Dive into the Latin American Market! Why Chile is one of Latin America’s Hottest Destination for Starting a Business

By: Trevor Mason

Latin American has many emerging markets that are thriving centers of economic growth.[1] Among the top for doing business has been the country of Chile.[2] Conducting business in Chile has rivaled that of Mexico as to the ease of doing business.[3] Much of this is attributed to the “stable and prosperous upper-middle-class economy.”[4] Conversely, doing business in Chile does come with its challenges such as tight competition and high taxes.[5] Yet, the prosperity and benefits that can be present for business owners in cities such as the capital, Santiago, are too much to ignore the growing opportunities.[6]

Chile is the fifth largest economy in Latin America and has the highest GDP per capita in the region.[7] It has ranked first among its Latin American counterparts in competitiveness and economic freedom.[8] So what are some specific benefits of starting a business in Chile? As the leading country for the sale of copper and other natural resources,[9] the country has been able to build off this rich environment to create a stable influx of foreign investment that continues to grow the economy.[10] Moreover, the government has promoted business growth with favorable economic policies that has stimulated the Chilean economy.[11] Another feature of Chile that has shown it to be a promising destination for business is that it has been a member of the Organisation for Economic Co-operation and Development (OCED) since 2010.[12] Chile has also been seen as country with low corruption, ranking 24 out of 175 countries on the Transparency International’s corruption perception index (CPI), which is the second highest ranking of any Latin American country.[13]

There of course will be some risks associated with doing business in Chile. While the success Chile has seen through its exports, which is seen mostly as a positive feature of its economy, it is also a risk given the overreliance Chile has on its exports, especially copper.[14] This makes its economy susceptible to slowdowns.[15] Some of Chile’s corporate polices, permit laws, and tax system can also create complex problems and make the process of conducting business slower.[16] Also, corporate policies lack several requirements such as no requirement to disclose executive pay polices and in general lack behind international standards.[17] Registering property, obtaining permits are both very long processes in Chile with many requirements and sometimes dense record keeping requests.[18]

One of the hottest spots to start a business in Chile is the capital of Santiago.[19] Maybe the biggest reason why this is such a hotspot destination is that foreign investors can take advantage of a government-backed program called “Start-up Chile.”[20] This program allows for foreign investors to obtain “$40,000 and a six-month stay, plus free office space and guidance-so long as participants agree to mentor their Chilean peers.”[21] This program is hard to beat for those looking to get their foot in the door of foreign investment. To date, this program has drawn thousands of applicants from over one hundred countries.[22]

So how does one go about registering a company in Chile? There are several steps that are pertinent to having your company incorporated in Chile. This starts by getting the public deed of your company signed and submitted.[23] You must then have your Tax Identification Number (known as “Rol Unico Tributario”) and get your company registered with the “Registro de Comercio.”[24] Also, your company must be published in the Official Gazette of Chile and you must open a local bank account in Chile.[25] Finally, you must submit articles of incorporation to the Commerce Register of Chile.[26] Additionally, you need to have a number of typed information, including proposed company name, brief description of company activities, shareholders details, company director details, and Chile registered office address.[27]

As mentioned before,[28] the Chilean tax system can be difficult to navigate. If your company is based in Chile then you must pay your worldwide income tax to the Chilean IRS.[29] However, if your company is not based in Chile, but you do business in Chile you only have to pay taxes on the income earned in Chile.[30] Depending on the corporate tax structure chosen by your company you will pay 25% or 27% tax.[31] The two tax regimes are the “Attributed Income Regime” and the “Distributed Income Regime.”[32] Where things get complicated is depending on the tax regime there are one of fifty-seven different types of sworn statements that must be submitted to the Chilean IRS.[33] These will be pertinent features of the Chilean system to consider when contemplating doing business in Chile.

 

#Chile #business #Santiago #Latin America  #Mason


[1] The Top 5 Latin American Countries To Start a Small Business, My Latin Life, https://www.mylatinlife.com/blog/2017/10/19/the-best-latin-american-countries-to-start-a-business (last visited Mar. 26, 2020).

[2] Id.

[3] Id.

[4] Justin Kuepper, Benefits and Risks of Investing in Chile, balance (June 11, 2019), https://www.thebalance.com/how-to-invest-in-chile-1979047.

[5] Id.

[6] See Jill Krasny, 5 Things to Know About Starting Up In Santiago, Inc., https://www.inc.com/jill-krasny/global-cities-of-the-future-santiago-chile.html (last visited Mar. 26, 2020).

[7] Overseas Business Risk – Chile, GOV.UK, https://www.gov.uk/government/publications/overseas-business-risk-chile/overseas-business-risk-chile (last visited Mar. 26, 2020).

[8] Id.

[9] See Kuepper, supra note 4; Overseas Business Risk – Chile, supra note 7.

[10] See Kuepper, supra note 4.

[11] Id.

[12] See Kuepper, supra note 4; Overseas Business Risk – Chile, supra note 7. The OCED is an intergovernmental organization with 36 member countries around the world and seeks to stimulate economic progress and world trade. See OCED, https://www.oecd.org/about/ (last visited Mar. 24, 2020).

[13] Overseas Business Risk – Chile, supra note 7.

[14] See Kuepper, supra note 4.

[15] Id.

[16] See Top Challenges of Doing Business in Chile, TMF Group, https://www.tmf-group.com/en/news-insights/business-culture/top-challenges-chile/ (last visited Mar. 27, 2020) [hereinafter Top Challenges].

[17] See Kuepper, supra note 4.

[18] See Top Challenges, supra note 16. 

[19] See Krasny, supra note 6.

[20] Id.

[21] Id.

[22] See id. (noting 12,000 applicants from 112 countries and admitted 810 from 65 countries).

[23] How to Register a Company in Chile: Business Incorporation & Formation, BizLatin Hub (June 15, 2018), https://www.bizlatinhub.com/register-company-chile-business-incorporation-formation/.

[24] Id.

[25] Id.

[26] Id.

[27] Id.

[28] See supra note 16.

[29] See What is the Corporate Tax Process in Chile?, TMF Group (Mar. 13, 2019), https://www.tmf-group.com/en/news-insights/articles/2019/march/corporate-tax-process-in-chile/.

[30] See id.

[31] See id.

[32] Id. The Attributed Income Tax regime works as follows: “[I]ncome received or accrued by a company is annually attributed to its shareholders or partners, regardless of the effective dividend distributions. Companies are subject to a 25% corporate income tax. [T]his regime is available only to companies entirely held by Chilean individuals or non-residents (individuals or entities). Corporations (sociedades anónimas, or SAs) are excluded from this regime.” Id. The Distributed Income Tax regime works as follows: “shareholders or partners are taxed only on the actual distribution of dividends or profits by the company. Companies are subject to a 27% corporate income tax.

shareholders or partners are able to use 65% of the corporate income tax paid by the company as a credit against the withholding tax. The obligation to return 35%, will not be applicable to ‘additional tax’ taxpayers which are residents in countries with which Chile has signed an agreement to avoid double taxation, and to beneficiaries with remitted or distributed income as long as the ‘first category tax’ is deductible from the tax.”

[33] Id.

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