Legal-Economic Aspects of Investing in Chile

Gustavo Cuevas

InvestChile March 2012

Index

I. Why Chile ?

1. Dynamic politics

2. Economic model

3. Trade relations

II. Set up Business in Chile

1. Protection of foreign investments

2. Different types of companies

3. Residency for foreigners in Chile

First Part:

Why Chile?

1. Dynamic Politics

A. Political Stability

• Chile stands out in the region

• Peaceful cohabitation of all political sectors

• Continuity of public policies

B. Legal Safety

• Well-defined political and legal structure

• Clearly separated powers

• Legalistic culture

• Special protection for foreign investors

C. State Support

• There is political will. The necessary Instruments to implement innovative and technological transfer businesses

• Existences of instruments that favour setting up industries in different regions of Chile

D. Flexibility of Labour Law

• Freedom to hire and dismiss employees

• Low employer contributions

• Solutions to impartial conflicts

• Clear, uniform and stable regulations

2. Economic Model

A. Open Economy

• Widespread national consensus on the importance of free trade

• Low import duties

• Free movement of capital, goods and people

• No discrimination against foreigners

B. Taxes

• Low corporation taxes

• Trade agreements to prevent double taxation

• No tax discrimination between locals and foreigners

• Clear, uniform and stable regulations

• Modern technologies applied in tax inspection.

C. Banking System

• An autonomous Central Bank with a clear, constitutional mandate

• Strict banking regulations

• Autonomous and professional regulatory organisation

• Professional and capitalised banks

• Important technological leadership

• Nationwide coverage

3. Trade Relations

A. Communication Infrastructure

• Extensive coverage of low-cost, data communication

• Appropriate road infrastructure

• Appropriate and low-cost port and air infrastructure

• Infrastructure planning based on Chile’s growth needs

• Proximity between production centres and shipping areas

B. Free Trade Agreements

• Chile has signed the most free trade agreements in the world, covering 89% of the world GDP.

• The contents of these agreements is extensive and they cover key economic sectors

• There is a free trade agreement between the EU y Chile.

C. Tax conventions tending to avoid double taxation

• Agreement to avoid double taxation between Chile and Belgium (since 2011)

• Tax Variable without negative effect

• Clear and specific regulations to ensure tax neutrality

D. Common Cultural Values with Europe

• Intolerance of corruption

• Respect agreements

• Work culture

• Efficient State

• Integrated society

E. Chile : Investment Platform

• Time zone for the Americas

• Knowledge

• Language

• Agreement with MERCOSUR and free trade agreements

• Personal safety

Second Part :

Setting up Business in Chile

1. Protection of Foreign Investments

A. Constitutional Level

• Property rights

• Economic freedom

• State’s subsidiarity principal

B. Legal Level

• Foreign Exchange Regulations at Banco Central de Chile (Chapter XIV)

• Decree Law No. 600 (DL.600)

C. Contents of Foreign Investment Contract• No discrimination

• No discretion in procedures• Free access to production sectors

• Contract with the Chilean State• Access to the formal exchange market

• Repatriation of capital and profits• Choice of taxation system

• Various investment methods

2. Different Types of Businesses

• Joint stock company

• Public Limited company

• Limited liability company

• Incorporation period

• Incorporation expenses

• Foreign participation in companies

3. Residency for Foreigners in Chile

A. Visa

• For investors

• Subject to a work contract

B. Taxes

• Taxes are mandatory in Chile

• Agreement to avoid double taxation

• Agreement to recover retirement funds

• Specific work contract regulations

End

Gustavo Cuevas

InvestChile

March 2012