How to Start a Business in Chile While Being a Foreigner [Guide 2023].

Steps to Create a Company and Invest in Chile as a Foreigner

About Us

NSS Attorneys Limited is a law firm that specializes in providing services and legal advice efficiently and with fixed prices to entrepreneurs and companies both domestic and foreign, providing comprehensive advice throughout the process of investing and raising capital in Chile. We have experience creating foreign companies from 5 continents and more than 20 countries.

Our firm has vast experience in its specialized area in incorporating and legally representing foreign companies, carrying out all the necessary procedures for their expeditious operation in the country.

We invite you to invest in Chile with our guide updated to February 2023 that we make available to you.

Chile as a Business Location

No matter the size or line of business of your company, investing in Chile offers a stable environment in terms of its innovation and economic environment, with ample projections of economic growth and controlled inflation. This makes it attractive for foreign investment.

There is in our country a legal environment for the protection of foreign investments, protected by international treaties, independent of the process of changing the Constitution that the country is currently facing.

PRO TIP: A law is being debated in Congress that reduces the corporate tax rate for Small and Medium Enterprises to 10% by the year 2023, on the profits generated by the company, among other important tax benefits.

This allows foreign capital to operate as any domestic company would, without discrimination.

Naturally, the structure of each business will depend on its unique characteristics, which must be analyzed on a case-by-case basis.

This manual seeks to provide practical guidance on the key legal aspects of investing in Chile.

If you wish to incorporate your company in Chile, and designate us as representatives, supporting you in the whole process, without the need to travel to Chile, send an email explaining your project to our partner, expert in foreign investment and international tax law, Esteban Sáez: esaez@nss.cl, or send him a Whastapp to +569 9010 2490, we will be happy to help you.

Supporting companies in their internationalization processes is our passion.

We also invite you to visit our international services page and our Doing Business in Chile where we explain in depth various matters related to foreign investment in our country.

How to Start a Business in Chile Being a Foreigner

1.- Obtaining RUT as a Foreign Investor.

All persons seeking to invest in Chile will be subject to pay taxes, so it is necessary to assign them a Unique Tax Number (RUT) also known internationally as TAX ID.

To obtain a RUT as a foreigner - person or company - it is required to grant a power of attorney to a Chilean person.

This power of attorney is specifically to represent the Investor before the Internal Revenue Service.

Such power of attorney may be executed abroad or in Chile. If subscribed abroad, it must be apostilled and physically sent to Chile.

In case it is a company that is going to invest in Chile, it is also necessary to present the following documents:

• The company's bylaws
• A certificate of Good Standing or Existence of the company
• Our KYC Form Information about:
  • Who are the current shareholders of the company.
  • Percentages of participation in the company.
  • Tax identification number of the shareholders.
  • Country of residence Tax.

It is very important that all documentation must be submitted duly apostilled or legalized, and must be no more than 60 days old.

Documents issued in a language other than Spanish or English must be translated by a competent authority and apostilled.

With these documents, the investor's representative must file form 4415.1 with the SII to obtain a RUT for a foreign investor. obtaining a RUT for foreign investor..

With which Visa can I become a Legal Representative?

As a general rule, in order to be a legal representative you must have a Definitive Visa.

In case the investors act through representatives or agents, they must have domicile or residence in Chile. In the case of foreign agents, they must also have a residence permit that allows them to carry out activities in Chile.

Normally, if the legal representative is not a national or does not have the necessary permit to represent companies, he/she will experience certain limitations, the most common being the limitation to open bank checking accounts with local banks and not be able to represent the company before the Internal Revenue Service. Review circular 31 of 2014 of the SII.

Our recommendation at the time of Investing in Chile is to appoint someone of absolute confidence or expert lawyers in the legal representation of companies that act by instructions of the principal (the investor in this case) at the time of subscription of acts and contracts.

Incorporation of a Company or Commencement of Activities as a Permanent Establishment

There are many ways in which companies can organize themselves in the country to initiate activities.

From non-profit organizations to corporations with stock market presence. Local legislation seeks to recognize different structures for different needs that may arise.

2.1 Incorporation and types of companies

Once we already have a RUT as a foreign investor and we are in the SII database, we can proceed with the incorporation of a company.

This is done by signing a public deed of incorporation. The bylaws regulate the way in which the corporation is administered and the capital contributed by the shareholders, among others.

PRO TIP: If you seek to carry out the procedure without traveling to Chile, the power of attorney must grant the power to incorporate a company in Chile. This way your representative will sign the incorporation of the company in your name and on your behalf.

PRO TIP: It is also possible to acquire all the shares of a company already incorporated in the country. Please contact esaez@nss.cl or whatsapp +56990102490 for the possibility of acquiring a company ready to operate, with a bank account.

Generally a foreign company can choose within one of the following types of organization:

• Public Limited Company
• Joint Stock Company (Recommended)
• Limited Liability Company
• Other

As a general rule, it is not mandatory to choose any of these particular structures to do business in the country.

The above, except for certain business areas, such as the banking industry, investment funds, among others.

It is important to take into account aspects such as administration and corporate governance, share transferability, among others. These criteria will help us to choose the appropriate corporate structure.

Permanent Agency.

A permanent agency is one that is incorporated in Chile but maintains its domicile abroad, through its parent company. Conducting its business through an agency or branch in Chile, without incorporating a new company.

In certain cases, due to the application of agreements to avoid double taxation, it could be the most convenient structure.

This is because it allows paying taxes only in the country where the company is headquartered.

3.- Tax Strategy

Once the RUT has been obtained and the most convenient corporate structure has been chosen, it is recommended to request a report on how the future profits generated by the company will be taxed.

It is also important to determine what tax will be paid on the eventual sale of the property (shares or rights) of the company.

3.1 Tax on Profits Withdrawn from the Company.

Profits generated in Chile by foreign individuals are generally subject to an additional flat tax rate of 35%.

When a company distributes dividends or profits to its foreign shareholders, it is obliged to withhold 35% of such dividend through Form 50 available on the Internal Revenue Service's website.

3.2 Corporate Tax

In Chile the corporate tax amounts to 25% of the income generated in a year by the company. This in case it is a "Small and Medium Company" with an annual turnover of less than approximately USD 2.7 million per year.

Once the partners obtain dividends from the company (withdrawal of profits), the company is obliged to withhold the difference between the corporate tax and the additional tax rate of 35%.

It is important to determine which benefits I can apply depending on the country from which I am going to invest in Chile, applying the agreements to avoid double taxation that Chile has signed with a large number of countries.

By application of an international tax treaty, it may be more convenient to come from one country than from another.

3.3 Tax on the sale of the Company's Property (Capital Gains).

The sale of the company's shares can also generate a profit for the practitioner.

To calculate the profit generated, the value of the contribution made at the time of incorporation of the company must be deducted from the amount of the sale of the company.

The higher value generated is subject to tax at a rate of 35%.

Practical planning case: If we apply agreements such as the one signed between Chile and Spain, the tax rate for the sale of the company's property is subject to a single rate of 16%.

In other words, for the same transaction, depending on the country of residence of the parent company, I will pay 19% less tax.

As long as you are aware of this benefit and how to apply it.

This makes Spain one of the most convenient countries to invest in Chile.

4. Publications in public records

Once the corporate structure and tax strategy have been defined, the investor's representatives will sign a company charter.

This deed defines the form of administration, capital, domicile, line of business, among other precepts of the parent company.

The articles of incorporation of the company must be notarized before a notary public for its registration.

In case of incorporation of a permanent establishment, they must also expressly declare that:

1. The agency is aware that Chilean law governs its business and contracts entered into in the country.
2. It will maintain sufficient liquidity to meet its obligations and taxes.

A summary (extract) of the public deed must be published in the Official Gazette and registered in the Commercial Registry within 60 days.

It is also necessary to represent the Foreign Agency in court and any other action they wish to take.

5.- Tax regularization of the company.

Once the public deed has been obtained, published in the official gazette and registered in the Commercial Registry, it is necessary for the legal representative of the company to appear before the Internal Revenue Service (Servicio de Impuestos Internos).

The following documentation must be submitted in order to obtain the RUT and start activities:

• Public Deed of incorporation of the Permanent Establishment, publication in the official gazette and registration in the commercial registry.
• Certificate of good standing, bylaws and Apostilled Power of Attorney granted by the parent company abroad.
• Lease contract, certificate of ownership or assignment of use of real estate in Chile.

With these documents, it is necessary to file Form 4415 for the commencement of activities. This form informs the economic activities that the company will carry out in the country.

6. Electronic Invoicing and Monthly Taxes.

Once the company has completed all the above steps, it must prove its domicile in the country through a lease or sublease contract.

Once this is done, the company is authorized to issue invoices and other tax documents in Chile.

The important thing now is to file the monthly tax returns in due time and form. It is important to seek the advice of an accountant to make such filings in accordance with local legislation.

Conclusions

The incorporation of a foreign company in Chile has become a simple procedure, if we add to this fact the tax benefits such as the corporate tax reduced to a rate of 10%, Chile is presented as an excellent option to invest in Latin America.

The key is to have quality representatives and advisors in the country, with experience in the use of all tax and corporate benefits that can be accessed.

At New Society Solutions we specialize in representing foreign companies seeking to expand their business horizons in our country. We have represented companies from all corners of the world, such as Iceland, United States, Mexico, Colombia, Argentina, among many others.

If you have doubts, questions or require advice to incorporate your company in Chile, please do not hesitate to send an email to esaez@nss.cl or talk by Whatsapp to +56990102490.

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