Tax Filing in Chile: What You Need to Know
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If you are looking to enter the Chilean market, or already do business there, it is worth having an understanding of tax filing in Chile. Because while it is highly likely your tax affairs will be handled by corporate accountants in Chile, having a grasp of the requirements needed to remain in good standing with local authorities will be beneficial to your business.
Chile is a prosperous high-income country, as highlighted by its gross national income, which reached $24,140 (all figures in USD) in 2019, after three decades of near-continuous growth. With a gross domestic product adjusted to purchasing power parity (GDP-PPP) of $502.8 billion in 2019, Chile saw foreign direct investment (FDI) inflows of $11.9 billion that same year. The South American nation is considered a beacon of free trade in the region, and maintains free-trade agreements (FTAs) with countries in the Americas, Asia, and Europe, through both bilateral agreements and regional associations.
Chile has traditionally enjoyed a stable institutional environment and a strong education system, having the highest rates of educational coverage in the region. It is also one of the most secure countries in the region, with the lowest rate of crime among Latin American countries.
Chile is also an important hub for entrepreneurship, ranked first among Latin American countries and number 19th in the world in the 2020 edition of the Global Entrepreneurship Index. Chile is also well known for its promotion of entrepreneurial culture, with the “Start-Up Chile” accelerator launched in 2010, described as “revolutionary” by Forbes in 2018.
Tax filing in Chile: submitting a monthly declaration
Any company that operates and generates income in the country must comply with statutory requirements related to tax filing in Chile to avoid penalties and fines that may put business operations or profitability at risk. As such, each company must fill out an F29 declaration form and submit it every month to the internal tax authority (Servicio de Impuestos Internos — SII).
Note that for companies employing an electronic sales invoice system, the deadline for submitting this form is the 20th of each month, while those using manual invoices have until the 12th of each month to submit. In addition, the F29 must be completed from the first month of the start of operations, even if the company didn’t perform any business transactions.
Some of the taxes listed in the F29 include:
Value-added tax (VAT): is applicable to companies whose commercial activity requires payment of VAT. This tax is equal to 19% of the total amount of sales.
Employee income tax: is paid on behalf of employees who earn more than an established threshold (which stood at approximately $903 as of February 2021).
Provisional income tax (PPM): is a monthly advance payment to offset the economic impact of the annual income tax payment. For new businesses, this tax equals 1% of gross sales in their first year.
Professional fees withheld: is a tax applicable to suppliers of professional services, and is equivalent to 10% of the amount billed for service provision.
Additional taxes: are also applicable to companies in the liquors, mining, or hydrocarbon sectors.
Making your annual tax declaration
Tax form F22 contains the information on the annual income of a company. According to tax filing requirements in Chile, the annual income generated by companies and individuals must be declared each year before the SII. With this information, the entity will determine how much money each company must contribute to State coffers.
Taxes in Chile are applied according to two broad categories:
Category I: This tax is applicable to companies in the commercial, industrial, mining, and service sectors. This tax corresponds to 25% of the company’s total net profits.
Category II: This tax is applicable to employees who earn more than the aforementioned threshold per month. Note that this tax is deducted directly from your wages.
Note that the F22 is automatically generated in the SII system and summarizes the information from the previous year. Those who carry out this procedure on the SII website will receive a proposal for a statement of results prepared by the entity based on the information provided by the companies in affidavits, and other sources of information linked to the SII.
Note that the SII has a coding system for affidavits according to the information they report, examples include:
- DDJJ 1887: Employee payroll and tax withholdings
- DDJJ 1835: Office rent
- DDJJ 1926: Income tax calculation
- DDJJ 1987: Professional fees and withholdings
Source: Biz Latin Hub
Post available in: English