Chile

3 Chapter Incorporation

    • Incorporation

       

      Overview.

      Chile was ranked 33rd on the Global Competitiveness Report for 2017-2018, Chile ranked 33rd among other 137 countries. Chilean local authorities realized that foreign investment is a key contributor to sustain economic growth and this led to ratify 26 international agreements regarding double taxation with 64 countries. One of the main industries in Chile is the mining industry, the country is especially rich in metals, such as copper, lithium or molybdenum. Other key industries include the energy sector, tourism, and services. In this chapter we will discuss the main types of companies in Chile and requirements. 

      How to open a company in Chile?

      There are different companies, but the most common legal entities include the Corporation, Company by Shares, Limited Liability Company or the Foreign Branch Office. And the main parts of the company incorporation process are indicated in the following steps:


      • Obtain local tax IDs for the company shareholder.

      • Create and sign the company bylaws.

      • Incorporate Local Company Chile.

      • Register the company.

      • Obtain the company ID number (RUT).

      • Open a corporate bank account.

      • Deposit the minimum capital to active the bank account.


      Types of companies:


      Limited Liability Company.

      This type of company is regulated by Law N ° 3,918, must be constituted by public deed and mention the name of one or more of the partners or a reference to the object of the company. The Limited Liability Company cannot have more than 50 members, nor can it have the purpose of conducting banking business.


      The Public Deed must contain some of the following:

       





      Simplified Procedure.

      There is an alternative simplified electronic procedure, regulated by Law 20659, known as the simplified procedure for the following companies:


      • The individual limited liability company (EIRL)

      •  Limited responsibility society.

      •  The Closed Joint Stock company.

      •  The mutual guarantee companies.

      •  The commercial collective company.

      •  The Joint stock companies.

      •  The simple limited partnership.

      •  The limited partnership by shares.


      The Open Joint Stock Company ( Sociedad Anónima Abierta) is not eligible for this method. The companies indicated by law 20,659 may change to this electronic method, which will allow them to modify, merge, divide, transform or dissolve the company in a simple way. The change to this method, in some cases, must be approved by all the holders of social rights and, in the case of companies whose agreements must be adopted by meetings, by an absolute majority of the shares issued with voting rights.


      Joint Stock Company.

      The corporation is a capital company divided into shares, so decisions are made according to the number of shares, not the number of shareholders. These actions must be registered. The administration of the company is carried out by a board regulated by law. There are two types of corporations, open and closed, the general rule is that Corporations are constituted as closed.


      According to the Law there are three situations in which a corporation can be considered as open:


      1) When there are 500 or more shareholders, it may happen that a corporation is born as a closed company and eventually increases its number of shareholders and becomes an open corporation. But when an open corporation reduces its number of shareholders to less than 500, will take on the character of a closed corporation.

      2) When at least 10% of the subscribed capital belongs to a minimum of 100 shareholders, excluding those that directly or indirectly exceed said percentage.

      3) When they voluntarily register their shares in the securities register.


      The Public Deed must contain some of the following:



      Limited Liability Partnership.

      It is the company most used by entrepreneurs looking to start a business and make all decisions individually, without partners. Known in Spanish as “Empresa Individual de Responsabilidad Limitada (EIRL)”. The owner is always a natural person who responds with his assets only to the contributions made to the company. It can develop civil and commercial operations, (except those reserved by law to corporations, such as banks and insurance companies.) The administrator is the owner, who represents the company in a judicial and extrajudicial manner, with all the powers of administration and provision.


      The constitution requirements are basically the same as for limited liability companies. The Public deed must be authorized by a notary and grant the registry in the Commercial Registry. The name of the EIRL must include the name and surname of the constituent, plus the economic activities that constitute the object and turn of the company.



      Representative office and Branch office.

      The branch, is a separate subdivision of the legal entity that performs all the functions of one, including representative. The representation of foreign companies in Chile can only perform representational functions. In an office of representation for tax and practical purposes, an agent or representative with domicile or residence in Chile must be appointed, proof that the parent company exists abroad by presenting a Certificate of Validity of the company, authentic copy of the current Statutes and General Power granted by the company to the agent that must represent it in Chile. Documents from abroad must be duly legalized before the Consul of Chile or the relevant authority of the country of origin and must be approved by the Ministry of Foreign Affairs of Chile. 


      The process of registration of branches or representative offices are almost the same, these are the requirements to open a representative office in Chile:

      • A copy of the constituent documents

      • The certificate of registration as a taxpayer resident

      • The certificate of registration in the State Register of Legal Entities

      • Last tax return

      • Power of Attorney

      • The registered branch of a foreign company in Chile (or representation) requires the appointment of a nominee director


      The approximate time for registration for the Representative Office is 10 days.


      Benefits for entrepreneurs. 


      There are multiple benefits for entrepreneurs starting a company in Chile by the government, these are some examples:

      1. Chile has the 2nd lowest tax rate in Latin America, 20%.

      2. Dividends from one resident company to another are 100% tax exempt.

      3. All exports from Chile are completely exempt of customs duties and VAT. (Custom duties and VAT paid on inputs used in the production of exports will be reimbursed)

      4. There are regional tax incentives available to resident businesses such as a 17% tax rebate (available on income from investments in Region I, XI, and XII) and a 25-year corporate tax exemption and import duty exemption for companies producing mining supplies.

      5. A Chilean holding company is 100% tax exempt if it is listed on the Chile stock exchange, it is not domiciled in Chile, its shareholders and directors are not Chilean residents and the company's purpose is making investments in other countries.

      6. There are numerous Double tax treaties with different countries such as Canada, USA, and South Africa as an example, these treaties can help reducing withholding taxes on dividends, interests and royalties to foreign companies.


       

    • Reference

       

      Procedimiento simple para crear empresas, Biblioteca del Congreso Nacional de Chile, 2019.

      https://www.bcn.cl/leyfacil/recurso/procedimiento-simple-para-crear-empresas

       

      Ley 20659, SIMPLIFICA EL RÉGIMEN DE CONSTITUCIÓN, MODIFICACIÓN Y DISOLUCIÓN DE LAS SOCIEDADES COMERCIALES, 02/MAY/2013.

      https://www.leychile.cl/Navegar?idNorma=1048718

       

      Ley 3918, SOCIEDADES DE RESPONSABILIDAD LIMITADA, Biblioteca del Congreso Nacional de Chile, 2019.

      https://www.leychile.cl/Navegar?idNorma=24349

       

      Tipos de sociedades para crear una empresa en Chile, Mis Abogados, 2019.

      https://www.misabogados.com/guia-de-tipos-de-sociedades-para-crear-una-empresa-en-chile

      Types of Companies and Chile advantages, Doing Business, Chile Business, 2019.

      http://www.chile-business.com/wordpresschb/doing-business-in-chile/

      Opening a branch office for foreign company in Chile, Lawyer Chile, 2019.

      https://lawyerchile.org/en/2018/12/18/branch-office/