Chile has been the first among Latin American nations to join OECD, and therefore, it is among the region’s most stable and prosperous countries. Moreover, due to this, the business environment in Chile has become attractive to foreigners looking to engage in commercial dealings.
According to The World Bank’s ease of doing business report 2020, Chile ranks 59th among 190 countries. Therefore, setting up a subsidiary in Chile is not challenging as you might anticipate. The GDP of Chile touched 317.10 USD Billion—an all-time high—in 2021. It has since grown at 11.7%, which indicates that you can profit by setting up a subsidiary in Chile. Also, the taxation of foreign subsidiaries in Chile is relatively easy to grasp. This makes the country a lucrative hub for big companies setting up subsidiaries in Chile.
In foreign trade, international technological and economic corporations dominate the Chilean economy. Chile also exports wood, seafood, minerals, wine, and fruits, further driving GDP growth. Chile ranks 33rd on the list of the best countries for business globally.
Establishing a subsidiary here is the first step if you plan to expand your business in the country. This guide will help you set up a subsidiary in Chile and also get you to understand what the process is like.
What are the Types of Subsidiaries in Chile?
When you set up a subsidiary in Chile, it is part of any Foreign Legal Entity or Agencia. It is an establishment having no fixed obligations of any range for investors in the parent company. This parent company stands ruled as per foreign laws and is also open to any liability of its branch.
There are different types of subsidiaries that you can incorporate in Chile. While setting up a subsidiary business in Chile, you can select from the options below:
A parent company entirely owns a wholly-owned subsidiary. It has complete control over a wholly-owned subsidiary regarding board seats and voting rights to set up a subsidiary in Chile.
The parent company owns 1–49 % control over its stock in a partly-owned subsidiary. The former, however, has controlling votes in all major decisions.
Joint venture subsidiaries
A parent company forms a joint venture subsidiary when two companies come together and own half of the subsidiary’s stock. Both parent companies appoint half the board members and get one vote in all major decisions.
When you set up your subsidiary business in Chile, you can choose from many options listed above as to how you want to conduct business in Chile.
How to Set Up a Subsidiary in Chile?
Begin the process of setting up a subsidiary in Chile by registering the company with Registro Publico de Comercio and the Servicio de Impuestos Internos. The complete process for enrolment takes between 15–20 days.
The next step is to publish the social constitution and then create a bank account in Chile. The timeline for opening this account might run up to four weeks.
The other steps to set up a subsidiary in Chile are:
- Get the company name approved at the Chilean Company Registry
- Draft a brief description of the main work your company does
- Write all shareholder names and the company director-related details
- Create a registered office address for Chile
- Produce a Memorandum of Association and also Articles of Association
- Present them before the Conservador de Comercio
Of note is that any limited liability company will need a minimum of two shareholders plus one director. There is no compulsion for these people to be Chilean. They also don’t need to reside in Chile. You will need $1 as minimum share capital for initiating the setup of a Chile subsidiary.
Benefits of Setting Up a Chile Subsidiary
Setting up a subsidiary in Chile offers a slew of benefits.
- A significant benefit of setting up a Chile subsidiary is its legal ability to conduct operations in the country. You can also hire local workers.
- As a parent company and subsidiary, the two entities have limited liability over the former. This spares the parent company from pending litigation or related potential loss.
- This limited liability factor allows a Chilean subsidiary to conduct operations in line with its culture.
- The structural framework to set up a subsidiary in Chile enables you to establish a clear identity separate from your parent company. This allows the subsidiary to conform to Chile’s overall culture and business norms.
You may benefit more from outsourcing the Chile subsidiary with a global PEO. Multiplier helps set up the Chile subsidiary smoothly, enabling you to begin hiring employees and kick-start work sooner. Multiplier also acts as an Employer of Record, and you stand spared from being held liable for any compliance.
Documents to Prepare When Opening a Subsidiary in Chile
Any foreign company setting up a Chile subsidiary must get a tax number to be a foreign investor. To get this tax number, you must complete the following documentation:
- Power of attorney signed by the Principal, Director, Proxy, a company legal representative, or a foreign investor. The document needs signing before a public notary and must be legalized.
- A certificate for good standing or validity indicates the company’s legitimacy and states that it currently exists in the home country. The document must also display the names of all shareholders of this company.
- A duly apostilled certificate, per what the tax office grants. The certificate must be less than three months old.
- The incorporation deed or the bylaws of the company. The document must be certified by any public notary and apostilled.
Obtaining tax numbers for the foreign shareholder.
- Get all documents from the shareholder as per the list above.
- Translate these documents into Spanish. This takes up to a couple of days at the most.
- Notarize the documents and the translated version from any public notary. This legalization takes two or three days.
- Complete all the tax office-related forms and then take these legalized documents to the office to obtain the tax number for the foreign company. This takes only a day.
Overall, the time taken to complete the process is just six days.
Setting up the legal entity
After the foreign company tax number is in hand, you must understand the bylaws and proceed with various legal formalities.
- Draft and complete the incorporation deed. The process takes only one day.
- Send the deed to the public notary for company establishment through a formal deed. This process takes between a day or two at the most.
- Proceed with drafting the company extract. Again, this takes only a day to complete.
- Take this drafting extract to the Commercial Registry for registration. It may span between two and five days.
- Once this is registered, proceed over to the publication of the extract. The time for this is a day.
- Take these documents to the notary again for compilation and protocolization. This, again, takes around a day or two.
Overall, the time taken to complete the process is just 7–12 days.
Tax number for a new entity for setting up a Chile subsidiary
The final step is obtaining a tax number for your Chilean entity that is newly created. We will need to understand if this company will have to initiate activities immediately or if there can be a delay. This influences all matters related to accountancy and business license during the stage post-incorporation.
- Complete the tax office form and file all documents before the local tax office to obtain the new tax number.
The total time for this ranges between one and three days.
What Business Forms can Chile Subsidiaries Take?
A Chilean subsidiary is a separate legal entity formed under the Republic’s laws.
The parent organization owns 100% of the subsidiary and can set up a wholly-owned subsidiary. Companies can also set up partial subsidiaries if less than 100% of stocks are owned by the parent organization for setting up a Chile subsidiary. In collaboration with another company, there is another joint venture option wherein the parent company sets up a subsidiary where each owns half of the stocks.
When opening a subsidiary, pick a business form applicable to subsidiaries. Make sure you know the benefits and taxation around each type of subsidiary set up in Chile before sealing one.
Chile Subsidiary Laws
- Chilean subsidiary laws mention that all companies in Chile must have legal representation from a native of Chile or a foreigner with a valid visa. The lawyer will aid you in drafting the legalization of incorporation deed, and your legal representation will also become the company representative.
- You must submit all shareholder details. These can be corporations or even individuals of any nationality. You are allowed between 2 and 50 shareholders.
- Getting a Tax Identification Number or Rol Unico Tributario (RUT) is vital.
- According to Article 447, all foreign companies establishing an agency-type relationship in Chile must have an agent or legal representative. They help in establishing subsidiaries and legalizing them before the Chilean notary. They must furnish:
- The company’s proof of presence in its country of domicile
- Copy of all current company statutes
- General legal power that the entity grants to the agent. The power needs to be “precise and clear” in its statement that the agent shall work in the Chilean territory under the direct responsibility of the foreign entity. The agent will have broad faculties for executing actions as a representative of the principal company.
- Per Article 448, the agent must send to a notary a public deed stating the below pointers on behalf of the concerned foreign entity:
- Entity name and objectives
- A statement that this entity understands Chilean legislation and rules
- A statement that the entity assets are subject to laws in Chile
- Statement of obligation that the entity will maintain realizable assets for answering
- any obligations when in Chile
- A statement that the entity’s capital must be used on operations and the means and the date wherein the funds entered the Chilean agency.
- Main agency address
Post Incorporation Compliance
Any foreign entity can conduct trade in Chile once they set up a subsidiary.
You must ensure compliance with the following:
- Spanish version of all documentation from the parent company. These include articles of incorporation, all bye-laws, and a certificate of good standing.
- Legalization and execution of the power of attorney of the agent in Chile
- An extract of a public deed that the agent executes. This must be registered before the Registry of Commerce and published in the Official Gazette within 60 days of the public deed’s execution date.
Taxes on Subsidiaries in Chile
You must determine if the entity has a permanent establishment in Chile per the substance-over-form principle. This means that even if domestic requirements are not fulfilled, a taxpayer corporation might choose to be seen as a local PE for business expense deductions.
Corporate Tax for a partially integrated system
Corporate tax rate for small and medium enterprise system
SMEs or Full Integration Regime
10% for 2020-2022 and 25% from the year 2023
Resident companies stand taxed as per worldwide income. Non-domiciled companies stand taxed only as per the Chilean income. All final shareholders stand subject to a 35% rate applied using withholding on receipt of the taxable distribution.
Tax Incentives for Firms Setting Up a Subsidiary in Chile
Tax on corporate income was thoroughly creditable against the final tax in the SME regime. However, 5% is creditable as per the partially integrated regime. Foreign owners of any partially merged regime entity, also a resident of the double taxation treaty jurisdiction, also stand entitled to full credit.
The Chilean tax system contemplates all direct and indirect taxes wherein the income, and value-added tax or VAT is relevant to the businesses.
All companies carrying out business in Chile are subject to income taxes. However, with bilateral taxation treaties in place, the problem of double taxation stands negated. Chile has 37 Conventions signed for Avoidance of Double Taxation. Out of these, 33 Conventions are in force in 2022.
Other Important Considerations
When you initiate activities with a tax office, it signifies that you are actively engaged in trade. Therefore, you must file monthly declarations of tax. You might forget to take into consideration hiring an accountant. Unless you choose to hold on hiring any staff, you are liable for taxation because of trading activities.
Consider hiring a delegate to handle establishing a company’s Chilean subsidiary if your schedule doesn’t allow you to make the necessary travel arrangements.
How Can Multiplier’s Employer of Record Help You Hire & Expand in Chile?
Business expansion in Chile demands effort and money. Apart from this, you must stick to the country’s labor laws and follow all industry norms.
Multiplier offers the infrastructure to help employ talent in Chile without needing an employer to be present to start a subsidiary. This helps in testing markets and establishes teams in Chile. Multiplier takes care of all formalities such as employment contract generation, payroll, multi-currency payments, and contingent workforce management.