Chile: Taxation Of Individuals

Last Updated: 24 September 1997

Chilean nationals who are resident in Chile are liable for Chilean taxes on their worldwide income. These taxes are principally the withholding tax on employment income, known as second category tax (impuesto de segunda categoria), and complementary tax (impuesto global complementario). Foreigners who are resident or domiciled in Chile are liable for the same taxes as resident Chilean nationals, but for their first three years in the country (sometimes longer if the tax authorities grant an extension), they are taxed only on their Chilean-source income. Thereafter, they are taxed on their worldwide income.

As a rule, nonresidents are liable for Chilean taxes only on their Chilean-source income. Chilean-source income is income derived from services rendered in Chile or assets located there. However, nonresidents are also liable for Chilean withholding tax on income from services rendered abroad to a Chilean resident individual or entity.

A foreigner becomes resident in Chile for tax purposes if he or she remains there for more than six consecutive months. Up to the end of the sixth month, the individual is regarded as nonresident; thereafter, he or she is resident. Foreigners acquire a domicile in Chile as soon as they show an intention of transferring their abode, family, and business center to Chile. This could occur on the first day that a foreigner enters the country.


Three main property regimes apply to couples who marry in Chile: the jointly owned property regime, the separately owned property regime, and the separately owned property regime with benefit sharing on its termination. A couple normally chooses one of these regimes when they marry. Foreign married couples who come to Chile are normally considered to fall under the separately owned property regime unless they choose to register under either of the other two regimes. Under the separately owned property regime, a husband and wife are taxed separately both on income from their personal work and on income derived from their property. Under the jointly owned property regime, the husband is taxed on his own income and income from the jointly owned property. The wife is taxed separately on income from her personal work and income from assets acquired with income from her personal work. Under the benefit-sharing regime, the husband and wife are taxed as in the separately owned property regime. Benefits transferred from one spouse to the other on the regime's termination are not taxable.

A child's income from property is generally taxed in the father's hands until the child reaches eighteen. Children are taxed separately, however, on their income from personal work and income from assets acquired with their income from personal work.


Table A sets out the current rates of second category tax and complementary tax. Both are paid at the same progressive rates, but second category tax is paid on a monthly basis, while complementary tax is paid on an annual basis. Thus, the bands of taxable income to which the various rates apply are expressed in terms of monthly tax units (MTUs) in the case of second category tax and annual tax units (ATUs) in the case of complementary tax. To determine from the table the tax payable, it is necessary to convert the bands of income expressed in tax units into Chilean pesos. The MTU is assigned a value in terms of pesos, which is adjusted monthly according to the consumer price index. (For April 1996, for example, the MTU is equivalent to Ch$22,144.) The ATU is equivalent to the MTU for December of the year multiplied by twelve. (If there is no inflation between April and the end of the year, the annual unit for 1996 will be Ch$22,144 times twelve or Ch$265,728).

                           TABLE A

Band of Taxable                    Rate of Tax on Band (%)
Income(MTUs or

        0-  10                                 -
       11-  30                                 5
       31-  50                                10
       51-  70                                15
       71-  90                                25
       91- 120                                35
      Over 120                                45

(a)  Second category tax is paid on  monthly taxable
     income based on its value in MTUs. Complementary
     tax is paid on annual taxable income based on
     its value in ATUs.

Individuals who are not resident or domiciled in Chile are liable for a flat-rate tax of 20% on their gross employment income (without any deductions) received for scientific, technical, or cultural services rendered in Chile or rendered abroad to a Chilean resident individual or entity. If an individual becomes resident or domiciled in Chile at some point during the tax year, the 20% tax applies to employment income earned up to that point, and second category tax at the progressive rates applies to employment income earned thereafter.

Income received by a nonresident foreigner from sources other than employment is normally subject to final withholding taxes (see "WITHHOLDING TAXES").


Taxable income for the purposes of the second category tax is gross remuneration from employment, less social security payments, lunch and transportation allowances, and a few other items. Benefits granted to an employee in the sole interest of the employer are deductible. Education grants for the employee are also deductible.

Taxable income for the purposes of the complementary tax is a resident individual's total income, including income subject to the second category tax (although a credit is available for tax paid, as described below). Allowable deductions are few. They include losses on the sale of shares and securities against similar income and a few other items. An individual who has only employment income, however, is liable only for second category tax, not complementary tax.

Foreign-Source Income

When foreign-source income is taxable, it is included in taxable income net of taxes paid abroad.

Dividend Income

Dividends received by a resident individual who holds no accounting records are included in the individual's income subject to complementary tax, but a credit is given against complementary tax payable for the first category tax borne on the profits out of which the dividends are paid.

Capital Gains

A resident or domiciled individual's capital gains are normally subject to complementary tax. Some gains, however, are subject to a final, separate tax of 15%. Gains from the disposal of real estate are exempt unless the individual carries on a real estate business or uses the real estate as a fixed asset in some other personal business.


Personal allowances are virtually nonexistent. Taxpayers are entitled to a credit equal to 10% of the MTU against their second category tax liability and a credit equal to 10% of the ATU against their complementary tax liability. Chilean tax borne on the profits out of which dividends are paid may be credited against complementary tax. A credit is also given against complementary tax for second category tax paid.

Deductions from the base for second category tax or complementary tax are allowed for certain investments in first-issue shares of publicly traded corporations and certain dividends and capital gains. Certain investments held over time grant the individual the right to a refund of the second category tax or to a deferral of the complementary tax, which must be paid back or paid, respectively, if the investments are later liquidated.

The information in this article was correct as of 9 July 1996.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Anthony Cook, Deloitte & Touche, Santiago, Chile on Tel: +56 2 638 4186, Fax: +56 2 639 1522.

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