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:
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%.
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.
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.
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.
|Monthly Gross Income||Progressive Tax Rate (%)|
|Up to CLP 680,022 (UF 13.5)||0|
|CLP 680,022.01 - CLP 1,511,160 (UF 13.5 to 30)||4|
|CLP 1,511,160.01 - CLP 2,518,600 (UF 30 to 50)||8|
|CLP 2,518,600.01 - CLP 3,526,040 (UF 50 to 70)||13.5|
|CLP 3,526,040.01 - CLP 4,533,480 (UF 70 to 90)||23|
|CLP 4,533,480.01 - CLP 6,044,640 (UF 90 to 120)||30.4|
|CLP 6,044,640.01 - CLP 15,615,320 (UF 120 to 310)||35.5|
|More than CLP 15,615,320 (UF 310)||40|
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:
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.
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.
27% (standard corporate income tax for companies in Chile)