Chile payroll and tax overview.

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. One of South America’s most prosperous nations, Chile offers high standards of living, income, economic freedom, and business competitiveness, and imposes traditionally low rates of personal income tax. Major industries in Chile include mining, manufacturing, and agriculture, while the finance and tourism industries have also experienced sustained growth in the 21st century. In 2019, Chile’s GDP reached around $294 billion dollars, with a growth rate of around 1.1%. Chile enjoys strong trade and political connections with its regional neighbours and the world: it was one of the founding members of the UN and it is also a member of CELAC, the OECD, and APEC. Chile was ranked 59 on the World Bank’s Ease of Doing Business Survey in 2019.

Foreign Direct Investment in Chile

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.

Registering a Company and Establishing an Entity in Chile

Registrations to the tax and social security authorities for companies looking to process payroll in Chile include; “Registro Publico de Comercio” and “Servicio de Impuestos Internos”. The estimated timeline for the completion process is between 15 and 20 days with the inscription to Registro Publico de Comercio.

Business Banking in Chile

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.

Working Week and Working Hours in Chile

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.

Basic Facts about Chile

General Information

Population: 19.12 million (World Bank, 2020)

Capital: Santiago Major

Language: Spanish

Religion: Christianity

Monetary Unit: Chilean peso CLP (the symbol used locally for it is $)

Main Exports: Copper, fish, fruit, paper, pulp and chemicals

GNI per Capita: US$24, 140 (World Bank, 2019)

Internet Domain: .cl

International Dialing Code: +56

The tax year runs from 1 January to 31 December.

Income Tax in Chile

Employee deductions for taxes range from 4% to 35% depending on income level.

Monthly contributions must be made from the 10th - 12th 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).

Calculation Example

If the salary is CLP1.000.000,00 the tax will be 4%, coming to a CLP 40.000,00.

Employee deductions for social security come to around 20%:

• 10% Pension Fund System
• 7% Health Insurance
• 0.6% 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.

The typical penalty awarded for the late submission and payment of tax contributions is 2% - 5%.

Reporting Tax in Chile

Monthly

• The employer must pay taxes to the SII (Servicio de Impuestos Internos, “IRS” national tax agency) and 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 retentions made during the last year.

New Starts in Chile

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

Leavers in Chile

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.

Payroll in Chile

It is legally acceptable in Chile to provide employees with online payslips, but the employer should have a copy signed by every employee.

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