CHILE Law and Practice Contributed by: Francisco Barreda, Barreda Legal Tech
profits. Shareholders/investors (individuals) are taxed with final taxes (global complementary or additional tax) when they receive withdrawals or distributions of profits. Profits obtained from the sale of start-up shares will be subject to taxes, although in some cas - es, they may qualify for exemptions or benefits established in the Income Tax Law, depending on the specific case. Taxation Applicable to Investment Funds Investors participating through regulated vehi - cles such as public or private investment funds can benefit from a more efficient tax treatment. The Single Fund Law (LUF) establishes that funds do not pay taxes on their capital gains, but taxes are incurred at the contributor level, which allows for deferral of taxation until the actual withdrawal of profits. 4.3 Government Endorsement In Chile, recent governments have developed various initiatives to promote financing through capital in early-stage and growth-stage ventures, with a special focus on start-ups and innovative companies. The main public institution responsi - ble for these policies is CORFO ( Corporación de Fomento de la Producción ), which has played a key role in the development of the venture capi - tal ecosystem. Some of the most relevant initiatives include: • Financing Programmes for Investment Funds: CORFO has launched financing lines where it co-invests with an investment fund, not as a contributor but as a creditor of the fund through a credit line. • Contributions to Start-Ups: Through instru - ments such as Start-Up Chile and Capital Semilla, among others, CORFO provides
money to support entrepreneurs in the early stages, facilitating their subsequent access to investment rounds. • Capital Markets Strengthening Initiatives: CORFO and Start-Up Chile have also col - laborated on the development of platforms such as ScaleX (Santiago Venture Exchange), an alternative market on the Santiago Stock Exchange designed for start-ups and scale- ups to raise capital more efficiently. These public policies have been crucial in building the venture capital ecosystem in Chile, attracting both national and international inves - tors, and promoting a culture more open to risk investment. In Chile, venture capital investors typically secure the commitment of founders and key employees through vesting clauses (reverse vesting for those who are already sharehold - ers), which allow shares or economic rights to be acquired or consolidated gradually over time. These clauses are complemented by transfer restrictions, buyback rights (under certain con - ditions, the price per share is penalised), and non-compete agreements, all aimed at aligning the incentives of the founding team with the sus - tainable development of the business. 5.2 Securities The most commonly used instrument to incen - tivise founders and key employees is primarily the stock option agreement in its various forms (depending on whether it is vesting for founders or stock options for employees). 5. Employment Incentives 5.1 General
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