INDIVIDUAL TAXES SIGNIFICANT DEVELOPMENTS
There have been no significant tax changes as relates to individual taxation during the past year.
TERRITORIALITY AND RESIDENCE
Chile taxes its citizens resident or domiciled in Chile on worldwide income. Domicile is physical presence with the intent to remain in the country. Residence is mere physical presence.
Foreigners working in Chile are subject to taxation only on their Chilean-source income during their first three years in Chile, after which worldwide income is taxed. In special cases, the three-year period can be extended.
Residence for tax purposes is acquired upon remaining six consecutive months in the country in one calendar year, or more than six months, whether consecutive or not, in two consecutive calendar years. If domicile is acquired before residence and the intention is to stay permanently or for a long period of time in Chile, normal taxation applies as of the date of entry into the country. While residence is being acquired, when
applicable, a flat 20% tax normally is levied.
GROSS INCOME
Employee gross income/Resident or nonresident foreigners are taxed on their salary, deducting social security contributions.
Such items as reimbursement of travel expenses and housing provided in the employer's interest, moving expenses and a reasonable relocation allowance are considered nontaxable income and are excluded from the tax calculation.
Such items as cost-of-living allowance, area allowances, car allowance, vacation travel expenses, and utilities are taxable.
Capital gains and investment income/There is no capital gains tax in Chile. Capital gains are taxed as normal income unless qualified by the law as being nontaxable income.
Investment income is also taxed as normal income. However, in the case of interest, only "real interest" is taxed , i.e., interest effectively paid less cost-of-living increase.
DEDUCTIONS
Business deductions/In general, all expenses incurred that are in the employer's interest, provided they are duly documented, are deductible.
Among these are travel and lodging expenses and documented entertainment. No blanket or standard deductions, such as representation allowances, are allowed.
Non-business expenses/Except for social security contributions and a percentage of certain investments in shares and time deposits, no non-business deductions are allowed.
Personal allowances/Personal allowances are minimal. However, all employees have a monthly tax credit of approximately US$5.48.
TAX CREDITS
A recent amendment to the Income Tax Law allows a tax credit in connection with income received for personal services rendered abroad by individuals resident or domiciled in Chile. Personal allowances are in the form of a tax credit(see above). No other tax credit is available.
OTHER TAXES
Social security taxes/Foreign individuals may be exempt from local social security payments, provided they belong to a foreign social security entity covering at least pension, disability, illness, and death. For foreigners who contribute to Chilean social security, amounts up to the equivalent of approximately US$1,758 monthly are subject to a 20.2% tax.
The excess is not subject to contributions.
In practice, nonresidents normally would not be subject to social security contributions in Chile. However, if they were, the same description as for a resident foreigner would apply.
As noted above, social security contributions are deductible in
determining taxable income.
Local taxes on income/There are no local income taxes to be paid, only central government taxes.
TAX ADMINISTRATION
Returns/Yearly tax returns need not be filed if the employee receives only salary income. If taxable income from another source is received, such as interest income, a yearly return must be filed.
Husband and wife must file separate returns if each has separate income. The tax year is the calendar year.
Payment of tax/In the case of employees, there is mandatory monthly withholding by the employer.
TAX RATES
Second category tax rates/Tax rates applied to this category are shown below.
TAX UNITS(NOTE 1) TAX ON PERCENTAGE
FROM TO FACTOR DEDUCTIONS
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