CHILE BUSINESS NEWS

Chilean taxation, regulations, laws, economic data, trade news. Some issues will be addressed frequently, due to its relevance.

TRADE BETWEEN CHILE AND USA GROWS TO US$ 25 BILLION
June 16th

Chile and USA signed a Foreign Trade Agreement in 2004. Ten years later, the trade raised from US$ 6 billion to US$ 25 billion between both nations. During 2013, Chile exported US$ 10 billion to USA and imported US$ 15 billion from USA.

The total trade between Chile and the world in 2013 was US$ 158 billion, divided almost even between importation and exportation, meaning that this small country has chosen foreign trade as way to develop the nation. So, there are many opportunities open to foreigners to import from and export to Chile.

If interested on trading with Chile, contact us :  businessinchile@gmail.com
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TAX REFORM 2014 IN CHILE AND TAXATION TO FOREIGNERS
June 16, 2014

The government of Chile sent to the Congress on April 1, 2014 an extensive reform to the taxation in Chile. The main purpose of it is to finance a major reform to improve the quality of  school education, and also to diminish segregation and inequalities. However, there is a huge discussion regarding that the tools, as buying out chartered schools from private hands to be owned by the State, can really help to these purposes.

The taxation reform has many edges and some are "non negotiable" by the authority and others are receiving severe criticism and it is expected that the Senate will make some modification.

This reform is affecting more Chilean companies and Chilean owners, than foreigners. In fact, the maximum tax rate for foreigners during decades has been 35%, but for Chileans  it is 40%. Not long ago Chileans had to pay 45% for taxpayers on the higher income bracket.  Now, the maximum rate is going to be fixed in 35% for all taxpayers, if approved by the Senate.

Company profits is 20% presently. A foreigner deducts  this 20% tax paid by the company from his 35% when he SEND or WITHDRAW the profits from Chile. Then he pays the difference or 15%. If he keeps the profits reinvested locally, this additional  tax is suspended until he wires the benefits to his country. However, the government presented several changes to taxation.

1. Corporate tax is going to raise gradually to a maximum of 25% in 2017 for the accrual profits produced by the company. The tax will be paid, even if the company has not collected the profits.

2. An additional withholding of 10% will be paid to the government by the company, as a provisional tax on behalf of the stockholders taxation. In summary, the earnings yielded by the company in 2017, will pay a 35% tax on April 2018, although some of this, it is on behalf of the owners.

For new investors coming to Chile, the overall tax burden keeps being 35%. The difference is that he will have to pay annually the tax independently if he keeps the profits on the company or he withdraw them from the country.

The other main change affecting large foreign investors is to eliminate a contract signed between them and the State of Chile. This is called DL 600. This contract offered a fixed 40% tax burden during the lifetime of the business, free access to the exchange market, etc. Many foreign companies had not signed this contract, choosing instead the general tax regulation of 35%. Regarding safety of dealing with Chile, no one is afraid that Chile could change its market and private driven economy.

On the case of SMALL BUSINESS taxation, there are some benefits today, that the government wants to keep. So, if foreign investors decide to invest on small businesses, they may keep the taxation over profits withdrawn or wired to your home country. And not over accrual profits as the reforms intend to do. I guess the government will not risk to get a public disapproval by thousands of small business owners, when he needs that support for increasing the taxation over larger companies. So, foreigners investing on Small Business may still keep some of the present advantages.   We need to see the final law approved. But that is my opinion.

There are more issues on this wide tax reform but these are the most relevant to foreigners.

If you need  more insights of this subject we can advice you. Write to businessinchile@gmail.com