CHILE: An Introduction to Tax

The Chilean Advantage: A Tax and Investment Playbook for the Global Investor

Chile: a premier gateway for investment in Latin America

Chile has cemented its position as one of Latin America’s most attractive and secure investment destinations, thanks to its macroeconomic stability, a robust legal framework and deep integration into the global economy. For foreign investors, the country offers a predictable and favourable environment for business.

Macroeconomic stability and a positive growth outlook

The Chilean economy is on a recovery path. The OECD, of which Chile is a member, projects seasonally adjusted growth of 2.4% for the Chilean economy in both 2025 and 2026. This is driven by strong external demand for key exports like copper and lithium. Recognised by the World Bank as a high-income economy, Chile consistently achieves high ratings for competitiveness and stability within the region.

However, this recovery is uneven. Export-oriented sectors, such as mining and renewable energy, are performing strongly, while those reliant on domestic consumption face ongoing challenges. The Central Bank of Chile projects an inflation around 4.4% for 2025, being actively managed through cautious monetary policy.

A favourable and secure legal framework for foreign capital

Chile’s foreign investment policy ensures non-discrimination, simplicity and transparency. Foreign investors are subject to the same legal regime as their domestic counterparts, which significantly reduces political risk. The right to remit capital and profits abroad is guaranteed, and investors may own 100% of Chilean companies, with rare exceptions in strategic sectors. The national investment promotion agency, InvestChile, facilitates the process for foreign firms.

Establishing a company in Chile is a straightforward process. A foreign investor must first obtain a Chilean tax identification number (RUT), which requires appointing a legal representative domiciled in Chile. Following this, the investor selects a corporate structure – the flexible Stock Company (SpA) and the Limited Liability Company (Ltda) are common vehicles. Finally, the new entity must register with the Chilean Internal Revenue Service (SII) to obtain its corporate RUT and begin operations.

Strategic sectors and global integration

According to the Chilean Ministry of Finance, Foreign Direct Investment (FDI) in Chile is historically concentrated in mining (26.8%), electricity, gas and water (14%), and financial services (11.2%). The country is a key player in the global energy transition, holding 41% of the world’s lithium reserves. The government has also prioritised high-value sectors such as the sophisticated food industry, exportable technology services and green hydrogen development.

Chile’s economic strength is amplified by its extensive network of free trade agreements, including a modernised accord with the European Union. A recent milestone is the entry into force of the double taxation convention (DTC) with the United States, further deepening Chile’s global economic integration, putting the number of Chilean DTCs at 37, the third-largest network in Latin America, only behind of Mexico and very close to Brazil.

Navigating the Chilean Tax Landscape

Understanding Chile’s tax structure is essential for efficient investment planning. The system is stable and based on clear principles.

The corporate income tax system: a two-tier regime

Chile operates a dual system of First Category Income Tax (FCIT) on corporate profits. Large companies are subject to the Partially Integrated System (PIS), with an FCIT rate of 27%. Small and medium-sized enterprises (SMEs) fall under a fully integrated regime with a standard 25% rate, temporarily reduced to 12.5% for the 2025–2027 commercial years. Resident companies are taxed on worldwide income, while non-residents are taxed only on Chilean-source income. The system is “integrated” because the FCIT paid by the company serves as a credit against the final taxes paid by its owners upon profit distribution.

Taxation on profit repatriation: the additional withholding tax

Profits distributed abroad to non-resident shareholders are subject to a 35% withholding tax, known as the Additional Tax. The FCIT paid by the company is credited against this tax. The crucial elements for international tax planning are as follows:

• for shareholders resident in a jurisdiction with a DTC with Chile, 100% of the FCIT can be used as a credit; and
• for shareholders resident in a jurisdiction without a DTC, only 65% of the FCIT can be credited.

This differential mechanism creates a fundamental divergence in the final tax burden, which can increase from 35% to 44.45%. The existence of a DTC is therefore the central pillar upon which any significant foreign investment should be structured. For clarity, the total effective rate for shareholders resident in a DTC country is therefore 35% and for a resident in a non-DTC country, it is 44.45%.

The US-Chile tax convention: a new era of bilateral investment

The entry into force of the tax convention between the United States and Chile in December 2023 is a major bilateral economic development. The convention reduces withholding rates on dividends, interest and royalties. Crucially, it grants US investors access to the 100% FCIT credit, levelling the playing field with investors from other treaty countries.

VAT and other relevant levies

Chile applies a broad-based, single-rate VAT of 19% on most sales of goods and services. Other relevant taxes include Stamp Duty, which primarily taxes credit operations at a maximum rate of 0.8%, and an annual Municipal Licence fee.

The Horizon: Key Challenges for 2025 and Beyond

Chile’s business environment, though stable, is not static. For clients, navigating the coming years requires a clear understanding of potential hurdles and how to overcome them. The key challenges revolve around political uncertainty, a paradigm shift in tax enforcement, and the arrival of new global tax standards.

The shifting political and regulatory landscape

President Gabriel Boric’s administration faces a polarised congress, which has hindered progress on structural reforms. With general elections scheduled for November 2025, there is considerable uncertainty regarding policy continuity. While Chile’s institutional framework is robust, this political climate may alter key economic reforms.

The tax reform agenda: a pivot to compliance and transparency

Unable to pass reforms that substantially modify tax aspects, the government has shifted its focus to strengthening enforcement. Law No 21.713 (October 2024) grants new audit powers to the SII and reinforces anti-avoidance rules. This represents a “soft” increase in the tax burden through stricter application of existing laws. For investors, fiscal risk has shifted from legislative changes to administrative scrutiny, demanding proactive governance and robust documentation.

The advent of BEPS 2.0: preparing for the global minimum tax

The Chilean government has announced its intention to incorporate the OECD/G20’s Pillar Two framework into its domestic legislation. This represents a profound change in Chile’s international taxation, as it imposes a minimum effective tax rate of 15% on the jurisdictional profits of multinational groups with global revenues exceeding EUR750 million.

Although it remains unclear if the initiative will proceed and a specific timeline for its implementation in Chile has not yet been defined, large multinational enterprises should begin preparing.