Taxation of international executives
Are there social security/social insurance taxes in your country/jurisdiction? If so, what are the rates for employers and employees?
|Type of insurance||Paid by employer||Paid by employee||Total|
In the case that the assignee does not meet the requisites of Law 18.156 or there is no totalization agreement in place, the assignee will have to contribute to the Chilean social security system. As a general rule employees working in Chile are subject to the payment of social security contributions, which are deducted from their gross salary with certain caps.
These contributions must be withheld by the employer and are paid as follows:
Pension fund administrator:
Public Health Institution:
All of these percentages are calculated over the gross salary with a cap of 80,2 Development
Units per month (approximately CLP2,300,000). Such mentioned cap of 80,2 UF is adjusted annually considering the variation of the real wage rate determined by the National Institute of Statistics.
In certain circumstances, a foreigner who decides to leave the country/jurisdiction may seek reimbursement of funds provided under point i), except management fees.
It should also be noted that AFP may request the respective new or different background information in order to comply with Law No. 18.156, authorizing the waiver or refund of the funds provided.
Finally, it is important to consider that the withdrawal of the compulsory contributions and agreed deposits is affected to the Second Category Tax (Art. 42 No.1 and 43 No. 1 of the Income Tax Law), and the return of the Voluntary Pension Funds Savings Account B is subject to the taxation of Article 42 of the Income Tax Law, so the AFP must withhold the corresponding withholding income tax.
According to Law No. 19.728, on unemployment insurance, employers and employees will be obliged to make contributions for unemployment insurance, even when qualifying for the exemption under the Act discussed above 18.156.
The aforementioned unemployment insurance will be financed with the following allowances:
Contribution of the Government, whose amount is determined according to the rules established by law.
The funds corresponding to the contributions of employees and employers should be deposited in the management company within the first 10 days following the month the compensation is paid.
In case that the labor contract is terminated, and to the extent that certain requirements are met, you may be entitled to withdraw the contributions made to the unemployment insurance. It should be mentioned that a foreign employee who decides to leave the country/jurisdiction, deciding to use this insurance, will be charged in the same way that a Chilean resident.
Finally, the employer must pay certain amounts for insurance of occupational accidents and occupational diseases, which correspond to 0.95 percent calculated on the monthly salary of the executive with a cap of 80,2 UF per month, approximately CLP2,100,000. Additionally, the employer must contribute 1.53 percent for insurance of survival and disability in the worker’s AFP, calculated also upon the same cap of 80,2 UF.
In certain circumstances, a foreigner who decides to leave the country/jurisdiction may seek reimbursement of part of the social security contributions made during their assignment. This reimbursement would not have any penalty associated with it, however it will need to pay applicable income taxes upon distribution.
Are there any gift, wealth, estate, and/or inheritance taxes in your country/jurisdiction?
Are there real estate taxes in your country/jurisdiction?
There is a local tax levied on Chilean property charged annually by the municipality where the property is registered. The amount of the tax is calculated by reference to the cadastral value.
Are there sales and/or value-added taxes in Chile?
Impuesto al Valor Agregado (IVA) or Value-added Tax. This tax is the main tax for the consumption of goods and services in Chile. It has a general tax rate of 19 percent.
A new tax is created for individual taxpayers (regardless of Chilean tax residency) who own real estate property located in Chile exceeding CLP400,000,000 (approx. USD485,000). For purposes of the threshold, the value of the property is based on the tax-assessed value determined by the Chilean Internal Revenue Service (Servicio de Impuestos Internos or “IRS”). The tax will be applied based on three tax brackets that vary from:
This tax will be added to the ordinary real estate tax that is payable on a quarterly basis and applies from 1 January 2020 on.
Are there unemployment taxes in your country/jurisdiction?
Unemployment income is paid monthly and is not subject to taxes or social security deductions. (Law 19.728).
Are there additional taxes in your country/jurisdiction that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.
The stamp tax applies for documents or act involved in money credit operation, for example provisory notes and bills of exchange.
The tax base is the amount granted in the document. The tax rate varies depending on the period of time between the document issue and its expiration, and it applies from 0.033 percent to 0.4 percent.
Is there a requirement to declare/report offshore assets (e.g. foreign financial accounts, securities) to the country/jurisdiction’s fiscal or banking authorities?
Yes, for those foreign individuals residents in Chile with more than of 3 years of residence in the country/jurisdiction are obligated to submit the Sworn Statement 1929 in order to report foreign investments and the corresponding incomes generated abroad. This obligation includes to Chilean individuals considered residents in Chile.
All information contained in this publication is summarized by KPMG Chile, the Chilean member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on Chilean income tax law Decree law n° 824..
© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.