Being the most stable economy of Latin America, Chile has grown into a popular destination for innovative business ideas and commercial expansion by well-consolidated and renowned foreign companies. With its globally recognized copper and salmon exports and distinguished wines, Chile offers many strong national sectors for keen investors. Moreover, because of Chile’s rise in tourism (2017 saw an all-time high in the number of tourists received), smaller cities are starting to grow, and opportunities are presenting themselves. The combination of these strong markets and new and attractive commercial opportunities are key attractions for foreign companies looking for additional sources of revenue abroad.
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 too 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 incorporate 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 a place where any third parties can request corporate information on any company formed within Chile. In case of any major corporate changes (Hecho Eventos Essenciales), 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.
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.
To learn more about the Chilean economy, the business opportunities to form a company in Chile, and how you might take advantage of these political shifts, please contact us today.