Chile is one of Latin America's wealthiest, most stable and competitive countries but when it comes to starting a business there are many regulatory and bureaucratic challenges. It is important to have the local knowledge to set your company up for success in Chile.
1. Starting a Business
The World Bank and International Finance Corporation (IFC) rank Chile 55th in the world for ease of starting a business. There are seven procedures to complete which can take about five to seven days with some having to be completed in person and some online. The processes include obtaining a tax ID (RUT), having a notary digitally sign documents, obtaining a business license (Patente Comercial) and registering with the labor-related accident insurance.
2. Dealing with Construction Permits
Obtaining construction permits is a lengthy procedure in Chile that can take 133 days with 12 steps to complete. Many of these stages have to be completed by various government bodies, such as the sanitation company for water and sewage availability and connection to the water services. The longest process is to request and obtain the building permit which can take 68 days. In some municipalitiesthere is an online platform called la Ventanilla Transaccional de Trámites Municipales, VTM) where nine proceedings can be completed. But, the procedures and rules are different depending on the building height and density.
3. Getting Electricity
Businesses will have to wait 43 days and go through 5 procedures to get electricity. The first step is to submit an application in person with Enel Distribución Chile S.A. and wait for a cost estimate. Enel Distribución Chile S.A. will conduct an inspection and once approved it can still take 14 days to sign and submit 6 separate documents until the connection to the electricity is provided.
4. Registering Property
Registering property in Chile is a long process, lasting 28.5 days, but it still takes less time that other places in Latin America. A lawyer must conduct due diligence on the legal history of the property for the preceding 10 years while the business must request copies of property titles for the prior 10 years, the 'Certificado de Vigencia' and certificate of encumbrance from the registry in order to register a property. Land tax must be paid, the public deed must be signed and registered at the Real Estate office, and both a Property Certificate and a Mortgages and Ownership Limitations Certificate must be obtained.
5. Getting Credit and Protecting Investors
Getting credit in Chile can be pretty simple and fast because it has a strong financial sector. Protecting minority investors in Chile is also not the best performing but is comparable to other countries in the region.
6. Paying Taxes
In Chile, there are at least 15 tax payments to make each year (VAT, Income Tax, business license) with many processes that can take 291 hours each year. While most of the processes can be done online, they are still very time consuming with employment taxes and value added tax (VAT) taking 124.5 hours of the company's time. In August 2018, there was a tax reform proposal which would establish a single system and a simplification of registries among many other positive changes.
7. Trading Across Borders
Chile has one of the most open economies with free trade agreements with many countries. This makes cross border trade easier although there can be some high costs to export and import in Chile. Its ranking is very similar to Mexico and Peru.
8. Enforcing Contracts
Enforcing contracts takes 480 days which is less time than Brazil and Mexico but still has many procedures. The judicial system efficiently processes the claim, but filing and service adds a large amount of time to the overall procedure.
9. Resolving Insolvency
Resolving insolvency in Chile takes two years with a low recovery rate. The reorganization procedure is relatively fast but the liquidation stage is what takes a longer time with processing times varying based on the courts.
Chileans are supportive, welcoming and friendly but are more formal when it comes to business. Punctuality is key and building trust through lighter, personal conversations prior to discussing business matters helps to build the relationship.
The experts at TMF Chile have the local knowledge to help you understand investing and operating your business in the country. Whether you want to set up in Chile or just want to streamline your Chilean operations, talk to us.
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.