To work legally in Chile, all foreign employees must have registered for and received a RUT (Rol Único Tributario) number. This number will effectively be their tax identification number and social security number, as well as a more general form of civic identification for bank accounts, buying a car, and more.
If you are still a tourist and not yet a resident, you can get a RUN card which is a tax ID number available to anyone so you can pay taxes on purchases such as autos or homes. However, this number will not be valid to open bank accounts or legally be employed.
With the lowest personal income tax rates of any of the OECD (The Organisation for Economic Co-operation and Development) nations, Chile maintains low rates of taxation while avoiding the reputation of a tax haven for money laundering and improper dealings. Residents and employees can expect to benefit from zero taxation by Chilean authorities on their foreign earnings for up to three years upon arrival.
Who has to pay income tax in Chile?
All residents of Chile are subject to income tax on their worldwide income. However, an individual taking up domicile or residency in Chile is taxed only on Chilean source income for the first three years, and this may be extended.
Persons without domicile or residency in Chile are taxed only on their Chilean source income.
A person is deemed to be domiciled or a resident in Chile if:
- It may be assumed from the activities that they wish to stay in the country on a permanent basis (domicile).
- If they spend more than six months in the country in a given calendar year or over a period of two years (resident).
Chilean source income is defined as income derived from:
- Goods or assets located within Chilean territory
- Activities performed in a Chilean territory
Chilean tax rates
For wage earners, the regular income tax is graduated between 0% and 40%. Business tax is 20% of net profits. Capital gains are taxed at a flat rate of 20%, while the inheritance tax is graduated from 1% to 25%. Chile does not tax pensions, retirement benefits, or social security from foreign countries, and you may be able to have your income directly deposited into your Chilean bank account. See our article on Banking and finances in Chile for more information.
IVA in Chile
The sales tax (known as IVA) is 19% and applies to many value-added items. While you may structure your affairs to minimise other taxes here, you won't escape IVA. It is included in everything you buy unless you buy on MercadoLibre.cl or at the local feria libre. Furthermore, if you make any purchases outside of Chile over USD 30, the customs agent will charge you 19% for IVA plus another 6% customs tax. Fortunately, there are some tax-free zones in Chile. Iquique in the north, Punta Arenas in the south, and Coyhaique in the south all have free trade zones where you can import items free from the IVA and import taxes.
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