Chile is situated along the southwestern Pacific coastline of continental South America, bordered to the north by Peru, to the northeast by Bolivia, and to the east by Argentina.

General Information

• Population: 19.6 million (World Bank, 2022)
• Capital: Santiago Major
• Language: Spanish
• Religion: Christianity
• Monetary Unit: Chilean peso CLP (The symbol used locally for it is $ or alternatively CLP$)
• Main Exports: Copper ore, refined copper, fish, fruit, wine and chemicals
• GNI per Capita: US $15,360 (World Bank, 2022)
• Internet Domain: .cl
• International Dialing Code: +56

How Do I Say in Spanish?

• Hello: Hola
• Good morning: Buenos días
• Good evening: buenas noches
• Do you speak English?: Habla usted Inglés?
• Good bye: Adiós
• Thank you: Muchas gracias
• See you later: Hasta luego

Dates

Dates are usually written in the day, month and year sequence. For example, 1 July 2019 or 1/7/19.

Numbers are written with a period to denote thousands and a comma to denote fractions. For example, CLP$ 3.000,50 (three thousand peso and fifty centavos). Fractions or cents are no longer valid and must be rounded up to the nearest peso figure.

Chile, with its robust economy and strategic positioning as the gateway to South America, presents a lucrative landscape for businesses considering expansion or establishment in the region. Known for its strong and stable economic indicators, political stability, and open market policies, Chile is a beacon of opportunity for international businesses.

The cornerstone of doing business in Chile is its dynamic economy, distinguished by a consistent growth rate, low inflation, and prudent fiscal policies. The country's commitment to free trade is manifested in its extensive network of free trade agreements, offering businesses access to a vast global market. Chile's transparent regulatory framework and competitive corporate tax regime further enhance its attractiveness as an investment destination, fostering a predictable and secure business environment.

Innovation and sustainability are at the forefront of Chile's economic agenda. The country is a global leader in renewable energy and mining, with significant investments in solar, wind, and hydropower. The government actively supports R&D through various initiatives, positioning Chile as a hub for innovation in sectors such as mining technology, agriculture, and renewable energy. This focus on sustainable and innovative practices not only aligns with global trends but also offers businesses a competitive edge in the market.

The Chilean workforce is another vital asset for businesses. Known for its hardworking and educated labour force, Chile provides companies with a pool of talent that is both skilled and adaptable. The government's focus on education and vocational training ensures a continuous supply of qualified professionals, driving productivity and innovation in the business sector.

Chile's strategic location as the gateway to the South American market, combined with its modern infrastructure and logistic capabilities, ensures that businesses have seamless access to regional and global markets. The country's well-developed transport network, advanced telecommunications, and growing digital economy make it an ideal hub for companies looking to tap into the Latin American market.

Overall, Chile's economic resilience, commitment to innovation and sustainability, skilled workforce, and strategic geographic position make it an appealing destination for businesses aiming to explore or expand their presence in South America. The nation's business-friendly climate, bolstered by a stable economy, comprehensive trade agreements, and a focus on future-oriented industries, provides a solid foundation for companies seeking growth, innovation, and a competitive edge in the international arena.

The government has focused on developing a stable economy and political environment to provide businesses with a consistent economy to operate within. The government welcomes inward investment from foreign entities, particularly in growing markets that are key for the future long-term Chile GDP.

Chile distinguishes itself as a supportive and forward-thinking environment for businesses, backed by a government keen on fostering growth and innovation across various sectors.

The Chilean government offers an array of incentives and support mechanisms to encourage investment and business development.

Notably, the country provides significant tax benefits, grant schemes, and subsidies, particularly for industries identified as strategic growth areas such as mining, renewable energy, and technology.

Agencies like CORFO (Corporación de Fomento de la Producción de Chile) play a pivotal role in this ecosystem by offering financial support, fostering innovation, and promoting entrepreneurship. 

Chile's investment promotion agency, InvestChile, provides valuable assistance to foreign investors, offering services ranging from information on regulatory frameworks to help with establishing operations in the country.

This comprehensive support system not only lowers the barriers to entry for new ventures but also solidifies Chile's reputation as a nurturing ground for business innovation and expansion. Leveraging these government-provided resources and incentives can significantly benefit businesses aiming to capitalise on the lucrative opportunities in Chile's vibrant and growing market.

It is mandatory to make payments to employees and authorities from an in-country bank account.

Banks are open from 0900 to 1400 Monday to Friday and are closed on Saturdays and Sundays.

Establishing a business entity in Chile involves a well-defined process, ensuring compliance with local regulations and facilitating a smooth entry into the Chilean market. The process of registration and setting up an entity in Chile is methodical and necessitates engagement with various governmental bodies, primarily focusing on tax and social security registrations. Key registrations include the "Registro Público de Comercio" (Public Commerce Registry) for legal entity establishment and the "Servicio de Impuestos Internos" (SII) for tax purposes. The entire process is estimated to take between 15 and 20 days, commencing with the inscription at the Registro Público de Comercio.

The initial step in the establishment process involves the creation of a public incorporation deed in accordance with local Chilean law. This deed, a formal legal document, outlines the fundamental aspects of the company, including its purpose, capital, and governance structure. Once the deed is formulated, it must be formally registered with the local Servicio de Impuestos Internos (SII), marking the official recognition of the company's operational commencement.

Following the registration with SII, it's imperative to file a Start of Operations form (Formulario de Inicio de Actividades). This form, which must be signed by the company's legal representative, is a declaration of the company's intent to commence business activities and is essential for the entity to be recognized as an operational business by the Chilean authorities.

Subsequent to the submission and approval of the Start of Operations form, the next crucial step involves inscribing the company with the Registro Público de Comercio. This registration is pivotal as it provides legal validity to the company, enabling it to engage in business activities, enter contracts, and acquire assets.

Finally, obtaining the VAT Register number from the local IRS is an essential step for any business intending to engage in taxable transactions. This registration ensures compliance with Chile's tax regulations and facilitates the proper administration of VAT on goods and services offered by the company.

For the most part, a work visa is simply done by sending an application by mail. The application should be sent by certified mail and the receipt kept as proof that the application has been sent until official authorisation is obtained. However, it is much simpler even though time consuming, to present it in person.

When applying to the Chilean Consul for a work Visa the application generally would include a letter by the employer addressed to the Chilean Consul which justifies the hiring of the applicant.

The following documents must also be provided:

• Work contract (notarized, legalized and translated, if need be)
• Professional degree (if required)
• Criminal record certificate
• Medical certificate
• Valid passport
• Four passport-sized photos

The Department of Immigration of the Ministry of Foreign Affairs will also be involved as they are responsible for analysing the applicant's personal details.

In Chile, taxable income includes an employee's salary, bonuses, and other forms of compensation.

Chile operates under a progressive income tax system, meaning that the rate of taxation increases as an individual's income rises. The tax rates are applied on a monthly basis and are structured into several brackets, with the percentage of income tax owed escalating in proportion to the individual's taxable income. HR professionals should stay updated with the latest tax brackets to withhold the correct amount of tax from employees' salaries.

Taxable Income Range (CLP)	Tax Rate
Up to 670,000	0%
670,001 - 1,400,000	4%
1,400,001 - 2,320,000	8%
2,320,001 - 3,780,000	13.5%
3,780,001 - 5,750,000	23%
5,750,001 - 9,540,000	30.4%
9,540,001 - 15,900,000	35%
15,900,001 - 26,500,000	40%
26,500,001 and over	44.45%

 

Employers are responsible for withholding income tax from employees' salaries and remitting it to the Servicio de Impuestos Internos (SII), Chile's tax authority. Monthly tax declarations are submitted through Form 29, where the withheld taxes are declared and paid.

Monthly contributions must be made from the 10^th - 12^th of every month to the tax authority. The typical penalty awarded for the late submission and payment of tax contributions is 2% - 5%. This can vary depending on the delay time and the institution (ISAPRES, MUTUAL, CCAFF, AFP, ETC).

Social security in Chile plays a pivotal role in the financial security of employees, and understanding its structure is essential for HR professionals. It encompasses a range of contributions for pensions, health insurance, and unemployment benefits.

Employee deductions for social security come to around 20%:

• 10% Pension Fund System
• 7% Health Insurance
• 6% Unemployment Insurance
• 0.93% Chilean Association

There may also be a further contribution for “heavy work” depending on the level of accident risk relating to the company’s activity. For this, the employer and the employee must contribute 2% of the salary.

Pension Contributions (AFP)

Employees contribute a portion of their gross salary to a Pension Fund Administrator (AFP). The contribution rate for the pension is approximately 10% of the employee's monthly income, but the exact percentage can vary slightly depending on the chosen AFP. Additionally, there are commissions that vary by AFP, which can be around 0.77% to 1.54%.

Health Insurance Contributions

For health insurance, the contribution rate is 7% of the employee's monthly income. This can be directed to the public health system (FONASA) or private health insurers (ISAPREs). ISAPRE contributions can be higher based on the plan chosen by the employee.

Unemployment Insurance (AFC)

• For employees on indefinite-term contracts, the total contribution is 3.0%, with 2.4% contributed by the employer and 0.6% by the employee.
• For fixed-term contracts, the total contribution is 3.0%, all of which is contributed by the employer.
• For employees on indefinite-term contracts with more than 11 years of service, the total contribution reduces to 0.8%, all contributed by the employer.

Accident Insurance

The employer contributes between 0.95% and 3.4% of the employee's salary towards accident insurance, depending on the risk level of the industry.

Family Allowances 

The family allowance is a state subsidy, not a deduction from the employee's salary. Employers pay this directly to employees who are eligible based on their income level and family situation.

Interaction with Progressive Tax Rates

The contributions to AFP, health insurance, and AFC are deducted from the employee's gross salary before calculating the income tax under the progressive tax rates. This effectively reduces the taxable income and may place the employee in a lower tax bracket, thereby potentially reducing their overall tax burden.

Monthly

The employer must pay employee´s withheld taxes to the SII (Servicio de Impuestos Internos, “IRS” national tax agency) and to the applicable Social Security Institutions.

Yearly

In March, the employer must present an annual income report to the SII for each employee with the detail of salaries, withheld taxes and social security retentions made during the previous year.

It is legally acceptable in Chile to provide employees with online payslips, however the employer should have a copy signed by every employee, even though it is also acceptable the salary´s bank transfer proof.

Reports

 By law, payroll reports must be kept for five years.

Chilean Payslip Example

 

It is mandatory for the employer to publish its own social constitution in the official bulletin, and it must register itself in the Public Commerce Registry. It is also obliged to notify the start of activities towards the SII.

A new employee must be registered with the authorities within 60 days from the start date of employment, in which the company has to present its structure to the SII and await authorisation to start operations.

The following information is required to set up a new start:

• Full Name
• RUT
• Date of Birth
• Address
• Salary
• Pension Insurance
• Health Insurance
• Other Information About Hiring

The company has to notify the Inspeccion del Trabajo of any leavers.

The deadline for an employee’s final payment in Chile is 10 working days.

Holiday Accrual / Calculations

The statutory minimum employment leave in Chile is 15 working days after 1 year of service.

The holiday payment is calculated based on the last three months average pay. If the employee receives commissions or variable payments monthly, these will be included when the average amount is calculated.

Maternity Leave

Employees re entitled to a prenatal leave of 6 weeks before the expected date of birth and 12 weeks after birth of paid maternity leave. 

The maternity leave pay is financed by the Chilean social security system, not by the employer. Maternity leave entitlement is paid by the health institution the employee is registered with. The employer only covers the costs of the risk insurance policy and the unemployment insurance.

Mothers are entitled to receive 100% of their remuneration during the maternity leave period, based on their average earnings. 

After the initial 12 weeks of postnatal leave, either parent has the right to extend the leave for up to 12 additional weeks. This extension can be taken as full-time leave, where the parent receives 100% of the remuneration (up to the legal cap), or as part-time leave, where the parent works half-time and receives 50% of their remuneration.

If the parental postnatal leave is shared between both parents, the total period of extension can be increased to 18 weeks.

Paternity Leave

 

Fathers are entitled to 5 days of paternity leave, which can be taken from the birth of the child. This leave is paid by the employer.

Sickness

Sick day expenses are covered by the health institution the employee is registered with.

If an employee is off sick for less than 11 days, the first three days are not paid for. If the employee is off for longer than 11 days, they are paid from the very first day.

National Service

There are no national service obligations in Chile.

 

 

 

A law has been approved to gradually increase it to $500,000 pesos.

The minimum wage will rise to $440,000 pesos as of May 1, 2023, $460,000 pesos as of September 1, 2023, and then to $500,000 pesos as of July 1, 2024.

Additionally, if the Consumer Price Index (CPI) for 2023 exceeds 6%, an increase of $10,000 pesos will be made on January 1, 2024, bringing it to $470,000 pesos on that date.

The working week in Chile is Monday to Friday.

The standard working week is usually made up of 45 hours and the maximum number of hours permitted is 45.

The maximum number of ordinary hours a dependent can work is 10 hours per day.

There are multiple statutory holiday schedules within Chile. Below are the statutory national holidays in Chile for 2024.

Holiday Name	Weekday	Date
Año Nuevo	Monday	1 January
Viernes Santo	Friday	29 March
Día del Trabajo	Wednesday	1 May
Día de las Glorias Navales	Tuesday	21 May
San Pedro y San Pablo	Saturday	1 July
Día de la Virgen del Carmen	Tuesday	16 July
Asunción de la Virgen	Thursday	15 July
Fiestas Patrias	Wednesday	18 September
Día de las Glorias del Ejército	Thursday	19 September
Día de las Glorias del Ejército (feriado adicional)	Friday	20 September
Encuentro de Dos Mundos	Saturday	12 October
Día de las Iglesias Evangélicas y Protestantes	Thursday	31 October
Día de Todos los Santos	Friday	01 November
Inmaculada Concepción	Sunday	08 December
Navidad	Wednesday	25 December

Expenses

General expenses, car mileage, company cars and other similar expenses are paid through the financial department not through the payroll process. However, some of these expenses, like a company car, are not accepted as such by the Internal Revenue Service and the employer must pay an additional tax on them.

 

 

In 2024, Chile underwent several significant changes in its tax, social security, and employment legislation. These changes reflect the government's commitment to reforming these areas to align with evolving economic and social needs. However, all these measures are still not approved by the Senate (Legislate Chamber) and it looks like they will not finally approved.

Income Tax Legislation Changes

• The Chilean Government proposed a comprehensive tax reform, a key component of President Gabriel Boric’s agenda. The Tax Reform Bill aims to modify aspects related to income tax, wealth tax, and shareholder taxation.
• New measures are introduced to prevent tax avoidance and evasion, and the bill also seeks to reduce the number of tax exemptions.
• The bill suggests changes in the taxation of dividends and the treatment of foreign tax credits.
• The corporate income tax rate would decrease from 27% to 25%, while increasing the tax rate on gains from stock sales to 22%.
• A new 1.8% tax is proposed on the retained earnings of certain companies​​​​​​.

Social Security and Employment Law Changes

• There were modifications in the tax treatment of retirement savings and pensions. This includes potential changes in the tax treatment of contributions to pension funds and the taxation of pension payouts.
• The government has also been focusing on strengthening labour laws to enhance worker rights and benefits, including regulations related to minimum wage, working hours, and conditions for contract and gig workers.

Other Notable Reforms

• The tax reform includes significant changes to VAT rules, particularly on digital services.
• A gradual elimination of the provisional payment for absorbed profits mechanism is planned, which will fully take effect in 2024. This mechanism provided a corporate income tax refund for profits received from subsidiaries absorbed by losses at the recipient entity level​​.
• New rules on indirect foreign tax credits are maintained, allowing Chilean entities to credit foreign taxes paid by indirectly owned foreign subsidiaries.
• These reforms represent a significant shift in Chile's fiscal policy, aiming to create a more equitable tax system and improve social welfare. It is important for businesses and individuals to stay informed and possibly seek professional advice to understand the implications of these changes on their financial and operational strategies.

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.