A Guide to Investing in Chile: Legal Keys for Success

Chile has established itself as one of Latin America’s most attractive and secure destinations for foreign investment. Its legal stability, open-door policy, and robust institutional framework offer fertile ground for business. However, to navigate this landscape successfully, a clear and expert guide is essential.

Why Invest in Chile? An Attractive Overview

Chile’s commitment to foreign investment is enshrined in its Constitution, which guarantees non-discriminatory treatment in economic matters. This translates into a policy that allows foreign investors to participate in nearly all economic sectors, with the ability to own up to 100% of a company’s capital. This approach, combined with an extensive network of international treaties to avoid double taxation, creates an environment of high legal certainty and fiscal predictability.

The Current Legal Framework: Law No. 20.848

Since 2015, Law No. 20.848 has been the cornerstone of the foreign direct investment (FDI) regime in Chile. This law modernized the system, establishing a set of standardized rights for all qualifying investors. The fundamental principle is that of national treatment and non-arbitrary discrimination, which ensures that a company with foreign capital will operate on equal terms with a local one.

To access specific benefits, such as a VAT exemption on the import of capital goods, the law defines FDI as a capital transfer exceeding 5 million US dollars or one that grants control of at least 10% of a Chilean company.

How to Incorporate in Chile: Choosing Your Corporate Structure

One of the most important steps when you invest in Chile is choosing the right corporate structure. Chilean law offers several options, but the most widely used for its flexibility is the Corporation by Shares (SpA).

Why is the SpA the preferred option?

• Flexibility: It can be established by a single shareholder, making it ideal for subsidiaries of foreign parent companies.
• Ease of transfer: The capital is divided into shares, which simplifies the entry and exit of partners without needing to amend the company’s bylaws.
• Adaptable governance: The administration can be freely structured, from a single administrator to a board of directors, without the rigidity of a traditional corporation (S.A.).

To incorporate in Chile, there are two paths: the traditional method (via public deed) and the simplified “Your Company in a Day” system. While the latter is faster and more cost-effective, the traditional method is indispensable for complex structures or detailed shareholder agreements.

The Tax System: What You Need to Know

Chile’s tax system is a key factor in the profitability of your investment. Companies are subject to the First Category Income Tax (IDPC), with a general rate of 27%. However, the most relevant point for foreign investors is the Additional Tax, which applies when profits are distributed abroad.

The general rate of this tax is 35%, but the system allows the IDPC paid by the company to be used as a credit. Herein lies a crucial difference:

• Without a Double Taxation Treaty (DTT): The total effective tax burden can reach 44.45%.
• With a Double Taxation Treaty (DTT): The total tax burden is limited to 35%.

Chile has treaties in force with over 35 countries, including the world’s major economies. For this reason, at Peñaloza Abogados, we believe that proper international tax structuring is not a luxury, but a strategic necessity.