CHILE Law and Practice Contributed by: Macarena Ravinet and Federico Espinosa, Cuatrecasas
Maximum Conventional Interest Rate (Tasa Máxima Convencional, TMC) The central mechanism for limiting interest rates in Chile is the “ tasa máxima convencional ” (TMC). The TMC is calculated and published monthly by the Comisión para el Mercado Financiero (CMF). The rate is determined based on the average rates charged by banks and financial institutions, with adjustments according to the type of loan, its amount, currency (CLP, UF or foreign currency), and term. Scope: The TMC applies to most credit operations, including consumer loans, commercial loans, and credit card debt. Publication: The CMF publishes the applicable TMC for different loan brackets and terms on its website and in the Official Gazette. Currency and Term: The cap varies depending on whether the loan is denominated in CLP, indexed units (UF) or foreign currency, and whether the term is short or long. Legal Consequences of Exceeding the Cap If a lender charges interest above the TMC, the excess interest is legally void. The borrower is only required to pay up to the maximum allowed, and any excess paid can be reclaimed. Furthermore, charging interest above the TMC may expose the lender to civil liability and, in cases of willful misconduct, criminal sanctions for usury. Exemptions The only exemptions to the TMC are those expressly established in Article 5 of Law 18,010. These include: • loans agreed with foreign or international banks or financial institutions; • loans agreed or expressed in foreign currency for foreign trade operations; • operations conducted by the Central Bank of Chile with financial institutions; and • loans where the debtor is a bank or a financial company. It is important to note that there is no exemption based on the size of the borrower or the amount of the loan.
The TMC applies equally to all borrowers, including large corporations, unless the operation falls within one of the specific exceptions listed above. Judicial Review and Consumer Protection Chilean courts have consistently upheld the applica- tion of the TMC, showing little tolerance for attempts to circumvent the cap through disguised fees or charges. The Consumer Protection Law (Law No 19,496) further reinforces these protections, requir- ing clear disclosure of the total cost of credit and the effective annual rate (EAR). 3.11 Disclosure Requirements In Chile, disclosure requirements vary depending on the contract type and parties involved. Public debt securities must be registered with the Comisión para el Mercado Financiero , and a public deed with the indenture – detailing financing terms, use of proceeds, covenants, and defaults – must be executed, binding both investors and the regulator. For consumer lending, banks must provide standard- ised information on total credit cost, interest rates, fees, and repayment schedules to ensure transparen- cy and comparability. Privately negotiated corporate or syndicated loans generally lack public disclosure requirements, but security interests, such as mortgag- es or pledges, must be registered to be enforceable, thereby revealing the existence of collateral. Payments of principal made to lenders are exempt from withholding tax in Chile. Interest payments to for- eign lenders, however, are generally subject to with- holding tax at a standard rate of 35%. This rate may be reduced to 4% if the lender qualifies as a foreign bank or a recognised foreign financial institution, pro- vided that certain regulatory conditions and reporting obligations are met. In cases where the loan is made under any structured arrangement, the reduced 4% tax rate is not applicable, even if the lender qualifies as a foreign bank or a recognised foreign financial institution. This includes situations where the inter- est is ultimately passed on or transferred to a foreign 4. Tax 4.1 Withholding Tax
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