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- Basic Facts
- Statutory Labor Requirements
- Employee Income Tax In Brazil
- Employee Social Security In Brazil
- Deductible Expenses In Brazil
- Immigration In Brazil
- Value Added Tax (VAT) In Brazil
- Withholding Tax In Brazil
- Terminating Employee In Brazil
- Statutory Employee Benefits In Brazil
- Payroll In Brazil
- Ease Of Doing Business In Brazil
- Business Opportunities In Brazil Section
- Why Use Global Expansion To Hire Your Employees In Brazil
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BASIC COUNTRY FACTS
The Republic of Chile
Santiago
- Spanish or Castellano (99%)
- Mapudungun
- Quechua
- Rapa Nui
19.1 millionsss
Chilean Peso
.cl
+56
Chilean Peso
STATUTORY LABOR REQUIREMENTS
Probation Period
- The Chilean Labour Code does not consider a probationary period.
Annual Leave
- Employees with more than one year of service have a right to 15 paid working days per year.
- Ten days can typically be taken consecutively, and the remaining 5 as agreed by the employee and employer.
- Vacation time can be accrued for up to 2 consecutive years.
Public Holidays
- New Year’s Day (1st January)
- Good Friday (10th April)
- Holy Saturday (11th April)
- Labor Day (1st May)
- Battle of Iquique (21st May)
- Our lady of Mount Carmel (16th July)
- Assumption of Mary (15th August)
- Independence Day in Chile (18th September)
- Day of the Glories of the Army (19th September)
- Discovery of Two Worlds Day (Columbus Day) (12th October)
- Reformation day (31st October)
- All Saints’ Day (1st November)
- Immaculate Conception (8th December)
- Christmas Day (25th December)
Maternity Leave
- In general, employees are entitled to 6 weeks of maternity leave before childbirth and 12 weeks after childbirth.
- In addition, parental leave may be granted, at the choice of the new mother, under any of the following options:
- a 12-week leave following the expiration of maternity leave or
- 18 weeks of half-day work following the expiration of maternity leave.
Paternity Leave
- Fathers are entitled to 5 continuous working days of paternity leave to be used when they want after the child is born.
- Fathers can also share the parental leave of up to six weeks of full-time leave or 12 weeks of part-time leave.
Sick Leave
- Employees are entitled to sick leave if supported by a medical certificate that is given to the employer within two working days from the date of beginning of the sick leave.
- Payment regarding sick leave is as follows: -
- 3 days or less of sick leave: employees are not entitled to sick pay
- Between 4 and 10 days of sick leave: employees are entitled to sick pay
- Greater than 10 days of sick leave: employees are entitled to sick pay for all working days during the sick leave period
Work Hours
- The Chile work week is 45 hours, with a standard work day of 8:30 am to 6:30 pm.
- Workers are entitled to 11 hours between work days and they are not allowed to work on Sundays (with certain exceptions depending on the sector, such as retail for example).
- Workers are entitled to one rest day a week.
Overtime
- If employees in Chile with contracts subject to a time clock must work overtime, they are entitled to 1.5% of their regular hourly salary, unless the collective bargaining agreement or employment contract indicate a higher amount.
- Overtime hours should not exceed more than 10 per week, or 2 hours per day.
Notice Period
- Notice period is 1 month by law.
- It is common that the notice period is waived and payment is made in lieu.
Severance
- If the employee has completed at least 1 year of employment, they are entitled to severance pay.
- For every year of service up to 11 years, the employee is entitled to 1 month's salary.
13th Month Salary in Brazil
- Yes
- There is a statutory requirement to pay the 13th or 14th month salary.
- Which is either paid in one or two instalments.
- Additionally, you have the compulsory profit sharing referred to as 'legal gratification' and it is paid monthly.
INCOME TAX
- Chile taxes its individuals’ resident or domiciled in Chile on worldwide income.
- Foreigners working in Chile are subject to taxation only on their Chilean-source income during the first three years in Chile, after which worldwide income is taxed.
- Before residence is acquired, a flat 15% tax generally is levied if the activities can be qualified as technical or engineering work or professional services that an individual renders through a report, advice, or plan development.
- Taxable employment income includes any kind of remuneration received under an employment contract, including entertainment expenses.
- Personal income tax, which is imposed at progressive rates ranging from 0% to 35%, must be paid on income withdrawn from business enterprises.
- Income earned by professionals and independent workers, minus deductions for actual or deemed expenses, is also subject to personal income tax, which is imposed annually at progressive rates ranging from 0% to 35%.
- Directors’ fees. Directors’ fees are taxed in the same manner as professional income, without deduction of actual or deemed expenses
- Personal income tax is levied on a progressive scale.
- The income brackets are adjusted monthly in accordance with the consumer price index variation expressed through a unit called a Monthly Taxable Unit (MTU).
- An MTU is equivalent to approximately USD72.
- The Annual Taxable Unit (ATU) is equal to one Monthly Taxable Unit multiplied by 12.
|
Taxable Income |
Rate (%) |
|
|
Exceeding MTU |
Not Exceeding MTU |
|
|
0 |
13.5 |
0 |
|
13.5 |
30 |
4 |
|
30 |
50 |
8 |
|
50 |
70 |
13.5 |
|
70 |
90 |
23 |
|
90 |
120 |
30.4 |
|
120 |
- |
35 |
|
Taxable Income (USD) |
Rate (%) |
|
|
Minimum |
Maximum |
|
|
0 |
947.34 |
0 |
|
947.34 |
2,105.2 |
4 |
|
2,105.2 |
3,508.66 |
8 |
|
3,508.66 |
4,912.13 |
13.5 |
|
4,912.13 |
6,315.59 |
23 |
|
6,315.59 |
8,420.79 |
30.4 |
|
8,420.79 |
And more |
35 |
DEDUCTIBLE EXPENSES
Personal Deductions
- Individuals may deduct from their taxable income their social security contributions paid, up to certain limits.
- Subject to certain limitations, amounts invested in pension or insurance funds may be fully deductible from taxable income.
- A deduction can be taken for voluntary pension contribution (APV), up to a monthly limit of 50 UF or annual limit of 600 UF for resident employees. In the case of a dependent worker, such savings can be made monthly if the contribution is deducted by the employer or annually if the worker pays it directly to an authorized institution
- Mortgage interest paid may be deducted from the tax base, subject to certain limitations (may not exceed 8 annual tax units)
- In addition, child education expenses incurred during the year are eligible for a tax credit against personal taxes if the parents’ total yearly income does not exceed UF792 (approximately USD32,582)
- The maximum annual tax credit per child is equal to approximately USD181.
Business Deductions
- Deductible expenses consist of expenses necessary to produce taxable income. Instead of accounting for actual expenses, individual professionals and independent workers may take a standard deduction equivalent to 30% of gross income, limited to 15 Annual Tax
|
Deductible Expenses |
|
|
Personal Deductions |
|
|
Business Deduction |
|
IMMIGRATION
- Expatriates who wish to engage in remunerated activities in Chile must apply for a visa or residence permit that entitles him or her to work.
- The most common of these are the provisional work permits for tourists, subject-to-employment-contract visas and temporary visas
- Subject-to-employment-contract visas are valid for up to two years and are renewable indefinitely for additional two-year periods.
- After two years in Chile under this visa, the employee may apply for a permanent residence status.
- Temporary visas are granted for up to one year, and may be renewed one time for an additional year.
- After the expiration of the renewal period, the expatriate must apply for permanent residence status or leave the country.
- Foreign nationals may start businesses in Chile if they comply with all legal requirements.
- Companies may be headed by foreign nationals if such nationals are residents or domiciled in Chile for tax purposes.
- The following types of residence visas are issued:
-
- Officials: members of the consular and diplomatic corps
- Temporary: gives the expatriate the right to work or perform other legal remunerated activities in Chile, and may be granted to individuals who have relatives in Chile or who intend to make investments that are considered advantageous for Chile
- Subject-to-employment-contract: valid for up to two years, and may be renewed for an additional two-year period
- Student: valid for up to one year and may be renewed for additional one-year periods, as many times as necessary
- Political refugee: issued to foreign nationals who intend to establish permanent residence in Chile
- Permanent residence: an indefinite visa that gives the expatriate the same rights as an ordinary Chilean national, except for the rights to vote and seek public office
- In general, foreign nationals must file all or some of the following documents when applying for visas and permits:
-
- An application form
- Passport and documents proving current visa status
- Documents that prove professional status
- Documents that prove marital status
- Birth certificates
- Documents that support the activities an applicant will develop in the country, such as a labor contract or documents that prove that the applicant has been accepted in a college or educational institution
- A certificate proving that the applicant has no criminal record
- A health certificate
- Police record (required to apply for permanent residence)
- However, the appropriate authorities have the discretion to request different or additional documents if these are deemed necessary for the approval of the visa.
|
Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
|
Temporary Residence Visa |
|
1 year (can be renewed for an additional year) |
|
|
Subject to employment contract |
|
2 years (can be renewed for an additional 2 years) |
|
|
Permanent residence |
|
5 years (renewable) |
|
VALUE ADDED TAX
- The current VAT rates are as follows:
- 19% standard VAT rate; and
- Exempt: exports of goods; entrance sporting and cultural events; real estate; freight services; used cars and lorries; international passenger transport; and education.
|
VAT |
|
|
Standard Rate |
19% |
|
Zero Rate |
0% |
WITHHOLDING TAX
Dividends
- Dividend income of nonresidents generally is subject to tax at a rate of 35%, with a credit for corporate tax paid.
- Profits from Foreign Capital Investment Funds, however, are subject only to a 10% withholding tax when repatriated, with no credit.
Royalties
- Royalty payment by the end user (no commercial exploitation) for the use of shrink wrapped software are exempt from withholding tax
- Payments for the use, enjoyment or exploitation of invention patents, computer programs, utility models, industrial designs and drawings, blueprints or topography of integrated circuits, and of new vegetable varieties, are subject to a 15% additional withholding income tax
- The rate increases to 30% if the income beneficiary is resident in a jurisdiction with a preferential tax regime
- Royalty payment in respect of trademarks, patents, formulae and other similar services are subject to a 30% additional withholding tax
Interest
- Interest is subject to a 35% additional withholding income tax on the gross amount.
- A 4% reduced tax rate applies, inter alia, to interest on loans granted by a foreign bank or foreign financial institution and by an insurance company or pension fund that complies with certain registration requirement, provided the lender and borrower are unrelated.
Technical Service Fees
- A 15% additional withholding income tax applies to payments made to nonresident persons without a permanent establishment in Chile for technical and engineering works and professional or technical services that nonresident individual experts in a science or technique renders through advice, a report or plan
- The rate is increased to 20% if the beneficiary is resident in a jurisdiction with a preferential tax regime
Branch Remittance Tax
- A 35% additional withholding income tax applies; the taxable event depends on whether the branch is subject to the fully integrated regime or the partially integrated regime.
|
WHT |
|
|
Dividends |
|
|
Royalties |
|
|
Interest |
|
|
Technical Service fee |
|
|
Branch Remittance Tax |
|
TERMINATION
In Chile, companies may terminate employment for the following reasons:
-
- mutual agreement
- the conclusion of particular task agreed upon
- force majeure (e.g. an unexpected event, for example, a natural disaster)
- the employee’s death
- the expiration of an agreed upon term or duration of employment
- resignation by the employee
- company needs/company reorganization
- Dismissal due to breach of contract or other serious issue (must be proven by the employer)
- In order to initiate the termination of a contract, you must first decide the cause, as per articles 159, 160, 161, and to a limited extent 163 of the Chilean Labor Code.
- In the event of dismissals, Article 161 (company needs/company re-organization) is the most commonly used cause.
- If this is the case, the employer would need to prepare a letter of notification to the employee, in which the cause is referenced and the effective date is indicated.
- This letter is either signed in person by the employee, or sent by certified mail to his home address. In parallel, an original is also filed with the Chilean Labor Ministry (“Inspección de Trabajo”).
- It is standard for the employee to be formally notified on his last day, with immediate effect.
- Once notified, the employer prepares the severance agreement (“finiquito”), in which the cause is detailed and the amounts are specified such as one month of notice, untaken vacation days, and severance (if applicable).
- This agreement should be signed within 10 days of notification, and this signature should occur either at the Chilean Labor Ministry or at a notary.
STATUTORY BENEFITS
- These are mandatory benefits as postulated by law
- These include annual leave, public holidays, sick leave, maternity leave, paternity leave, notice period, and severance pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Annual Leave |
|
Public Holidays |
|
Sick Leave |
|
Maternity Leave |
|
Paternity Leave |
|
Notice Period |
|
Severance Pay |
|
Social Security Benefits |
PAYMENTS AND INVOICING
- Taxes withheld by employers must be paid by the 12th day of each month for the preceding month’s payroll.
- Spouses are taxed separately on their personal income.
- Annual income tax returns must be filed in April for income received in the preceding calendar year.
- Tax withheld or paid monthly is credited against tax due.
- Any tax owed must be paid when filing the tax return.
- Balances in the taxpayers’ favor are refunded in May.
- Certain self-employed taxpayers, including independent workers, professionals and professional partnerships, must pay provisional monthly tax at a rate of 10% of gross monthly fees or receipts.
- The provisional tax is credited against final tax.
- Enterprises that pay fees to professionals or independent workers must withhold 10% from gross fees.
- The withholding is treated as a provisional payment by the taxpayer.
- Taxes withheld by payers of fees are credited against the provisional monthly payments.
EASE OF DOING BUSINESS
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Chile ranked 59th in the World in 2019 in terms of ease of doing business.
