The LegalFácil Guide to Tax Law in Chile: Taxes on Individuals

The LegalFácil Guide to Tax Law in Chile: Taxes on Individuals

Individuals with tax liability are expected to file tax returns with SII on a yearly basis.

The tax year is the calendar year, ending December 31, and returns should be filed by the following April.

Filing can be done online at the SII website (http://home.sii.cl).  With the information it collects from diverse sources, the SII will actually present you with a tax form that has been filled in with the necessary information and calculations; 99% of the time, the tax return the SII presents to you will be correct, and you can simply accept it.  You can then print out the page saying that your tax return has been filed successfully.  If, however, the SII later requests to see certain documents, you must go in person to show them.

You can pay online either with a credit card or by direct bank transfer.

 

Tax Types and Rates

Taxes are levied on income, real estate, and inheritance and gifts. There is also a stamp tax on all credit contracts.  Capital gains are generally treated as income.

 

Income Tax 

Individuals must pay the second-category income tax, the global complementary tax, and/or the additional tax (these three income tax types are defined in the introduction.)

The second-category income tax and the global complementary income tax are only paid by individuals who are resident or domiciled in Chile.   The second-category income tax applies to employment-related income.  The global complementary tax applies to all other sources of income, including income from investments.  For the global complementary tax, individuals can obtain a credit for first-category income tax (explained in the previous chapter) already paid.

The additional tax applies to income received by parties who are not resident or domiciled in Chile.

The rates for the second-category income tax and the global complementary tax are progressive, from 0% to 40%.  The rate for the additional tax is 35%.

Deductions are granted for interest loan payments on bank loans for houses, as well as for social security contributions.

 

Other Taxes

In addition to income tax, businesses may be liable for the following taxes:

  • Social Security Contribution: Employees must contribute 7% of their salary for health insurance and 10% for retirement (AFP).
  • Real estate tax: Owners of real estate must pay a contribution.  Interestingly, for residential properties that are less than 140 square, there is lower tax for the first 20 years of the house’s existence, regardless of the value of the house.
  • Stamp tax: A stamp tax must be paid for all foreign loans, including credit card transactions.  The stamp tax has been going down in recent years; as of early 2013, it stands at 0.4%.
  • Inheritance tax: Heirs of estates can receive up to 20 million Chilean pesos in assets without paying tax; above that amount, the tax rate is progressive, from 0% to 25%, depending on the value of the assets.
  • Card transfer tax of 1.5% of the price of the transaction.

 

Zonas Francas

Chile is very popular among export-oriented businesses, as it does not impose any export tariffs.  In addition, there are two duty-free zones (zonas francas) in Chile where importers and consumers do not pay IVA: in Iquique, in the North, and in Punta Arenas, in the South.

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