The Chilean government for many years has created policies encouraging foreign investment, enhancing an open market economy and entrepreneurship. In the Global Competitiveness Report for 2017-2018, Chile ranked 33rd among other 137 countries. The local authorities realized that foreign investment is a key contributor to sustained economic growth in Chile, and therefore ratified 26 international agreements regarding double taxation with 64 countries. Besides the stable political situation and business-friendly policies that the country has embraced, one reason for Chile´s economic success is without a doubt its abundance in natural resources. Chile is especially rich in metals, such as copper, lithium or molybdenum. For this reason, the mining industry became one of the crucial industries of the country. Other key industries include the energy sector, tourism, and services.
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Essential Guide: Company Incorporation Process in Chile
National legislation enables the establishment of various types of legal companies in Chile. The most common legal entity types include the Corporation, Company by shares, Limited Liability Company or the Foreign Branch Office. Another business-friendly policy was enacting the law to establish the ‘Company by Shares’ (SpA) in 2007. The Company by shares is also called a ‘Simplified Corporation’ and it is designed to make the entire company incorporation process simpler, as the same suggests. It is the first legal entity which allows only one shareholder, either a legal or natural person. The shareholder/s which can be either an individual or legal entity (natural or legal person) is only liable up to the amount of capital they have invested in the company.
In this article, we will focus on the incorporation of the Company by shares (‘SpA’).
The company incorporation process encompasses the following steps:
- Obtain local tax IDs for the company shareholder
- Create and sign the company bylaws
- Register the company
- Obtain the company ID number (RUT)
- Open a corporate bank account
- Deposit the minimum capital to active the bank account
Chilean Company Formation Fact Sheet
Is foreign ownership allowed?– Yes, up to 100% foreign ownership is allowed
Can the company sponsor foreign employees?– Yes
Are there capital controls?– No
Is there a minimum share capital?– No
What is the minimum number of shareholders?– There must be at least (1) shareholder
Are fiscal address and legal representation required? – Yes
How long does the process take (including the opening of a corporate bank account)? – Between 6 and 8 weeks
Legal Compliance in Chile
A shareholder is a natural or legal person (an individual or a company) that owns part of a company through the purchasing of shares, also known as stocks. A company by shares (SpA) is the only legal entity which requires a minimum of one shareholder, which can be either a natural or legal person. Shareholders are liable up to their capital contribution (i.e the amount of money they have invested in the company). In the case that you decide to register a legal entity as the company shareholder/s, local banks may require additional documentation identifying who are the beneficiaries. This is something that should be taken into account before moving ahead with the company incorporation.
Company Share Capital
The company share capital is the amount of capital subscribed by the shareholders during the company incorporation process. The share capital should be taken seriously by the company shareholders as it can have effect certain company operations such as applying for loans, being involved in joint ventures or bidding on contracts.
The value of this share capital can impact the ability of a local Chilean business to be granted loans from financial institutions. As an example, a local company with a high share capital will have a better chance of being granted a loan than a company with a low share capital. The company shareholder/s can increase or decrease the company share capital as they please, however, they must understand that the share capital should reflect the company´s size and business activities (i.e a large mining company should have a larger share capital than a small IT company). Chilean law does not require any minimum amount of company capital to establish a SpA, however, it is strongly recommended that the initial capital be at least USD$500 to facilitate smoothly the bank account opening process.
Company Legal Representative
All companies in Chile are required to appoint a company legal representative. The Company Legal Representative acts as the legal face of the corporation and is the signatory for all operational activities of the company i.e the opening of a company bank account. Consequently, the legal representative has the legal responsibility to ensure the good standing of the company and smooth flow of operational processes. The legal representative must be either a Chilean national or a foreigner who legally resides in Chile.
A fiscal address, also known as a ‘domicilio fiscal’ is a minimum statutory requirement for all legal entities in Chile and is registered with the Chilean tax authorities. The fiscal address, for all intents and purposes, will be the registered address of the company, and as such, will be used for all official communication.
Corporate Bank Account
As mentioned in the key company incorporation steps, the opening of a corporate bank account is a required part of forming a local Chilean entity. Chile has a variety of banks available for businesses such as Banco BICE, ITAU, Santander. When choosing a bank, you will need to look at your business needs and requirements, for example, the volume of international transfers needed. A local company will be able to support you in deciding which bank is best suited for your Chilean commercial operations.
Chile is one of the most developed countries in South America. It has a stable political environment, an open market economy, a qualified workforce, and advanced infrastructure. In addition, solid economic growth and richness in natural resources, such as copper or lithium, make the region an attractive place to invest for both local and foreign business.
If you would like to enter the Chilean market and establish a company, Biz Latin Hub has a team of local and international experts who can provide you with a tailored support. Do not hesitate and contact our Country Manager, Allan, here at Biz Latin Hub for personalized assistance.
If you are interested in incorporating a local business in Latin America, learn how our due diligence services can be a useful tool to mitigate risk, ensuring that your operations are successful.