As one of the most robust economies in Latin America, Chile has become a sought-after hub for pioneering business ventures and corporate expansion, drawing the interest of well-established foreign enterprises. Renowned globally for its copper and salmon exports, as well as its exceptional wines, Chile boasts thriving national sectors that present compelling opportunities for discerning investors. The surge in tourism has bolstered Chile’s economic landscape and sparked growth in smaller cities, creating a fertile ground for emerging opportunities. The convergence of these resilient markets and the emergence of new and enticing commercial prospects make Chile an attractive destination for foreign companies seeking additional revenue streams abroad. Explore Corporate Compliance in Chile today.
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Corporate Compliance in Chile – Legal Entities in Chile
Defining the best way to enter one of the Chilean markets requires knowledge of the different kinds of legal entities that Chile has available. However, all Chilean legal structures have some similar statutory requirements which must be adhered too. To ensure your company complies with the local and national authorities, certain procedures must be followed when setting up a company in Chile. Personalized support and counsel from a local law firm can ensure that your company remains 100% compliant.
Chile has developed several legal structures in which companies may be organized to undertake activities in the country, from non-profit organizations to stock corporations. A foreign company may incorporate a legal entity in one of the following structures:
- Corporation (Sociedad Anónima- ‘S.A‘)
- Simplified Corporation/Company by Shares (Sociedad por Acciones- ‘S.p.A‘)
- Limited Liability Company (Sociedad de Responsabilidad Limitada- ‘S.R.L‘)
- Branch Office of a Foreign Company (‘Sucursal’)
Corporate Statutory Requirements in Chile
A popular type of corporation is the Simplified Corporation, also known as the Company by Shares. This type of legal entity allows for 100% foreign ownership and can be incorporated with a single shareholder; being either a natural or legal person (an individual or a company). This structure is very popular because it allows the smooth flow of capital in and out of the company. As a result, foreign investors will tend to prefer this type of structure.
Once duly incorporated, all legal entities in Chile, including the Simplified Corporation, must meet some minimum statutory requirements to ensure corporate compliance. These are not very complex nor difficult to adhere to granted you have a comprehensive understanding of how the requirements function. However, it is important that all companies meet these requirements while engaging in commercial activities in Chile.
All companies in Chile must appoint a legal representative; this appointment must be completed during the company incorporation process. This legal representative is usually a local lawyer who has an in-depth understanding of corporate compliance and is able to be the legal face of the company before all governmental authorities. Some examples of the roles and responsibilities of the legal representative include:
- Opening and managing the corporate bank accounts in Chile
- Managing rent contract negotiations and signings.
- Signing commercial contracts on behalf of the company.
- Meeting with the governmental authorities.
Professional Note: In Chile, the Company Legal Representative must be a local Chilean, or a foreign with the legal right to reside/work in Chile.
In order to successfully incorporate a local legal entity in Chile, a fiscal address must be registered. This is the official registered address of the company and is used for all official communication and correspondence. The tax authorities require this and its compliance is mandatory, in fact, during the company incorporation process, the fiscal address will need to be stated in the company bylaws in order for the company to be legally registered.
All companies in Chile, as with companies in all other regions in Latin America, must prepare and lodge regular tax declarations with the national and/or local tax authorities. Moreover, Chilean companies need to meet specific tax requirements, these include:
- Income Tax Payments: These payments are due monthly and are mandatory for all companies.
- Value-Added Tax (VAT): VAT is a consumption tax incorporated into the value of goods and services whenever value is added at any step of the supply chain. In Chile, this VAT is taxed at 19% on top of the price of a good or service.
Every Chilean company must register with the Commerce Custodian. The necessity to register before the Commerce Custodian relates to the government’s commitment to providing awareness and notification to potential interested third parties and society at large. This registration allows for any person to review and analyze these public records – driving transparency.
The Commerce Custodian is where any third parties can request corporate information on any company formed within Chile. In case of any major corporate changes (Hecho Eventos Essentials), the Commerce Custodian needs to be notified. These changes can include:
- Change of company owners
- Mergers or acquisitions
- Change of company share capital
- Change of company legal representative
- Change in registered fiscal address
In case a company does not correctly register before the Commerce Custodian, the company will face legal problems, which can result in the company being de-registered and closed down.
Annual Shareholders Meeting
Structure: Obligation – deadline – object
In accordance with Chilean corporate governance norms, specific entities are mandated to hold annual shareholders’ meetings, a practice that is particularly significant for corporations (Sociedades Anónimas – S.A.). Stipulated under the Chilean Corporations Act (Ley de Sociedades Anónimas), these sessions serve as a platform for key corporate deliberations, such as the ratification of financial statements, decisions on profit allocations, and the election of board members (Article 67 of Law No. 18,046 on Corporations). Although Simplified Corporations (Sociedad por Acciones – SpA) and Limited Liability Companies (Sociedades de Responsabilidad Limitada – S.R.L.) may not be under the same statutory mandate for annual general meetings, they are often required to convene periodic assemblies as outlined in their internal bylaws or when summoned by partners or shareholders to address major strategic or financial directives. It’s imperative for companies to adhere to these governance requirements to maintain corporate compliance and uphold transparency with stakeholders (Article 58, Law No. 18,046 on Corporations).
Ultimate Beneficial Owner Registration
Structure: Obligation – deadline – object
In light of international standards and regulatory expectations, Chile has been advancing its legislative framework to enhance transparency in the financial and corporate sectors. This includes the contemplation of implementing a registry for Ultimate Beneficial Owners (UBOs) to fortify its stance against money laundering and the financing of terrorism. Such measures align with the recommendations of the Financial Action Task Force (FATF), which advocates for the clear identification of UBOs to prevent misuse of corporate structures for illicit purposes. Although as of the latest updates prior to April 2023, a comprehensive public UBO registry was not yet in place, Chilean companies are expected to maintain accurate information about their ownership and control structures. This is particularly relevant for due diligence processes under Law No. 19,913, which establishes the Anti-Money Laundering and Terrorist Financing Prevention System, and Law No. 20,393, which sets forth corporate criminal liability for money laundering, terrorist financing, and bribery. The enactment of a UBO registry would require companies to declare their beneficial ownership information, enhancing the country’s ability to tackle financial crimes and increasing corporate transparency for foreign investors and regulatory bodies alike.
Common Questions on Entity Legal Compliance in Chile
Based on our extensive experience these are the common questions and doubts of our clients when looking to operate within the country
The following are the most common statutory appointments for Chilean legal entities:
– An appointed Legal Representative who will be personally liable, both legally and financially for the good operation and standing of the company. This should be a local national or a foreigner with the right to live/work in the country.
Yes, a registered local Fiscal Address is required for all entities in Chile to receive legal correspondence and Governmental visits.
Biz Latin Hub can help you start your operations in Chile
Before expanding your operations to Chile, it is vital to have a sound understanding of your corporate obligations in the region. While the opportunities are great, so are the risks for those who do not comply with local Chilean law. To ensure compliance, you have to fulfill certain tasks, which include the following:
- Appointing a legal representative for the company
- Registering a fiscal address for the company
- Complying with local tax regulations
- Registering with the Commerce Custodian
Therefore, working with a trusted legal and accounting firm enables your company to comply during its Chilean expansion. Biz Latin Hub was established in 2014 to assist foreign companies to successfully set up their operations abroad.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.