CHILE LAW AND PRACTICE Contributed by: Fernando Lathrop Aubert, Francisco Cárcamo Valdés, Jimena Illanes Diez, Joyce Jankelevich Mayer, Macarena Jaramillo Solís, Michelle Niedbalski Ramírez, Nicolás Maldonado Leyton and María Fernanda Heusser Errázuriz, Lathrop Mujica Herrera & Diez Abogado
in a preferential tax regime (Article 41H of the Income Tax Law). Taxpayers must maintain proper documentation to justify their pricing methods and file an annual trans - fer pricing affidavit. The SII has the authority to adjust taxable income if transactions are deemed non-com - pliant, potentially leading to additional taxes and pen - alties. Anti-Hybrid Rules Chile has implemented anti-hybrid provisions aligned with the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan, particularly under its adoption of the multilateral instrument (MLI). These rules aim to counteract tax mismatches arising from hybrid instruments or entities, where income is either dou - ble-deducted or exempted in one jurisdiction. For example, deductions for payments made under hybrid arrangements may be denied if the income is not taxed in the recipient’s jurisdiction. CFC Rules Chile’s CFC regime targets offshore income earned through foreign subsidiaries, governed by Article 41G of the Income Tax Law. Under these rules, passive income derived by controlled foreign entities – such as dividends, interest, or royalties – is attributed to and taxed in Chile, regardless of whether the income is distributed. These provisions ensure that profits are not indefinitely deferred in low-tax jurisdictions. General Anti-Evasion Measures Chile enforces strict measures to deter tax evasion. Foreign investors must comply with reporting obliga - tions, such as registering with the SII and disclosing beneficial ownership structures. Additionally, bilat - eral tax treaties may include exchange of information clauses, enhancing transparency and preventing base erosion through international co-operation. 10. Employment and Labour 10.1 Employment and Labour Framework Labour legislation in Chile is based on three principles: addressing the power imbalance between employers and employees, ensuring minimum and non-waivable
regulations, and applying relative employment stabil - ity, meaning dismissals can only occur for specific legal reasons. These principles are reflected in measures such as establishing a minimum wage, regulating maximum working hours, and classifying labour rights as non- waivable. Employment contracts can only be ter - minated for legally defined reasons. Labour courts handle disputes, and the DT monitors compliance, interprets regulations, and mediates disputes. Collective labour rights are regulated at the company level, with no multi-employer or sectoral bargaining. However, in recent years, there have been several legislative initiatives aimed at establishing this type of multi-level bargaining. Nevertheless, no consensus has yet been reached on the matter, and those initia - tives have not prospered to date. The unionisation rate in Chile is low compared to other OECD countries. Collective bargaining occurs between unions and employers, with the Chilean state supervising pro - cedural formalities and mediating if necessary. The right to strike is constitutionally recognised but strictly regulated. It is only allowed during collective bargain - ing if no agreement is reached. Recent legislation emphasises protecting dignity in labour relations, with strict regulations to prevent, report, investigate and sanction sexual harassment, workplace harassment, and violence. Employers must adopt preventative and corrective measures to eradi - cate these behaviours. 10.2 Employee Compensation To understand labour compensation in Chile, it is essential to analyse benefits during employment, upon termination, and related to retirement. • Benefits during employment – These primarily consist of remuneration, which can be fixed, vari - able or mixed. Regulations impose restrictions – a minimum wage must be respected, remuneration must be monetary, conditions for earning must be objective and known to the employee, payment periods cannot exceed one month, and deductions must comply with legal limits. Remuneration is linked to the Chilean social security system, requir -
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