Expat taxes in Chile 2021

Expat taxes in Chile 2021 – that will be the topic of today’s article.

Nothing written here should be considered formal tax, financial, legal or any other kind of advice advice, and is for entertainment purposes only.

The facts might have also changed since this article was written, such as the implementation of new taxes in a post-Covid world, but we have done our best to ensure its accuracy. 

For any questions, or if you are looking to invest as an expat, you can contact me using  this form, or use the WhatsApp function below.

I specialise in expat investment and financial planning. The best time to review your situation is often when you are moving to a new country.

Introduction

Chile is a state located on the Pacific coast of South America. This distant country is very different from European states, primarily in culture and mentality. In the summer, New Year, and the flora and fauna pleases with a huge variety.

The country is not considered very rich, but it has a well-developed market economy. The state receives the main income from the extractive industry. So, here they are intensively engaged in the extraction, processing and export of copper. It is Chile that is the main supplier of this metal to the world market. The country also supplies rhenium, molybdenum, iron, gold, silver, and so on.

The state also exports:

  • wine;
  • fruits;
  • vegetables;
  • corn;
  • tobacco.

The government is so smart in its social policies that a lot of foreign investment and labor is pouring into the country. As for agriculture, it accounts for 11% of the state’s economy. Moreover, more than half of the grown products are exported.

In Chile, you can walk and not worry about your life or things, there is practically no crime here. This is not the case in any other country on the continent. Low levels of corruption and stability make this country so successful and enjoyable to live in.

On the roads, pedestrians and cyclists are prioritized, so people cross the road often without looking around, and cyclists can ride in the middle of the road, and this does not cause problems.

Education in Chile in 2020 is one of the best in South America. The standard of living in this country also compares favorably with many of its neighbors on the continent. For Russian and Ukrainian tourists, you can safely stay in the country for 30 days during one trip.

Despite the fact that in society Chile has gained fame as a very unkind and undeveloped country, education in Chile has a fairly high level. Chile is a country with a unique educational system. In this state, in 2020, a voucher system operates, which involves financing educational institutions from the state budget. Moreover, funding is provided both to public schools and private ones.

Education in Chile reaches a fairly high level among other countries. The literacy rate in this state is 95%. The remaining 5% do not receive education solely based on personal wishes and needs.

Prices in Chile in 2020 are relatively low compared to European countries, but quite high compared to countries in South America. Therefore, life in this country cannot be called relatively inexpensive for.

The national currency of this state is the Chilean peso. Below you can get acquainted with some prices in Chile for major products and services. For comparison, prices are also presented in USD .

The average cost of one pack of cigarettes is 1900 pesos. This is about $ 95.13. The cost of gasoline for 1 liter is 40 pesos – $ 2.00. More about the cost of living in Chile, you can find here

Since Chile has a well-developed industry, agriculture and fisheries, there is no shortage of jobs. Most people work and receive a stable profit, so the standard of living of people is considered to be quite high.

Salaries in Chile depend on specialty, qualifications and work experience. Compared with other countries, the average wage allows you to live well and not save.

If we translate the salary of a Chilean into dollars, then the minimum will be about $ 300, and a qualified engineer can receive $ 2,000 or more. The average salary is $ 800.

But, as almost in all countries, Chili has also its tax system on income, businesses, property and much more, that is why we decided to write about the existing taxes to make you informed. 

Taxation in Chile

The largest Latin American countries have recently been often compared to some European countries, invariably finding numerous similarities that do exist. In the area of ​​taxation, they are undoubtedly related to the fact that, for at least a century south of the Rio Grande, periods of authoritarian rule, characterized by an increased role of the state in the economy, were replaced by democratic regimes, which, as a rule, professed liberal and neoliberal models of economic development.

As a result, today it is practically generally accepted that the system of tax legislation of the largest Latin American country (Brazil) is extremely complex, cumbersome and confusing, and the very problem of the long-overdue tax reform causes, perhaps, the most acute disputes there, in which literally all sectors of society are involved.

However, there are no rules without exceptions. According to international experts, Chile is an order of magnitude ahead of not only developing countries, but also a number of Western European countries in terms of the level of elaboration of tax legislation, organization of the activities of tax authorities, technical equipment of the process of collecting taxes and interaction of relevant services with taxpayers.

Chile’s tax structure is characterized by a small number of direct and indirect taxes and a minimal number of tax incentives that apply to exporters.

Chilean residents pay tax on worldwide income; non-residents pay tax only on income derived from sources in Chile. Individuals who are not resident and not domiciled in Chile pay tax on services rendered abroad, but paid from Chilean territory. 

However, foreigners who have moved to the country, during the first three years of residence in Chile, pay taxes only from sources of income in Chile (the three-year period is allowed to be extended for another 3 years); they subsequently pay taxes on worldwide income.

The Chilean income tax system includes:

  1. business income tax – a tax of the first category (Impuesto de Primera Categoría, IPC). The “first category” income tax rate is uniform – 17%. For some activities, at the taxpayer’s choice, the tax base can be calculated as imputed income (for small businesses, family businesses, farms, small mines and land transportation). Branches or permanent establishments of foreign companies or individuals are subject to IPC on the income earned, just like any Chilean company. When distributing or transferring income abroad, an additional tax is paid on non-residents.
  2. salary tax – a unified tax of the second category (Impuesto Unico de Seguda Categoría, IUSC) – has a progressive scale: from 0% to 40%. The tax is charged on wages and work-related compensation minus social insurance payments. It is retained by the employer. Taxpayers who did not have other types of income in the tax year are not required to submit a tax return
  3. tax on the total income of individuals – a global companion tax (Impuesto Global Complimentario, IGC) – has a progressive scale with the same tax rates as the IUSC. It is calculated on the basis of the annual tax base and applies to income derived from all sources that are included in the tax base.
  4. non-resident income tax – additional tax (Impuesto Adicional, IA) – applies to remuneration or transfers of income abroad, or more generally to income received from a source in Chile by non-residents or persons who do not have a permanent residence in Chile. The obligation to pay tax lies with non-residents, but it is withheld at the source of income at a rate of 35% (except in special cases). The withholding is final and the non-resident taxpayer is not required to file a tax return.

The tax office has the right to check any tax return within three years from the date of its submission by the taxpayer. For incomes subject to mandatory declaration, if the corresponding declaration has not been submitted or has been falsified, the above verification period is six years.

On the website of the Chilean Internal Tax Service (Servicio de Impuestos Internos, SII), the taxpayer can obtain all the necessary information, forms and forms free of charge, fill out and submit an online tax return, ask tax consultants, etc.

Taxes in Chile The main provisions for the prevention of tax evasion are reflected in Law No. 19738 “Measures against tax evasion” (Normas para combater la evasion tributaria) of 19 June 2001.

The results achieved in the fight against tax evasion have become one of the arguments that lead many analysts to believe that Chile is ready to participate in offshore business. This topic appeared in the Chilean press quite recently and so far is developing only in theoretical terms, that is, it is limited to discussions at the academic level. However, it is quite possible that offshore zones will soon appear in the country.

Chile is a country that owes much of its worldwide fame to the former dictator Augusto Pinochet. The Chilean anti-hero was accused of all mortal sins: corruption, fraud, tax evasion, and financial fraud with bank accounts abroad. 

For a long time, his name did not disappear from the headlines of the world press. However, the tax scandals do not scare the 90-year-old Pinochet, or those who would like to settle in Chile or start their own business there. 

After all, this is the only state in Latin America where continuous economic growth has been observed over the past three decades. But the local government does not stop there and is pursuing an active policy of turning Chile into an offshore zone. And, in addition, the authorities are doing everything possible to attract foreign labor to the country and provide everyone with the best working conditions.

Property taxes in Chile

For people who want to buy property, or invest in Chilean real estate, the following information will be interesting for you. 

First of all, it is important to note that in Chile, individuals are not levied income tax on real estate (rent) for objects with an area of ​​up to 140 square meters with some restrictions on the number of objects leased. For real estate with an area of ​​more than 140 square meters, the tax is levied only if its profitability is more than 11% per annum.

Property tax (land, buildings, premises) in Chile is proportional to the cadastral value of the property and is paid in the amount of from 0% to 1% of the cadastral value per year, depending on the area and type of real estate. For the majority of residential real estate located within the city limits, the tax amount is 0.5% per annum of the cadastral value. Agricultural plots up to 1 hectare do not pay property tax. Also, income received from the rental of real estate subject to the DFL2 law does not pay income taxes.

Chile Property Tax Incentives

DFL Act 2

  • DFL 2 real estate is all residential and some commercial real estate with a usable area of ​​up to 140 m2. DFL-2 real estate is exempt from income tax, that is, income received from the rental of real estate is not taxed.
  • In addition, DFL2 properties only pay half of the property tax for 20 years from the first sale.
  • Agricultural plots up to 1 hectare do not pay property tax.
  • Residential real estate with a usable area of ​​up to 40 sq. m is not subject to property tax.

Property tax in Chile

  • Agricultural plots without residential buildings – 0%
  • Agrarian plots with residential buildings – 1% per annum of the cadastral value of the building
  • Living quarters (houses, apartments) with a usable area of ​​up to 40 sq. M. within city limits – 0%
  • Residential premises with a usable area of ​​up to 140 sq.m – 0.5% per annum
  • Offices – 1% per annum
  • Property tax is calculated on the cadastral value of the property.

More about income taxes in Chile 

If you want to work legally in Chile, all foreign employees must register to receive a RUT (Rol Único Tributario) number. This number will actually be their tax identification number and social security number, as well as a more general form of civil identification for bank accounts, buying a car, etc.

If you are still a tourist but not yet a resident, you can get a RUN card, which is a taxpayer identification number available to anyone so that you can pay taxes on purchases such as cars or houses. However, this number will not be valid for opening bank accounts or legal employment.

With the lowest personal income tax rates among OECD (Organization for Economic Co-operation and Development) countries, Chile maintains low tax rates while avoiding its reputation as a tax haven for money laundering and illegal transactions. Residents and employees can count on the Chilean authorities to be tax-free on their foreign income for three years upon arrival.

Who Should Pay Income Tax in Chile?

All Chileans are subject to income tax on their worldwide income. However, an individual who is permanently resident or resident in Chile is only taxed on the Chilean source of income for the first three years, and this tax is subject to renewal.

Individuals who do not have a permanent place of residence or residence in Chile are taxed only on income derived from Chilean source.

A person is considered resident in Chile or resident of Chile if:

  • Based on the activity, it can be concluded that they want to stay in the country on a permanent basis (domicile).
  • If they spend more than six months in the country in a given calendar year or for two years (resident).

Chilean source of income is derived from:

  • Goods or assets located in Chile
  • Actions in Chilean territory

Chilean tax rates

For employees, the amount of regular income tax ranges from 0% to 40%. Business tax is 20% of net income. Capital gains are taxed at a flat rate of 20% and inheritance tax from 1% to 25%. 

Chile does not tax pensions, retirement benefits or social security from abroad, and you may be able to transfer your income directly into your Chilean bank account. See our article on banking and finance in Chile for more information.

IVA in Chile

Sales tax (known as IVA) is 19% and applies to many value-added products. While you can structure your affairs to minimize other taxes, you cannot avoid an IVA. It is included in everything you buy, unless you buy it from MercadoLibre.cl or the local Feria Libre fair. 

In addition, if you make any purchases outside Chile for more than $ 30, the customs agent will charge you 19% VAT plus another 6% customs tax. Fortunately, Chile has several tax-free zones. Iquique in the north, Punta Arenas in the south and Coyaica in the south have free trade zones where you can bring in goods without VAT and import taxes.

Reasons to live in Chile

For those who are interested in living and working in Chile, we have prepared a few main points that you have to know before making your decision. Chile is a great place to live due to its:

Safety and stability

Chile has made real progress in development over the past few decades. Parts of Santiago may be mistaken for the United States, as tall skyscrapers have popped onto the Andes-filled cityscape. One of the best reasons to live in Chile, is the country’s economic stability and freedom from political corruption. Chile was also recognized for its security, ranking 25th among the most peaceful countries in the world and the most peaceful in Latin America, according to the Positive Peace Index (2017).

Employment Opportunities

Santiago, Chile is the place where an international professional can really start his career. The city has ample job opportunities for English speakers. In addition, the city’s growing technology and financial sectors are often looking for bilingual staff who can use their expertise at home to improve and develop strategic international relations. Gaining professional experience abroad at this Latin American job center is one of the best reasons to live in Santiago, Chile.

Closeness to mountains and beach.

The long and narrow country of Chile is characterized by over 6,000 kilometers of coastline and two parallel sets of mountain ranges: the Andean Mountains and the Chilean coastal ridge. Chileans like to say that in Chile you can ski and go to the beach on the same day. And this is just the beginning. From the snow-capped mountains of Patagonia to the otherworldly lakes of the Atacama Desert, life in Chile offers a range of stunning natural beauty to explore.

Chilean Spanish

While it is definitely not the easiest Spanish language to learn, Chilean Spanish is definitely the most interesting. With endless slang and jokes, Chileans really enjoy puns. Plus, once you master the fluent Chilean dialect, you will never have any problems understanding Spanish again.

A growing international community

Chile is a small country, separated from the rest of the world by the Andes Mountains on one side and the Pacific Ocean on the other. You will hear the locals say, “Chile is an island.” But this has all changed rapidly over the past decade thanks to the influence of expats and immigrants from all over the world. As the country becomes less homogeneous and more international, the capital – Santiago is embracing multiculturalism, including expats.

The ability to travel to South America.

If you choose Santiago as your base city, you can easily see other countries nearby. Take a weekend trip to Mendoza or Buenos Aires to get to know Argentina better. History buffs and hikers may want to cross out their goal of hiking Machu Picchu when their internship is over. Whichever travel suits your taste, living in Chile gives you easier, more affordable access to it all.

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Further Reading

Is income and wealth really always connected? Click on the article below to read more.

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