Taxes in Chile

Employer Contributions in Chile

Social insurance

Employers and employees must make social security contributions monthly, and employers are responsible for withholding the employees’ share of the contributions and remitting it to the social security authorities, along with their part of the contributions. Most of the social insurance contributions are borne by employees. The social security funds the following systems at the following contribution rates by employers:

• Work-related accident insurance: 0.93% premium on the employee’s remuneration, capped at a floating amount calculated by reference to the UF (an inflation-adjusted monetary unit used in Chile, which is non-circulating and much more stable) in respect of labour-related accident insurance
• Life and disability insurance (SIS): 1.85%

Unemployment insurance

The unemployment insurance is also compulsory for companies with employees, and the insurance is mandatory for every employee. The unemployment fund is financed by the employer and the employee. Employers must contribute 2.4% of the employee’s salary (also subject to the same floating cap as mentioned above). In the case of fixed-term contracts, employers bear entire contribution cost of 3%.

Professional illness insurance

Every company must contribute to the insurance, also known as liability insurance, to fund the risk of the employment activity. The amount of contribution borne by the company varies according to the level of risk of the activity, with a maximum rate of 3.4% of the employee’s salary.

Employee Contributions in Chile

Residents of Chile are subject to tax on their worldwide income; non-residents (foreigners) are subject to tax on the income generated within the country for the first three years in Chile, and from the fourth year on, they are subject to tax on their worldwide income. Any company or individual (Chilean or foreign) that is resident or domiciled in Chile must file the annual income tax return through Form 22. This form is filed in April of the year following that in which the income was generated. This declaration must include all income obtained between 1 January and 31 December of the year before that in which the income is declared. To be considered a resident, the individual must spend more than 183 days in one calendar year in Chile or more than 183 days whether consecutive or not, within any 12-month period.

Income tax

In Chile, income tax is charged at a progressive rate ranging from 0% to 40%. Tax on income from employment is withheld by the employer monthly during payroll. Other income (not employment income) must be declared on an annual income tax return, although tax paid on employment income may be credited against the final income tax liability.
Social security contributions are deducted from the employee’s gross salary before the tax base for the income tax contribution rate is defined.
Joint filing of the annual tax return is not allowed, but spouses married under a community property system must file their annual taxes jointly.

Chilean income tax

Social insurance

Both employers and employees must make social security contributions, with employees bearing most of the contributions (17.6%), which are withheld and remitted by their employers monthly during payroll. Social security contributions are deducted from gross salary.
The following are institutions and contributions rates by employees:

• Pension fund – 10%, capped at CLP 1,876,049 (81.6 UF)
• Health insurance – 7%, capped at CLP 1,876,049 (81.6 UF)
• Unemployment insurance – 0.6%, capped at CLP 1,876,049
  • Fixed-term employees do not make unemployment insurance contributions; this is financed solely by the employer in these circumstances.

Foreign individuals may be exempt from pension and health insurance contributions, provided they belong to a foreign social security entity system covering at least pension, disability, illness, and death.

Benefit in kind

Items such as reimbursements of travel expenses and housing provided in the employer’s sole interest, moving expenses, documented entertainment and a reasonable relocation allowance are considered non-taxable income and are excluded from the tax calculation.
Items such as cost-of-living allowance, area allowances, car allowance, vacation travel expenses, and utilities are taxable.

Company Taxes

Corporate income tax

27% (standard corporate income tax for companies in Chile)

• 10% – applicable to small and medium-sized companies with sales not exceeding approximately USD 2.8 million until 2022. From 2023 onward — 25%.
• plus 35% – additional withholding income tax applicable to branch profits granted for first category income tax paid, depending on whether head office is in tax treaty country.

Sales tax

19%.

Withholding tax

• Dividend: residents - NA; non-residents - 35%
• Interest: residents - NA; non-residents - 4% or 35% (10% available for some Tax Treaty Countries)
• Royalties: residents - NA; non-residents - 30%
• Capital gain: companies - 25% or 27%; individuals -progressive 0% to 40%
• Technical services: residents - NA; non-residents - 15% or 20%