Chile: Living There - Tax Issues

Country Rating  »

Home ›  Latin America ›  Chile ›  Living There

Living There

INDIVIDUAL TAXATION

Residents are taxed on their worldwide income.

Foreigners considered as Chilean residents are liable to tax on their Chilean-sourced income only, for their first 3 years of stay. After that period, they are subject to tax on their worldwide income. The said provision may be extended after the initial 3 year period.

INCOME TAX

Income tax is based on the Income Tax Act or the “Ley de la Renta.” Persons who are non-residents are taxed on their Chilean-sourced income. Income taxes, both corporate and individual, are divided into:

1. ‘Category Taxes’, which are payable on specific types of income, and
2. ‘Global Taxes’, payable on all income, which utilize the place of residence to differentiate tax rates.

Category Taxes

First Category Tax, FCT (Impuesto de Primera Categoria)

This tax is levied on business income, investment income, and any unearned income by the residents. The FCT is imposed at a single rate of 17% as of 2004.

Second Category Tax, SCT (Impuesto Unico de Segunda Categoria)

This is a progressive tax on salaries, fees, wages, and other forms of remuneration paid for personal services. It is calculated on gross salary as an employee and work compensations less social security payments. The tax rates range from 0% to 45% and the tax is withheld by the employer.

Global Taxes

Complementary Global Tax, CGT (Surtax or Impuesto Global Complementario)

This is a progressive tax assessed on individuals resident in Chile with respect to their worldwide income.

Both the Second Category Tax and Surtax are calculated on the basis of a regulated Monthly Tax Unit (MTU). As of December 2006, the MTU was CLP32,206 (US$71). The rates range from 5 to 40%. Income up to 13.5 Monthly Tax Units is exempted.

Professionals may either deduct well-evidenced expenses, or deduct presumed expenses up to 30% of their annual income, with a top limit of 15 MTU per annum.

CAPITAL GAINS TAX

Capital gains on the sale or transfer of real estate are not taxable if the seller is not habitually in the business of buying and selling properties.

Selling an apartment or flat owned for less than four years, and selling other immovable property within one year of acquisition, is considered habitual transactions. The gains are taxed like any other profit, at the standard FCT rate of 17%. The taxable capital gain is computed by deducting acquisition costs from the selling price. The acquisition cost is adjusted for inflation based on the consumer price index.

VALUE ADDED TAX (Impuesto al Valor Agregado)

Chile imposes 18% VAT on most goods and services. As a general rule, the sale of real estate is exempt from VAT but, the leasing of real estate is subject to VAT.

PROPERTY TAX

Real Estate Tax (Impuesto teritorial)

Real Estate Tax is levied on the fiscal valuation of property as assessed by the authorities, and is increased annually according to the Consumer Price Index. The tax rate is 1.2% of the fiscal valuation plus 0.025%. Real Estate Tax is due in four installments, in April, June, September, and November, calculated on the valuation in force at the time of payment.

• DFL-2 and Real Property Tax

DFL-2 properties are subject to Real Estate Tax. Property owners pay only 50% of the tax for:

• 10 years if the property area is between 140 sq. m. and 100 sq. m.
• 15 years, if the property area is between 70 sq. m. And 100 sq. m.
• 20 years if it is less than 70 sq. m.

Chile - more data and information

• Lawyers (attorneys) with property law practices in Chile

Your Comments

Post a comment