CHILE Law and Practice Contributed by: Patrick Humphreys, Daniela Gazmuri Larraín, Paula Lühr, Ian Hinzpeter, Camila Leviante, Beatriz Riveros and José Luis Bravo, Garnham Abogados
tive bargaining, internal workplace rules, health and safety, and dealings with unions. In practice, the level of employee representation depends on the workforce profile, union presence, sector, and company history. Companies should assess representation require - ments early, maintain consistent communication, and train local management on lawful interaction with employees, unions and mandatory committees.
survivorship insurance. These are not income taxes, but they add materially to hiring costs in Chile. 5.2 Taxes Applicable to Businesses Corporate Taxation and Residence A Chilean company is resident and generally taxed on its worldwide income; a foreign company is taxed only on Chilean-source income unless it operates through a permanent establishment or other taxable presence in Chile. Such income includes local assets or activi - ties, shares or rights in Chilean entities, certain royal - ties and services connected with Chile and, in some cases, indirect transfers of foreign entities whose value derives substantially from Chilean assets. Business profits are subject to corporate income tax (i mpuesto de primera categoría ). Under the general regime that applies to most medium and large com - panies, including most foreign corporate investors, the rate is 27%. It is charged annually on net taxable income — broadly, accrued income less costs and expenses connected with the business, reasonable and properly supported. Chile has simplified regimes for small and medium enterprises (p equeñas y medianas empresas , PYMEs) and presumptive income regimes for specific small- scale activities. These are generally not designed for foreign corporate investors and are often unavailable to holding companies or to businesses earning a rel - evant part of their income passively. Profit Distributions and Withholding Tax Dividends and profit remittances paid to non-resi - dents are generally subject to additional tax or with - holding tax ( impuesto adicional ) at 35%, subject to the integration rules and any applicable treaty. Profits passing between Chilean companies are generally not taxed again at corporate level, though tax attributes must be tracked for later distribution to individuals or foreign owners. For example, a Chilean subsidiary earning USD100 of profit pays USD27 of corporate income tax. On distribution to a foreign shareholder, additional tax is charged at 35% on the gross. If the shareholder is tax resident of a country with which Chile has a double taxation treaty, the USD27 credit is generally available
5. Tax Law 5.1 Taxes Applicable to Employees/ Employers Employee Taxation
Individuals domiciled or resident in Chile are generally taxed on worldwide income, while non-residents are taxed only on Chilean-source income. Residence is usually triggered by spending more than 183 days in Chile within any twelve-month period. Domicile turns on intention and factual links such as family, business or economic interests. Foreigners who become resident or domiciled in Chile are taxed only on Chilean-source income for their first three years, a period the Chilean Tax Authority (SII) may extend under special circumstances upon request. This matters for expatriate executives and is worth weighing before relocation packages are agreed. Employment income is subject to payroll tax ( impues- to único de segunda categoría ). It is a progressive monthly tax on salaries and similar employment income, rising through brackets from an exempt band to a top rate of 40%, and is charged after mandatory social security and health contributions are deducted. Employees make mandatory social security contribu - tions, which the employer withholds. These mainly cover pension, health and unemployment insurance, up to statutory caps. Employers also bear their own mandatory costs, including unemployment insurance, work-accident and occupational-disease cover, and disability and The employer withholds and remits it. Social Security and Employer Costs
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