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InterGest THE ART OF BEING LOCAL WORLDWIDE Chile: a great place to invest Business and legal context. General information. GPD local demand. GDP per capita USD 14.176 (2011) Inflation 3 % (2011) Unemployment 7,5 % (May- July 2011) Exports USD 55.303 (August 2011)

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  1. InterGestTHE ART OF BEING LOCAL WORLDWIDEChile: a greatplacetoinvestBusiness and legal context

  2. General information GPD localdemand GDP per capita USD 14.176 (2011) Inflation 3 % (2011) Unemployment 7,5 % (May-July 2011) Exports USD 55.303 (August 2011) Imports USD 45.617 (August 2011) Balance of Trade USD 9.686 (August 2011) Source: Central Bank of Chile

  3. Major exports and industries • Food andagriculture • 7 million people enjoy Chilean salmon a day • 6.4 million people drink a glass of Chilean juice each day • 41 million people enjoy Chilean fresh fruit a year • 5 million people drink a glass of Chilean milk each day • Mining • Chile is the the worlds largest copper producer, along with gold, • molibdene, and has an important part of the worlds lithium • reserves • 38.076.281.532 USD exports during 2010 • Leading markets, China, Japan, Korea, USA and Brazil

  4. An internationally integrated country with more than 22 Free Trade Agreements, with 59 countries, reaching 62 % of the entire world population and 84,7 % of the world´s GDP. (source Direcon)A wired country with more than 100% of mobile penetration, highly sophisticated services and a growing broadband penetration. (source IDC)A competitive country ranked top one in Latin America and 28 worldwide according with the IMD world competitiviness yearbook (source IMD Competitiviness Yearbook)Economical and political stability and low risk ranks Other important aspects to keep in mind

  5. Operating in Chile for foreign investors By appointing a representativeMandate. Representative acts on behalf and at the risk of the foreign principalBy registering a Chilean agencyProof of entity’s legal existence abroad Authenticated copy of statutes Power of attorneyAgent must execute a document indicating Capital DomicileBy setting up a limited liability individual enterpriseBy forming a partnership or corporation By setting up a company by sharesThe average time for setting up a new company is about ten days from the moment of receiving the required information.

  6. How to bring capital into Chile Chapter XIV of the Chilean Central Bank`s Compendium of Foreign Exchange Regulations It applies to foreign exchange operations related to credits, deposits, investments and other capital contributions, whenever the amount is higher than USD 10,000 and less than USD 5 mio.funds must be brought into the country through the Formal Exchange Market (FEM) Decree Law 600Investment Contract between the State of Chile and the investorMinimum investment of USD 5,000,000.Investment can only be repatriated after one yearFixed 42% income tax for 10 years Bringing loans into the countryNo prior authorization is required and funds should enter through the Formal Exchange Market

  7. Taxation / General • In general, all taxes in Chile are imposed and levied at a national level SII is in charge of tax control. It is also in charge of issuing instructions, rulings and interpretation of tax laws.All businesses must present their accounting to the SII for tax control • Principal sources of Tax revenues • Corporate and individual income taxes. • Income taxation in Chile is based in taxpayer’s place of residence and the • source of the income. • Resident taxpayers are subject to taxes on their total income. • Nonresident taxpayers are only taxed on Chilean-source income. • Second category for employees. • Value-added tax (VAT). • Customs duties. • Real estate tax. • Inheritance and donations tax.

  8. IncomeTax • Corporate income taxes • First category tax (20% of the accrued net income of the year)* • Special Mining Tax (From 5 to 14% when the sales are in excess of • 50,000 metric tons of fine copper)Global income taxes on distributions or dividends • Global Complementary Tax (resident individuals with a progressive rate up to 40% of the total income)Additional Tax (nonresident individuals or nonresident legal entities with a general rate of 35% of the total income remitted abroad)Income tax paid by corporations is a tax credit against the global complementary or additional taxes * As proposed by a draft currently under discussion in Congress.

  9. Additional Tax (Witholding tax on payments abroad) General Rate 35%Royalties paid abroad, in general 30%*Computer programs and others 15%*Royalties paid for IP rights 15%*Engineering and technical work 15%*Professional or technical services 15%*Interest to foreign corporations 35%Interest to foreign banks and financial inst. 4%**Rate increases if services are rendered or money is lent by a related foreign party

  10. VAT (VALUE ADDED TAX)IVA (Impuesto a las Ventas y Servicios) • 19% is charged on all recurring sales and other customary • conventions over material goods • It is also charged on services, whether recurrent or not, that • originate interest, premiums, commisions or other similar • remunerations that are considered commercial, industrial or • financial nature • Imports are also subject to IVA • Services of employees and independent professionals are not • subject to IVA • IVA paid on imports, purchases and services received is deducted • as a credit from IVA due on sales and services rendered

  11. Labor Law • The minimum wage is set by law and is annually adjusted (currently CLP $182.000 • or USD 370 plus legal bonuses) • Standard workweek shall not exceed 45 hours per week. Managers and personnel • working without supervision are not subject to such limitation • Employment contract can only be terminated with legal cause (resignation, fixed • term, specific task, among others) • In case of dismissal without legal cause, the employer must pay to the employee a • severance payment (one month’s salary per year of service with a maximum of 90 • UF a month (USD 4,100) • Profit sharing: At the election of the employer either 30% of the profits or 25% of • each employees salary with a maximum fixed by law • Employee’s contributions to private pensions fund are withheld from the monthly • remunerations at a fixed rate of 10% on wages up to a cap of 60 UF (USD 2,700) • Health care Employees pay 7% on monthly remunerations up to a cap of 66 UF • (USD 3,000) • Unemployment insurance. Financed with an obligatory contribution by the • employee of 0,6% plus a mandatory contribution of 2,4% both calculated on the • base of employee’s taxable income capped at 99 UF (USD 4,500) • Maternity leave: 6 weeks prior to the expected birth date; 24 to 30 weeks after birth. • Paid by the government

  12. Chilean Law requires that at least 85% of a company’s employees be Chilean citizens. Limitation does not apply: * If a company employs less than 25 workers* To technicians who cannot be replaced by ChileansPayment of salaries in a foreign currency is allowed to specialized personnel. In this case, remunerations are exempt from social security contributionsWorking visa for foreign employees: Tourist visa temporarily or visa subject to an employment contractRemunerations can be paid anywhere in the world. However, if services are provided in Chile they are regarded as Chilean source incomeFor a period of 3 years only Chilean source income of foreigners is subject to taxes

  13. Thank you… … for your attention!

  14. InterGest Chile Moneda 970, 5 Piso Santiago de Chile Chile Phone : +56 2 696 0171 Fax: +56 2 696 3859 info.chile@intergest.com www.intergest.com/chile

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