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10.1. Specific Incentives

Chile provides incentives for foreign investment, and for investment in certain regions and technology.

The Foreign Investment Statute

Under the foreign investment statute, foreign investors may enter into a contract with the Chilean State in order to receive certain benefits when investing in Chile.

The minimum investment is generally USD 5 million and the incentives the investors are entitled to include:

  • A non-discriminatory legal regime;
  • The option to freeze the withholding tax rate at 42% for up to 10 years. The election can be waived at any time, but may not be reapplied; and
  • The option to freeze the rates of value added tax and import tariffs on capital goods at the effective rate at the date of investment. The rate freeze applies during the period authorized for carrying out the investment.

When making an investment of USD 50 million or more in industrial or extractive projects, the option to freeze tax rates is extended to 20 years. In addition, the investor may also lock into existing practices on matters such as asset depreciation, carry-over of losses, and the tax treatment of start-up expenses.

Loans or credit facilities associated with the investment cannot represent more than 75% of the total amount invested in Chile in order for the incentives to apply.

The Tax Reform Act enacted by Chile in September 2014, proposed to abolish the Foreign Investment Statute effective 1 January 2016 and replace it with a new regime for foreign investments. However, subsequent amendments to the tax reform Act enacted in 2015, extended the enforceability of the Foreign Investment Statute for 4-years – i.e. from 2016 to 2020. Under this transition period, the fixed rate will be 44.45%. Companies with existing contracts under this statute will be able to keep the benefits for the applicable period or sign new contracts during the transition period.

Under the new regime, which is effective 1 January 2016, foreign investors are entitled to the following key benefits:

  • Access to the exchange market once they have fulfilled tax obligations;
  • Free repatriation of both capital and profits, once tax obligations are met; and
  • Exemption from value-added tax on capital asset imports, subject to conditions.

Regional and Technology Incentives

Chile provides certain incentives for investments in certain isolated geographic regions and new industries. The incentives come in the form of grants and tax rebates, and are generally available equally to both local and foreign investors.

Chile also has a special support incentives program of for investments in high-technology projects. The program covers projects that introduce new methods in traditional processes and new technology-based services, and for R&D projects with a high commercial impact.

Both foreign and local investors investing in projects with a minimum value of USD 1 million can apply for support under this program. Support includes grants towards pre-investment studies and the acquisition of fixed assets and staff training.

For regional investments in remote areas (the regions of far north and south of Chile) various incentives are provided including:

  • Tax credit for specific investments (between 10% and 40% of the amount invested in the region can be set off against corporate tax);
  • Subsidized labor costs; and
  • Investment subsidies.

The tax incentives applicable to Extreme Zones in the north and south of Chile are now extended to 2035.

Business Platform Companies

The business platform regime has been eliminated from 23 November 2017, however, taxpayers that are already part of the regime were able to apply it until 31 December 2021.

Business platform companies were joint-stock companies formed for the purpose of investing from Chile in essentially foreign holdings or the provision of services to foreign group companies. Such companies were deemed to be non-residents and were, therefore, not subject in Chile to tax on their foreign earnings. They were, however, subject to the 35% additional withholding tax on income paid to them from Chilean-sources.

Effective from 1 January 2022, companies formerly subject to this regime will be taxed as resident companies and will be subject to Chilean income tax on their worldwide income.