Doing Business In Chile.

INTRODUCTION

Company formation in Chile is a multi-step process, and one of the initial and most crucial decisions you’ll make is selecting the right type of company structure.

Here are the 4 types of Chilean companies:

• Individual Limited Liability Company (EIRL)
  An Individual Limited Liability Company (Empresa Individual de Responsabilidad Limitada EIRL) is a good choice when you are the sole business owner. An EIRL is a legal entity that can conduct most business activities, except for a select few reserved for corporations.
  
  
• Limited Liability Company (LLC)
  Formation of an LLC with anything between 2 to 50 shareholders, and the company name must illustrate the goods or services it provides or include the name of one or more partners. There is no minimum capital requirement, and the partners can decide on the company’s activities and choose its management.
  
  
• Public Limited Corporation (SA)
  A public limited company (Sociedad Anónima or SA) is another option for company formation. A corporation requires a group of shareholders that establish a common fund and a board of directors that administer the company and make decisions via a majority vote. Each shareholder is liable to the extent of their capital contribution.
  
  
• Stock Company (SpA)
  A stock company (Sociedad por Acciones or SpA) adhere to the same regulations as closed corporations, and their management is handled in a nearly identical manner. Stock companies can be formed by one or more individuals and their capital participation is represented by shares. In our experience, this is one of the easiest companies to start and always a strong recommendation.

 

SETTING UP OF A BUSINESS

A Limited Liability Company (Sociedad de Responsabilidad Limitada or SRL) is a legal entity or company formed by a minimum of two and a maximum of fifty partners, who limit their liability to the amount contributed as capital. Partners may be natural persons or legal entities.

Limited liability is incorporated mainly because the partners are responsible up to the amount of their contributions, they do not require a minimum amount for their incorporation and they are simpler in their administration, since as a general rule the partners themselves take charge of them. It is a type of company that is characterized by the fact that its members are people who trust each other.

• The minimum capital is $3,000 pesos. It is necessary and obligatory that the partners make an initial contribution, the amount of which must be established in the articles of incorporation. Each partner must initially contribute at least 50 percent of his or her total participation. 
• This company can be operated by one manager or several managers, whether they are partners or persons outside the company. 
• The liability of partners to third parties is only up to the amount of their contributions to the company.
• There is no income limit, but 5% of net profits must be set aside annually for the reserve fund.

 

7 STEPS FOR COMPANY FORMATION IN CHILE

You must understand each step of the company formation process before you begin. Below is a detailed step-by-step guide to help familiarize yourself with the system in Chile. 

It takes approximately 6 to 8 weeks to complete the process of company formation in Chile once you have all of the required documents. Here are the 7 steps you will need to follow:

• Step 1 – Register the company.
• Step 2 – Notarize the company statutes.
• Step 3 – Obtain a RUT number.
• Step 4 – Print receipts/invoices.
• Step 5 – Seal accounting books and other documents.
• Step 6 – Acquire a patente municipal.
• Step 7 – Register for labour-related accident insurance.

 

Step 1 – Register the company and obtain the authentication number

Apply for the authentication number at the Chilean Chamber of Commerce or the corresponding regional office. This is a unique identifier for the company and is required for all business activities.

Step 2 – Notarize the company statutes and digitally signed by the notary

The company statutes outline the structure and regulations of the company. It is essential to have these notarized by a public notary in Chile, and the document should be digitally signed to ensure its authenticity.

Step 3 – Obtain a RUT number by registering with the Internal Revenue Service (SII in Spanish)

The RUT (Rol Único Tributario) number is the company’s tax identification number. This number is necessary for all tax-related activities in Chile, including paying taxes, issuing invoices, and importing/exporting goods.

Step 4 – Print receipts/invoices at an authorized printing company

Receipts and invoices must be printed at a certified printing company in Chile. These documents are used for accounting and tax purposes and must comply with Chilean regulations.

Step 5 – Seal accounting books and other documents with the Chilean Tax authority

After registering the company with the Chilean Tax Authority (Servicio de Impuestos Internos), the accounting books and other financial documents must be stamped or sealed by the authority.

Step 6 – Acquire a patente municipal working license from the municipality

The patente municipal is a business license issued by the local municipality where the company is located. This license authorizes the company to operate and is necessary for many business activities.

Step 7 – Register for labour-related accident insurance

All employers in Chile are required to provide accident insurance for their employees. This insurance covers medical expenses and lost wages in the event of a work-related injury or illness.

 

FOREIGN COMPANIES REPRESENTATIVE UNDER ARTICLE 447

To establish a foreign company’s agency in Chile, specific legal requirements must be met according to Article 447 of Chilean Law. The process involves notarizing and legalizing documents at a notary’s office in Chile, translated into Spanish if necessary. The required documents include:

1. Proof that the company is legally constituted in its home country, along with a certificate of its current legal status.
2. A certified copy of the company’s statutes.
3. A general power of attorney for the agent representing the company in Chile, granting broad powers to act on the company’s behalf.

These steps ensure the legitimacy of the foreign company and give the agent legal authority to manage its affairs in Chile.

 

TAX REGIMES

• Branches and Permanent establishments of Foreign Entities or persons are subject to First Category Tax is 15% on an incurred income.
• If the debt is registered with the Central Bank, Standard rate is 35%, reduced to 4%
• Foreign Branches & Permanent Establishments Subject to a 15% tax on accrued income, similar to Chilean entities.
• Employment Income Taxed at 35% on gross earnings, except for engineering services or technical assistance, which are taxed at 20%.
• Services Rendered Abroad tax rate is 35%, but some exemptions apply (e.g., transport services completed entirely abroad).
• Maritime Transport Services is 5% withholding tax, often exempt due to reciprocal agreements.
• Lease Payments For assets qualifying for accelerated depreciation, the tax rate is 1.75%.
• Insurance Payments is 22% for non-Chilean insurers; 2% for reinsurance.
• Remittances of Profits & Dividends is Subject to a 35% tax.
• Royalty Payments is 30% standard rate, reduced to 20% for films and 15% for literary copyrights.

 

CONCLUSION

Doing business in Chile involves choosing the right company structure from four options: EIRL, LLC, SA, and SpA. Foreign companies must meet legal requirements to establish an agency in Chile. Chile’s tax regime includes various rates for employment, services, and remittances of profits and dividends. The standard tax rate is 35%, with reduced rates for certain activities. Understanding these requirements is crucial for successful business operations in Chile. Foreign companies can set up agencies by fulfilling legal requirements under Article 447. Chile’s tax regime covers various payments, including employment income, royalties, dividends, and services rendered abroad, with rates ranging from 1.75% to 35%, depending on the type of payment and applicable exemptions.