Chile has established some tax benefits designed to incentivize the inflow of foreign capital into the country, especially in capital-intensive sectors like technology.
Statute for Foreign Investment or law decree 600
The Committee For foreign Investment (Cinver) establishes a distinction between two types of investments. The first is productive investments, which are channeled through the Foreign Investment Statute or law decree 600 (DL 600). The second is non-productive financial investments that are made under the guideline of Chapter 14 of Compendium of International Changes.
With these mechanisms, Chile seeks to create both tax security and conditions that attract foreign investment by establishing fair and equal treatment of foreign investors.
Exemptions on capital gains
The Chilean tax code includes an exemption with respect to all taxes affecting foreign institutional investors (mutual funds and pension funds). Through this, an entity receives the best value in the sale of stocks, bonds, and other instruments emitted by the Central Bank and Chilean government.
Such sales must take place through a public stock exchange, a public offering, or any other system authorized by the Superintendencia de Valores y Seguros (SVS).
Incentives for Research and Development
Chilean legislation established tax incentives for private investment in research and development (R&D).
The benefit applies to “First Category” contributors whereby they can receive a credit towards their most recent tax payments equivalent to 35% of the payments made on R&D contracts certified by Corfo. This incentive applies to R&D activities that do not directly relate to the core operations of the company.
The amount of the credit cannot exceed either 15% of annual revenue or 5,000 Chilean monthly tax units (UTM) as defined at the termination of the project.
In order to receive this benefit, companies must submit, at the time of filing, their authorization from the Research Center of Corfo for amounts greater than 100 UTM at the conclusion of said contract.