in the country from the first day of his or her stay in Chile if evidence of an intention to establish a domicile in Chile exists.
Nonresidents are subject to an Additional Tax on their Chileansource income, which is income earned for services rendered in Chile or activities performed in the country, at flat rates of 15%, 20% or 35%.
The rate is generally 15% for remuneration paid for technical or engineering work or for professional or technical services rendered under certain conditions in Chile or abroad. However, the 15% rate is increased to 20% if the payments are made to a related entity or to a resident in a country listed as a tax haven. The rate is 20% for fees or salaries for scientific, cultural or sports activities. The tax rate for other types of services is 35%.
The Additional Tax may also be imposed on nonresidents receiving payment of remuneration from Chile for services rendered
abroad. The general tax rate is 35%, with special rates of 15% or 20% imposed under the conditions described above.
Dividend income of nonresidents generally is subject to tax at a rate of 35%, with a credit for corporate tax paid. Profits from Foreign Capital Investment Funds, however, are subject only to a 10% withholding tax when repatriated, with no credit.
Interest and remuneration for certain services are generally subject to a 35% withholding tax. The tax rate for directors’ fees is also 35%. Royalties are subject to withholding tax at a rate of 30%.
Relief for losses. Business losses of a self-employed person must first be carried back. To the extent the loss exceeds profits from prior years, the unused portion of the loss may be carried forward indefinitely. These matters are subject to special rules, applicable to self-employed persons subject to First Category Tax, or subject to accounting, according to the corresponding requirements for it.
Individuals who are not self-employed or engaged in their own business may offset investment losses against investment profits in the same year.
B. Estate and gift tax
Estate and gift tax is a unified tax, assessed in accordance with rates and brackets expressed in ATUs (see Section A). Residents are subject to estate and gift tax on worldwide assets. Nonresidents are subject to estate and gift tax on assets located in Chile only. Estate tax paid abroad may be credited against Chilean tax.
A zero rate applies to the first 50 ATUs transferred from an estate to close relatives, including a spouse or children. Only five ATUs are subject to the zero rate if assets are transferred to other beneficiaries. The following tax rates apply after deduction of the exempt amount.
C. Social security
Employers pay a basic contribution of 0.9%, which can be increased by 3.4% depending on the risk of the company’s activities, to cover work accident insurance for employment activities.
Also, employers must pay a contribution for accompanying insurance for boys and girls affected by serious health conditions, equivalent to 0.03% of the employee’s taxable remuneration.
In addition, employers must pay a 1.5% contribution for each employee to cover disability and survival insurance. These contributions are paid on salaries up to a maximum of UF84.3 for 2024 (approximately USD3,350) (for details regarding the UF, see Capital gains in Section A). This amount is adjusted on an annual basis.
Social security contributions covering health care institutions and pension funds are paid by employees at a maximum basic rate of approximately 18.4% (7% for health care institutions, 10% for pension funds and the Pension Funds Administrator commission of approximately 0.49% to 1.44%) on salaries up to a maximum of UF84.3 for 2024 (approximately USD3,350). The applicable wage ceiling is adjusted annually.
The contributions described above are withheld and remitted by employers on a monthly basis. In addition, employees may contribute voluntarily in excess of the ceiling to individual pension funds or health insurance. Voluntary contributions are entitled to the same tax benefits as required contributions, within certain limits.
Another mandatory social security contribution relates to unemployment insurance, which is financed by employers, employees and the government. For employees hired indefinitely, the contribution rates are 2.4% for employers and 0.6% for employees, with a salary ceiling of UF126.6 for 2024 (approximately USD5,000) per month. This amount is also adjusted on an annual basis. For fixed-term employees, the contribution is 3%, which is borne entirely by the employer.
To the extent that certain requirements established by law are met, to provide relief from paying double social security contributions and to assure benefit coverage, Chile gives the possibility to foreign individuals to exempt themselves from paying social security contributions in Chile if they are technical or professional employees covered under a similar social security system in their home jurisdiction. However, this exemption does not apply to unemployment insurance, work accident insurance and accompanying insurance for boys and girls affected by serious health conditions (SANNA fund).
Independent workers are also required to contribute to the Chilean pension system, on an annual basis. It is mandatory for all independent workers who receive income mentioned in Article 42, No. 2 of the Chilean Income Tax Law (see next paragraph), with the exception of the following:
• Men over 55 years of age and women over 50 years of age as of 1 January 2018
• Individuals affiliated to social security systems other than Pension Fund Administrators (Administradora de Fondos de Pensiones, or AFP)
• Individuals who already contribute up to the social security ceiling (UF84.3)
• Pensioners for old age or total disability
In general, Article 42, No. 2 of the Chilean Income Tax Law refers to income from the exercise of liberal professions or any
Foreign visitors can obtain special work permits that allow them to develop work activities in Chile for specific periods while they stay in the country with transitory permanence authorizations. The visitors can obtain these work permits abroad before entering Chile or in Chile after their arrival.
The entry and exit of persons into and out of Chile must be carried out through authorized passages with travel documents, provided that there are no legal prohibitions in their regard.
The new law provides a new catalog of residency and work permits and establishes its requirements.
In general terms, the new Chilean immigration law establishes four immigration categories, which may be requested by foreigners as main applicants or dependents in order to obtain authorization to enter Chile. The law establishes the following immigration categories:
• Temporary permanence: It is the permit granted by the National Immigration Service to foreigners who enter the country with no intention of settling there, which authorizes them to remain in Chile for a period of 90 days, extendable for the same period once, except in the case of force majeure. Foreigners with permanent residence are not able to carry out paid activities in the country, except in qualified cases.
• Official residence: It is the residence permit granted to foreigners who are on an official mission recognized by Chile and to their dependents. The granting and rejection of this residence permit is the responsibility of the Ministry of Foreign Affairs.
• Temporary residence: It is the residence permit granted by the National Immigration Service to foreigners who intend to settle in Chile for a limited time, and which enables them to carry out paid activities in the country. This permit is valid for up to two years, except in the case of seasonal workers, in which case it may be valid for up to five years when limited annual stay periods are established. This permit may be extended for up to two additional years.
• Definitive residence: It is the permission to settle indefinitely in Chile, which authorizes the development of any lawful activity, without other limitations than those established by legal and regulatory provisions. Definitive residence may only be granted to foreigners who hold a temporary residence permit that expressly allows applying for it and who meet the requirements of the law and applicable regulations. Holders of a definitive residence permit do not require prior authorization or a visa to enter the country.
• Nationalization: It is granted based on Supreme Decree No. 5,142, which provides the text for Chilean nationalization.
H. Work visas and self-employment
An expatriate who wishes to engage in remunerated activities in Chile must apply for the corresponding residence permit, or a special work permit as visitors with transitory permanence authorization. Except in certain special cases, visas can only be obtained abroad, before the arrival of the person to Chile.
Foreign nationals may start businesses in Chile if they comply with all legal requirements. Companies may be headed by foreign
nationals and be represented by them for tax purposes if such citizens have obtained residency in Chile. For this purpose, the Chilean Internal Revenue Service can define its criteria and can request a definitive residence in the country.
In general, foreign nationals must file all or some of the following main documents, duly apostilled, when applying for residence authorizations or work permits:
• An application form
• Passport and documents proving current immigration status
• Documents that prove professional status
• Documents that prove marital status
• Birth certificates
• Documents that support the activities that an applicant will develop in the country, such as a labor contract or documents that prove that the applicant has been accepted in a college or educational institution; according to current Chilean Immigration Service criteria, foreigners who will develop work activities in Chile should support those activities with a Chilean employment contract signed by a local employer
• Health certificate
• Police record
However, the appropriate authorities have the discretion to request different or additional documents if these are deemed necessary for the approval of the visa.
I. Family and personal considerations
Family members. Family members of a working foreign national should obtain their temporary residence permits as dependents. According to the new immigration law, dependents are allowed to develop their own work or economic activities.
Driver’s permits. Foreign visitors can drive in Chile with their foreign or international driver’s licenses while they stay in Chile with transitory permanence authorization. Nevertheless, foreigners who stay in Chile as residents rather than visitors should obtain a Chilean driver’s license. To obtain a Chilean driver’s license, a foreign national must take a basic written exam, a technical exam, a basic practical driving test and a basic medical exam. Notwithstanding, Chile has license reciprocity with a few jurisdictions, with the possibility to exchange a home driver’s license for a Chilean one, but subject to the validity of Chilean residence documentation.