How to start a business in Chile

Under the title “How to start a business in Chile” we start a information where we will explain the most important steps every company looking to expand internationally in Chile must follow. We will clear out topics such as the type of company structures, how to open a bank account, types of visas, intellectual property  and various aspects regarding accounting in Chile, tax compliance in Chile and payroll in Chile.

Obtaining the Tax Identification Number (RUT)

This is one of the very first procedures to carry out since everyone,  both individuals and legal entities, wishing to undertake an economic activity in Chile, before any kind of investment, must obtain a Tax Identification Number (RUT for its Spanish acronym “Rol Único Tributario”).

The RUT is a number which identifies taxpayers in Chile. For legal entities and foreign investors, the SII (Servicio de Impuestos Internos) is in charge of all applications. The SII gives a unique number to each taxpayer to identify them.

Obtaining  the RUT is required for foreing investors in the following cases:

  • Non-resident companies that invest in Chile, irrespective of the investment.
  • Individuals or legal entities not resident or domiciled in Chile that plan to participate in companies as partners or shareholders.
  • Persons not resident or domiciled in Chile that open agencies or branches in the country or undertake activities through a permanent establishment.
  • Non-resident individuals in Chile as company representatives, tourists and international officials and their accompanying family members and other non-residents if they invest in the country through, for example, the acquisition of real estate.

Simplified RUT application process

A simplified application process has been created where authorized Banks and brokers are able to apply on behalf of the foreign investors. If these foreigners invest in order to obtain income by buying and selling shares in listed corporations, fixed-income instruments, instruments of financial intermediation and quotas in mutual funds or through certain contracts can use a simplified mechanism for obtaining a RUT through institutions that act as custodians.

Choosing a company structure

After obtaining the RUT it is time to define the type of company you want to create. The one chosen will mainly depend on the business strategy, the amount of capital to be brought in and other factors.  It should also be recalled that these companies have different obligations regarding tax compliance; therefore it is recommended to get advised by a specialist accountant. Here we summarize the four types of company which can be used as a vehicle for foreign investment:

Individual Limited Liability Company

As an Empresa Individual de Responsabilidad Limitada or E.I.R.L (Individual Limited Liability Company) any individual can acquire the status of a legal entity. Its assets distinct from those of its owner, it does not require the participation of a third party and it has a commercial nature. These companies are subject to the Commercial Code and can undertake any type of civil and commercial activity, except those reserved by law for corporations.

It is the most used type of company for Businessmen who want to start a business without partners and be able to make all the decisions but with the assets are limited to the amount specified in their deeds and the owner is answerable only with personal goods up to the capital contributed to the company.

The company’s name must include that of its founder or an invented name that refers to its purpose and must also include the words “Empresa Individual de Responsabilidad Limitada” or “E.I.R.L.” The company’s purpose must indicate the nature of its activities and the specific sector in which it will operate.

Limited Liability Company

It is the type of company most used between partners who have a trusted relationship and are looking for few administrative formalities. Partners, in this case, can be a natural or legal person, national or foreigner, and their liability is limited to the amount of his capital contribution. They cannot be less than two or more than 50.

In these companies administration and control of these companies can be freely determined by their partners.

The name of the company may contain the name of one or more partners or a reference to its purpose and must include the word “Limitada”.

The general system of taxation is applied to these companies, being taxed with First Class taxed, global complementary or additional, which are determined through accounting.  Regarding VAT, the regime includes issuing sales documents and the obligation of keeping a sales and purchases book.

Corporation (S.A.)

It is a type of company widely used by big companies and corporations. Its main characteristic is that formed by a common fund provided by shareholders who are responsible only for their respective capital contributions and is administered by a board of directors, with at least three members who are essentially revocable, which elects a manager and the board’s chair. Decisions are taken by majority vote.

A corporation’s starting capital must be fully subscribed and paid in within a period of three years and, if this does not occur, its capital is automatically reduced to the amount effectively subscribed and paid in.

There are two types of Corporation:

  • Public: These are those corporations whose stock is publicly traded and have at least 500 shareholders or at least 10% of their subscribed capital is held by a minimum of 100 shareholders. The companies are subject to supervision by the Superintendencia de Valores y Seguros, SVS (Securities and Insurance Superintendency) and must be on the National Securities Register.
  • Close: These are those corporations that do not fall within the above definition but may voluntarily submit to the norms applying to public corporations.

A corporation is formed through a public deed that must contain information which includes the identity of all its shareholders, its specific purposes, duration, capital, forms of administration and the way in which profits will be distributed. The name of the company must contain the word “Sociedad Anónima” or its abbreviation “S.A”.

The corporation must subsequently register with the Companies’ Registry Office corresponding to its domicile and publish an extract of its deed in the Diario Oficial (Official Gazette). Both these formalities must be completed within 60 days of the date of the deed.

Stock Company (SpA)

It is a type of corporation. These companies can be formed by one or more persons; therefore if you do not have partners you can form it individually.  As in the S.A, participation in the capital is represented by shares, however, the SpA gives more freedom to the contracting parties, removing the main difficulties and problems S.A posses, especially the ones regarding its creation and administration, being this way cheaper.

SpAs are governed by the norms applying to close corporations and, in a requirement that is practically the same as for a corporation, must keep a shareholders’ register.

Stock companies are founded through a public deed or a private document signed by the participants in which case their signatures must be verified by a public notary who legalizes the document. This must be registered with the Companies’ Registry Office corresponding to their domicile and be published once in the Diario Oficial (Official Gazette) within a month of the date of the signing.

Starting Activities

The Iniciación de Actividades or Business Start-Up Statement is  “a sworn statement through which a taxpayer informs the SII of plans to undertake activities that may be liable to pay tax in Chile“. It must be applied for within the next two months after starting activities and it can be applied at the same time as the RUT.

In the case of persons not resident or domiciled in Chile, this statement must be presented  once the company has been set up.

On the other hand, investors not domiciled or resident in Chile who only obtain income from movable capital must obtain a RUT in Chile but do not need to present a Business Start-Up Statement.

Stamping documents

Stamping documents is “the procedure through which the documents and books required for a taxpayer’s economic activities are legalized and rendered admissible. Under this procedure, the SII authorizes a certain number of documents that may be issued electronically and/or embosses each document and its copies”.

All taxpayers who have presented a Business Start-Up Statement must carry out this procedure.

Opening a bank account in Chile

A bank current account is a contract between a bank and a person under which the former undertakes to fulfill the client’s payment orders up to the amount deposited with it or of the stipulated borrowing. There is no legal impediment to the opening of a joint bank account by two or more persons, who may act jointly or indistinctly, depending on the agreement. Minimum requirements for opening a current account.

Individual

  • Proof of identity through the presentation of identity card.
  • A recent photograph of the size used for identity cards or passports.
  • Right thumbprint on the client information card held by the bank.
  • Updated bank reports for the person opening the account.
  • Registry at the bank of the signature to be used on checks.
  • Information about activity and solvency (income, goods, debts) as deemed necessary by the bank.
  • Registry of a domicile in the country and notification of any change in this domicile.
  • The signing of a document setting out the general conditions of the current account.

Legal Entity

  • Verification that the company has been legally established and its representatives have the due powers.
  • Proof of identity through the presentation of the company’s tax number (RUT).
  • All the requirements applying to individuals as regards registry of identity, photograph, thumbprint and signature also apply to legal representatives opening an account on behalf of a company.
  • All the requirements applying to individuals as regards bank reports, domicile and contract also apply to companies.
  • Other requirements that the bank may deem it necessary to establish.

A bank current account can be unilaterally closed by its holder at any time.

Intellectual property

In Chile there are two institutions in charge of intellectual property.  One is  the Industrial Property Institute (INAPI), for patenting inventions, utility models, commercial and collective brands, certification and geographic indications and denominations of origin, and other one is the Department of Intellectual Rights of the Directorate of Libraries, Archives and Museums (DIBAM) for copyright and other related rights (performing artists and phonographic producers).

The protection awarded to the trade mark is territorial (only in Chile) and temporary ( 10 years but renewable indefinitely for further periods of ten years on payment of the corresponding fee).

You can check these web pages for more information:  www.inapi.cl and www.dibam.cl.

The .cl domain

The organization responsible for maintaining the register of websites using the .cl domain. is NIC Chile, that belongs to the University of Chile.

Applications for the registry of websites on the .cl domain can be presented by individuals domiciled in Chile as well as by state and private companies, foundations and other public and private legal entities with authorization to operate in Chile.

In case you do not reside in Chile, another person domiciled in the country can apply for the registry on your behalf. This representative will act as an administrative contact but the domain will be registered under the other person’s name.

Applications are only received electronically through either e-mail or www.nic.cl. A third party who acts as intermediary for the preparation or filing of the application does not have any right over the domain name.

Applications for registry of domain names already on the Registry of .cl Domain Names will not be accepted.

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