Chile

Registrations and Establishing an Entity

Every company looking to operate and process payroll in Chile must first register as an employer with the tax authorities and commercial registry. This process includes publishing the company’s constitution, obtaining a tax identification number, and formalising registrations with the relevant authorities. These registrations are essential to ensure compliance with local legislation and to enable the remittance of taxes and social security contributions.

Banking

It is mandatory to make payments to both employees and the authorities from an in-country bank account. Generally, banks are open to the public from 0900 to 1400 Monday to Friday and are closed on weekends.

Working Week

The working week in Chile is Monday to Friday, with a statutory maximum of 45 hours. Work may be spread across five or six days, and overtime is permitted up to 10 hours per week.

Employment Law

Holiday Accrual
Employees are entitled to 15 working days of paid vacation per year, following 12 months of continuous service. Payment for vacation is calculated using the average earnings from the three months prior to the leave.

Maternity Leave
Maternity leave consists of six weeks before childbirth and 12 weeks after, totalling 18 weeks. In some cases, this may be extended to 24 weeks. Leave is funded by the relevant health institution and not the employer.

Paternity Leave
Fathers are entitled to five working days of paid paternity leave, to be taken within the first month after the child’s birth.

Sick Leave
Employees are entitled to paid sick leave. The first three days are unpaid unless the absence extends beyond 10 days, in which case payment begins from day one. Compensation is paid through the employee’s health provider based on their prior average salary.

National Service
There is no compulsory national service in Chile.

Tax & Social Security

The tax year in Chile runs from 1 January to 31 December.

Income Tax
Income tax is calculated monthly on a progressive scale, ranging from 4% to 35%. Employers are responsible for deducting and paying the employee’s income tax to the tax authority between the 10th and 12th of each month.

Social Security
Social security contributions in Chile cover pensions, health, disability, unemployment insurance, and work injury insurance. Employees contribute a percentage of their gross salary to pension and health schemes, while employers cover insurance and unemployment contributions. These deductions are mandatory and must be paid monthly.

Payroll

Reports must be kept for five years from the date of generation. Employees can be provided with online payslips, and companies often retain digital confirmation or payroll system records.

Reports

Monthly declarations and payments must be submitted to the tax authority and relevant pension and health institutions. In addition, an annual income report for each employee is filed each March.

Payslip Example

(Local language example: not included in source)

Reporting

All payroll-related taxes and contributions must be reported monthly. The tax authority provides an online platform through which these filings and payments are submitted. Year-end income certificates must be provided to employees.

New Employees

Employers must register all new employees with the tax and social security authorities within 60 days of their start date. Employee information, including name, tax ID, salary, start date, and insurance status, must be submitted through official online systems.

Leavers

When an employee leaves, the final salary must be processed within 10 working days. The employer must also notify the labour authority, including the reason for termination and date of leaving.

Employee Benefits

Benefits such as private health coverage, transportation allowances, or company cars may be offered at the discretion of the employer. Some benefits may be considered taxable unless approved for exemption by the tax authorities.

Expenses

Employee expenses like mileage or business travel are typically reimbursed outside payroll and must be supported by valid receipts to be considered tax-deductible.

To work in Chile, foreign nationals must obtain a work visa, which is valid for up to two years and renewable. The application process involves submitting a signed employment contract, medical certificate, police clearance, passport, and employer support letter. Dependents may accompany the visa holder but are not authorised to work unless they obtain their own visa. Employers must register foreign employees for social security upon commencement of work.

Employers must ensure that benefits in kind—such as housing or transport—are properly documented and assessed for taxation. Any benefits not accepted as deductible by the tax authority may trigger additional liabilities. Employers must be registered and authorised before any employment activity begins, and payroll taxes must be filed and paid according to monthly and annual deadlines.

Further Information

For more information, or assistance with Chile Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.