The current rate of the value added tax (impuesto al valor agregado), referred to here as VAT, is 17%. However, for 1996, the Chilean president has exercised his right to increase the rate by one percentage point. The government has proposed making the 18% rate a permanent rate, with the difference of 1% going to finance educational projects.

Exports are zero rated. This means that no VAT is due on export sales, but VAT paid on purchases of goods and services that are necessary to produce the exported goods is either deducted from other VAT due or refunded by the tax authorities. Incoming and outgoing marine and air transport services are exempt from VAT. Services that are rendered to nonresident entities and are used exclusively outside Chile can be deemed by the customs authorities to be exports and treated in the same way.

A business that sells exempt goods or renders exempt services does not have to charge VAT to its customers, but it is not entitled to recover VAT charged to it on its purchases. Exempt transactions include sales of used vehicles, sales of goods and services the receipts from which constitute nontaxable income for income tax purposes, most loans, the letting of unfurnished houses and buildings, reinsurance, cultural and sporting events (in some cases), hotel services provided to foreign tourists and paid for in foreign currency, and school tuition.

Certain luxury items and beverages are subject to sales tax, as well as VAT, at rates that vary according to the type of item sold.


Employees and self-employed individuals who have joined the work force since 1980 are required to contribute to private pension funds based on their monthly remuneration or earnings up to UF 60. The UF (unidad de fomento) is an index-linked unit that is equivalent to approximately US$32. Employers withhold employees' contributions from their pay. The contribution rate is 10%, plus a variable commission established by each fund (currently about 3%). Employees can elect to make additional contributions of up to UF 60 per month. There is also an older system of government pension funds. Most private-sector employees covered by this system contribute 21.84% of their total remuneration.

Employees and self-employed individuals are also subject to a 7% health insurance tax on monthly remuneration or earnings up to UF 60.

Employers are not required to contribute to the pension funds, although they can make additional contributions to the private pension funds that are a tax-free benefit for the employee. All employers must pay a 0.9% tax on an employee's monthly remuneration up to UF 60 to provide work-related accident insurance. According to the risk of the employer's activity, additional payments at varying rates may be required of up to 3.4% of remuneration.

Foreign technical personnel and their employers are exempt from Chilean social security payments, provided that the foreigner be-longs to a social security program outside Chile that covers old age, disability, illness, and death and the foreigner expresses a desire to continue under that program in the contract of employment. The exemption does not extend to the 0.9% tax and additional payments to provide for work-related accident insurance.


Businesses must pay an annual business license tax (patente municipal ) to the municipalities based on their equity as determined for tax purposes. The tax rates charged by the various municipalities range from 0.25% to 0.5%. The mini-mum tax is currently equivalent to MTU 1, and the maximum tax is equivalent to MTU 4,000 (see "TAXATION OF INDIVIDUALS" under "Income Tax Rates").


Inheritance and gift tax (impuesto a las herencias, asignaciones y donaciones) is levied at progressive rates that take into account the value of the property received and the relationship of the recipient (the heir, legatee, or donee) to the deceased person or donor. The recipient of the property is the taxpayer. For recipients who are close relatives (as defined), the rates range from 1% to 25%; for more distant relatives, they range from 1.2% to 30%; and for very distant relatives or unrelated persons, they range from 1.4% to 35%. Recipients in the first two categories are entitled to exemptions. Taxable property is essentially property located in Chile, whatever the nationality or residence status of the deceased person or donor, and property located abroad of a Chilean deceased person or donor.


Most urban real estate is subject to an annual real estate tax (impuesto territorial) of 1.35% on the value established for tax purposes. The rate for rural real estate is 1.5%. There are numerous exemptions, however. Generally, this tax may be credited against first category tax only if it is actually paid.

Most documented loans and foreign loans are subject to a stamp tax (impuesto de timbres y estampillas) at 0.1% of their value for each month (or fraction of a month) from issue of the loan to maturity, the maximum tax being 1.2%.

To deter excessive foreign lending into Chile and consequent pressure on the foreign exchange rate, Chile requires foreign lenders either to deposit 30% of any loan interest free with the central bank for one year or to pay a loss-of-interest fee to the central bank equivalent to the interest that the lender would have forgone if this deposit had been made.

The information in this article was correct as of 9 July 1996.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Anthony Cook, Deloitte & Touche, Santiago, Chile on Tel: +56 2 638 4186, Fax: +56 2 639 1522.