Income tax in Chile

Taxation Researcher | July 23, 2019

INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. Married couples are taxed separately but the husband reports the income derived from marital community properties.

Chile Santiago properties

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

INCOME TAX

Income taxes in Chile are divided into two categories: category taxes and global taxes.

Category taxes are payable on specific types of income.

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 First Category Tax (FCT) is imposed at a single rate of 27%.

For business and professional income, income-generating expenses are deductible when computing for the taxable income. Alternatively, taxpayers may choose to deduct 30% of the gross income as standard deduction for income-generating expenses.

The tax rate was 25% for tax year 2016. The tax rate is 25.50% for tax year 2017. The tax rate is 27% for tax year 2018.

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 are payable on all income. This tax utilizes the place of residence to differentiate tax rates.

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

This is a progressive tax assessed on resident individuals 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 2011, the MTU was CLP39,021 (US$76). The rates range from 5 to 40%. As of June 2012, the MTU was CLP39,689 (US$77). The rates range from 5 to 40%.

INCOME TAX

MONTHLY INCOME, (MTU) TAX RATE
Up to 13.5 MTU nil
13.5 MTU - 30 MTU 5% on band over 13.5 MTU
30 MTU - 50 MTU 10% on band over 30 MTU
50 MTU - 70 MTU 15% on band over 50 MTU
70 MTU - 90 MTU 25% on band over 70 MTU
90 MTU - 120 MTU 33% on band over 90 MTU
120 MTU - 150 MTU 37% on band over 120 MTU
Over 150 MTU 40% on MTU over 150 MTU
Source: Global Property Guide

The ATU for tax year 2019 is CLP580,236 (US$879). The ATU for tax year 2018 is CLP572,172 (US$867). The ATU for tax year 2017 is CLP563,664 (US$854). The ATU for tax year 2016 is CLP554,196 (US$840).

CAPITAL GAINS
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.

Chile apartments for sale

Selling an apartment or flat owned for less than four years, and selling other immovable property within one year of acquisition, is considered as habitual transactions. The gains are taxed as any other profit at the standard FCT rate of 27%. The taxable capital gain is computed by deducting the acquisition costs from the selling price. The acquisition cost is adjusted for inflation based on the consumer price index.

The tax rate was 25% for tax year 2016. The tax rate is 25.50% for tax year 2017. The tax rate is 27% for tax year 2018.

VALUE ADDED TAX (Impuesto al Valor Agregado)

Chile imposes 19% 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 Chilean property annually, payable by the property owners. The tax base is the cadastral value of the property, and an exemption is granted for properties whose cadastral value does not exceed a certain limit. The tax rate is 1.2% for urban properties and 1% for rural properties.

For residential properties, the tax rate is 0.98% on part of the cadastral value not exceeding a certain limit and 1.143% on the remaining value. Surcharges may apply.

CORPORATE TAXATION

INCOME TAX

First Category Tax, FCT (Impuesto de PrimeraCategoria)

This tax is levied on business income, investment income, and any unearned income. The First Category Tax (FCT) is imposed at a single rate of 27%.

For business and professional income, income-generating expenses are deductible when computing for the taxable income. Alternatively, taxpayers may choose to deduct 30% of the gross income as standard deduction for income-generating expenses.

The tax rate was 25% for tax year 2016. The tax rate is 25.50% for tax year 2017. The tax rate is 27% for tax year 2018.

 

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