Israel – Chile Tax Treaty

Business Activity in Chile

Chile’s stable business climate has attracted many international investors. The country maintains economic stability through its independent central bank, inflation-regulating laws, and a free-floating exchange rate.

Being one of the most open and integrated economies has enabled Chile to sign free trade agreements with over 50 countries. Notably, the country’s poverty rate has decreased to 13% in recent years. Furthermore, Chile’s participation in the Organization for Economic Co-operation and Development (OECD) makes it stand out as the first South American country to meet international standards and promote cooperation.

Chile is the largest producer and supplier of copper, lithium, and iodine and is a leading player in the fresh grapes, blueberries, plums, and dried apples markets. Tourism has been a significant factor in the economy since the mid-1990s. In 2010, according to the World Trade Organization, Chile was the eighth most popular destination in the Americas. Tourists are mainly attracted to Chile’s breathtaking natural landscapes, especially in the extreme regions of the country.

The export of livestock and agricultural products has significantly increased to Asian and European markets due to rising demand. Additionally, the forestry, fishing, and crustacean sectors have also registered remarkable growth in exports.

Bilateral Agreements between Chile and Israel

The following agreements were signed between Israel and Chile:

1. Agreement on Tourism Cooperation.
2. Agreement for Air Services Between and Beyond their Respective Territories

Applicability of the MLI

Both Chile and Israel have signed the “Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting” (MLI). Israel signed the agreement on June 7, 2017, and ratified it on September 13, 2018. Chile also signed the MLI on June 7, 2017 but ratified it on November 26, 2020.

Residency for Tax Purposes in Chile

Residence of an Individual

An individual is considered a tax resident in Chile if the individual stays for a continuous six months within a year or more than six months, whether consecutive or not, in two consecutive calendar years.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

Companies that are incorporated in Chile are regarded as residents of Chile for tax purposes.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Chile

The Chilean Tax Authority is called Servicio de Impuestos Internos (SII)

Income taxation:0% to 35,5%

Taxation of companies and branches: 25 % or 27%

VAT: 19%

Capital gains tax: 15%

Withholding Tax

Inheritance and Estate Tax in Chile

In Chile, the inheritance and estate tax is applied to all transferred assets after the death of an individual. The 25% tax should be paid by heirs and beneficiaries to proceed with the transfer of the assets.

Relocation to Chile

Chile’s economy is positively influenced by its highly skilled professionals with competitive costs. As Latin America’s top educational system, Chile is also internationally recognized for its innovative entrepreneurial ecosystem.

Chile has all the qualities necessary for renewable energy to thrive. The northern areas are yearly exposed to 4,000 hours of sunshine and receive the highest solar radiation on Earth. The country can effectively exploit wind energy, with existing wind farms in Antofagasta, Coquimbo, Biobío, Los Lagos, and Magallanes. The coastline, which extends over 4,000 kilometers, provides ample room for the development of ocean energy. The central and southern areas have rivers capable of producing 11 GW of hydroelectric power. The Andes mountain range is rich in geothermal energy, and the southern areas have rich biomass fuel.

In addition, Chile offers a variety of unique experiences. Be the stargazing in the world’s driest desert with the cleanest skies, ancient glaciers at the southernmost tip of the planet, or forests and lakes at the foot of imposing volcanoes, the country has a lot to offer. Chile is the perfect destination for conventions and events, inviting you to develop projects and enjoy the ultimate adventure in Latin America. It is one of the most attractive countries for individuals or businesses looking to relocate.

Furthermore, Chile has the third-largest Jewish community in South America, following Argentina and Brazil, with around 16,000 Jews. The Chilean Jewish community, founded in 1535, has more than 50 institutions, primarily located in Santiago.

Real Estate Taxation in Chile

The Real Estate tax is determined by the official appraisal of the property. The constant rate is 1.4% for non-farming real estate and 1% for farming real estate, with a few of the properties being exempt from this tax.

Moreover, there is a graduated surcharge on properties if the total value of all the taxpayer’s properties exceeds about USD 530,000.

Transfer of Funds from Israel to Chile

According to section 170(a) of the Israeli income tax ordinance, any transfer of payment to a non-Israeli resident is subject to 25% of withholding tax. The tax authority can allow, under certain circumstances, to reduces or dismiss the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.

In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our office handles the requirements of the foreign banks, such as an accountant’s approval regarding the payment of taxes and examines additional actions required in light of the uniform standard of CRS between the countries – automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.

The banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Chile

Most common types of Chilean business entities are:

Limited Liability Company

This partnership allows for flexible administration and representation. In this type of company partners can be nationals or foreigners, individuals or legal entities, with a minimum of two and a maximum of fifty partners. They are only liable for the capital they contribute. Partners’ rights are represented by quotas, not shares, while decisions must be approved by all partners.

Natural Person

In Chile, an individual can initiate a business as an individual under the Individual Entrepreneur. This implies the individual is the one in charge of the business, liable for all debts, and therefore it is possible to use private property to make up for the business debts. The individual assumes all rights and obligations of the business, which does not constitute a separate legal entity and uses the personal name. The income falls under the first tax category, and the individual is personally responsible for all business debts and obligations.

Commercial Partnerships

Commericial companies are created for the purposes of commercial activities as defined by the Code of Commerce. In these partnerships, all managing partners have the right to manage the company, either individually or through delegates. They can appoint an administrator either in the corporate deed or later. The general partners whose names appear on the corporate deed are debtors and creditors alike for all company obligations, and this joint liability cannot be waived.

Incentive Laws in Chile

Most important incentive laws in Chile are:

Research and Development: Chilean legislation offers tax incentives for research and development investments, covering up to 35% of the expenses. Companies can use this credit for reinvestment, hire a third party to manage it, or allocate it to registered outsourced centers.

Remote Areas: Investors who establish companies in remote areas can access various tax benefits, including a 10% to 40% tax credit on their investment, a 17% tax bonus on employment wages (for small and medium investors with revenue less than $1.5 million), and a 20% deduction on investment capital.

Free Trade Zones: Chile’s free trade zones in provinces such as Arica y Parinacota, Tarapacá, Magallanes, Tocopilla, Isla Navarino, and Tierra del Fuego offer significant tax benefits. Goods and imports are free of all customs duties and taxes in these zones, and sales of them elsewhere in Chile or overseas are also exempt. These zones also distribute businesses operating in them from corporate tax.

Double Tax Treaties Chile