Our guide to Payroll in Chile

Doing Business in Chile

Investing 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.

Basic Facts about Chile

General Information

Full Name: The Republic of Chile

Population: 19.12 million (World Bank, 2020)

Capital: Santiago

Major Language(s): Spanish

Major Religion(s): 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$24, 140 (World Bank, 2019)

Internet Domain: .cl

International Dialing Code: +56

Registrations and Establishing an Entity

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.

Banking

It is mandatory to make payments to employees and authorities from an in-country bank account. Banks are opened from 0900 to 1400 Monday to Friday and are closed on Saturdays and Sundays.

Working Week

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 extraordinary hours a dependent can work is 10 hours per week.

Employment Law

Holiday Accrual and Calculation (Chile)

• The statutory minimum annual paid leave in Chile is 15 working days, earned after completing one year of service.
• Holiday pay is calculated based on the employee’s normal remuneration. For employees who receive regular variable pay (such as commissions or bonuses), holiday pay is based on the average remuneration earned during the last three months.

Maternity Leave

Employees are entitled to 6 weeks (42 days) before birth and 12 weeks (84 days) after birth of paid maternity leave.

Following this period, the mother may opt for postnatal parental leave, which may be taken as:

• 12 additional weeks full-time, or
• 18 additional weeks part-time

Maternity and postnatal parental leave benefits are paid by the health institution (FONASA or ISAPRE). During this period, the employer only continues to pay work-risk insurance and unemployment insurance contributions.

Paternity Leave

Fathers are entitled to five (5) paid working days of paternity leave following the birth of a child. These days are paid by the employer as normal working days.

Sickness / Work Incapacity

Work incapacity benefits are paid by the health institution (FONASA or ISAPRE) through Work Incapacity Subsidies (SIL).

• SIL is paid from the first day if medical leave exceeds 10 days
• SIL is paid from the fourth day if medical leave is 10 days or less

Consecutive medical leaves for the same diagnosis are treated as a single leave for payment and calculation purposes.

The daily subsidy amount is calculated as one-thirtieth (1/30) of the subsidy calculation base.

The calculation base corresponds to the average net monthly remuneration (after social security and taxes) earned during the three calendar months preceding the start of the medical leave.

National Service

There are no mandatory national service obligations in Chile.

Tax & Social Security

The tax year runs from 1 January to 31 December.

Income Tax

In Chile, the income tax system is characterized by progressive rates and different regimes depending on the type of income.

The income tax rates for individuals are progressive and depend on the Monthly Tax Units (UTM).

Deductions for workers' taxes vary between 0% to 35.5% depending on the level of income.

Monthly income tax withholding and social security contributions are generally due:

• By the 10th of the following month
• Electronic filing may allow extension to the 13th, depending on scheme,10th–12th is not a standard statutory range

Social Security

In Chile, both employers and employees are required to make mandatory social security contributions to fund pensions, health coverage, unemployment insurance, disability and survivorship benefits, and work-related accident insurance.

Employer Contributions

• Disability and Survivorship Insurance (SIS): approximately 1.5%
  (rate may vary slightly by tender)
• Unemployment Insurance (indefinite contract): 2.4%
  (3.0% for fixed-term contracts)
• Work Accident and Occupational Disease Insurance (Mutual): ~0.93% (base rate)
  (rate varies depending on industry risk level)

Reporting

Monthly

The employer must pay employee´s withheld 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 withheld taxes and social security retentions made during the previous year.

Payroll

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.

Payslip Example

New Starts

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

The company has to notify the Inspeccion del Trabajo (Labour Office) of any leavers. The deadline for an employee’s final payment in Chile is 10 working days.

Employee Benefits

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.

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.

Visas & Work Permits

Obtaining a Chile work visa typically takes 15-20 days, not including the appointment scheduling time. Applicants must submit a notarized and legalized employment contract, a letter from the hiring company, proof of qualifications, a valid passport, police and health clearances, passport photos meeting specific criteria, and completed application forms. Applications are submitted through the Chilean Ministry of Foreign Affairs' website, where documents must be uploaded electronically.

Applicants cannot begin work until the visa is granted. The visa is valid for up to two years and is renewable for another two years, requiring renewal within 90 days before expiration. Dependents, such as spouses and children under 18, may accompany the applicant but must apply separately. Dependents cannot work in Chile unless they obtain their own work permits.