The applicable legal system in Chile is a civil law system, characterised by laws and rules written into comprehensive legal codes, such as the Civil Code, which governs matters like purchase agreements, usufruct, inheritance and succession, the Commercial Code (focused on business activities), and the Labour Code(Código del Trabajo) which addresses employer-employee relations. Judicial decisions, while they may influence future cases, do not have binding precedent as in common law jurisdictions.

The Chilean judiciary is structured hierarchically, with lower courts resolving most disputes, appellate courts reviewing these decisions, and the Supreme Court serving as the highest judicial authority. In addition, specialised courts address labour, family, and constitutional matters, among others.

For businesses operating in Chile, key regulatory and oversight bodies include the Central Bank, the Financial Market Commission (Comisión para el Mercado Financiero or CMF) which oversees financial markets and corporate activities, the Internal Revenue Service (SII), which is responsible for tax compliance and enforcement and the Labour Directorate (DT) a decentralised public service that regulates labour relations between employees and employers.

Chile’s Law No 20,848 (the “Foreign Investment Promotion Law”) establishes the legal framework for FDI, ensuring equal treatment for foreign and domestic investors (principle of non-discrimination), promoting transparency and ensuring legal certainty. FDI is defined as the transfer of foreign capital or assets to Chile, amounting to at least USD5 million. This can occur through various mechanisms, such as currency exchange, reinvestment of profits, or technology transfer. Investments must grant at least 10% control over the recipient company’s voting rights.

Furthermore, the Foreign Investment Promotion Law, establishes the Foreign Investment Promotion Agency, known as InvestChile (formerly Agencia de Promoción de la Inversión or APIE) which is tasked with positioning Chile as an attractive destination for global FDI. The Agency acts as a link, connecting international investors with the diverse business opportunities available in the country.

For other sectors or industries subject to particular rules, please see 8.1 Other Review/Approvals.

Chile’s current economic and political environment presents both opportunities and challenges for FDI. Economically, Chile’s GDP growth is expected to be between 2% and 2.5% in 2025, driven by gradual improvement in domestic demand. FDI for January to September 2024 reached USD17.76 billion, 5% higher than the average for the same period over the past two decades. However, inflation remains a concern, and is expected to stay above the Central Bank’s 3% target until 2026 due to higher energy tariffs, potentially affecting purchasing power and investment expectations.

Politically, Chile is undergoing structural reforms in areas such as the pension scheme and tax system. Lack of consensus in Congress and political polarisation have hindered these reforms, creating uncertainty for investors seeking stability. Additionally, challenges related to state efficiency and security, particularly in sectors like forestry and energy, limit investment. Companies like Arauco have highlighted bureaucratic hurdles and security risks that negatively impact the investment climate. Despite being a leader in renewable energy, these risks could diminish Chile’s competitiveness.

Regarding FDI regulation, Chile adopted a strategy in March 2022 to promote and develop this type of investment. This includes an action plan for InvestChile to attract foreign capital and co-ordinate with relevant services and ministries. The strategy also focuses on promoting renewable energy and green infrastructure to align with global sustainability goals. Recent litigation in the mining sector, such as the Dominga project halted by the Environmental Court due to insufficient environmental impact assessments, highlights regulatory challenges.

Although the 2022 attempt at constitutional reform was rejected, discussions about potential changes remain significant, particularly regarding the management of natural resources like water and lithium, which could affect FDI regulation.

Transaction structures in Chile depend on the type of business and the parties’ objectives. Common structures include:

• share purchases: transfer of ownership through equity acquisition;
• asset purchases: transfer of specific business assets; and
• mergers: integration of two entities into one.

These transactions are primarily governed by the Commercial Code and Law No 18,046 (the “Corporations Law”).

For public company acquisitions, stricter regulations apply under Law No 18,045 (the “Securities Market Law”), which requires tender offers to protect minority shareholders and ensure transparency. Tender offers are required in the following four scenarios.

• When a person gains control of a public company.
• When a controller seeks to acquire two-thirds or more of the voting shares.
• When acquiring control of a company that controls another public company representing 75% or more of its consolidated assets.
• When a person or group reaches or exceeds two-thirds of the issued voting shares, requiring a tender offer for the remaining shares within 30 days.

In private transactions, share purchase agreements are generally preferred due to their simplicity, adaptability, and efficiency. Foreign investors must consider factors such as tax implications, regulatory approvals, and industry specifics. Tax obligations are governed by Law Decree No 824 of 1974 (the “Income Tax Law”), and bilateral tax treaties can reduce withholding tax rates, making certain structures more attractive.

Transaction agreements often include governance provisions, profit-sharing arrangements, and exit strategies, regulated under the Civil Code.

In regulated industries like banking and telecommunications, additional approvals from authorities such as the CMF may be required. This framework ensures transactions align with local law and international business practices.

Domestic M&A in Chile is regulated to ensure compliance with competition, labour, environmental, and tax laws.

Antitrust and Competition Review

Transactions surpassing specific market thresholds must be reviewed by the National Economic Prosecutor’s Office (Fiscalía Nacional Económica or FNE) under Law Decree No 211 of 1973 (the “Competition Law”). This review ensures that the transaction does not lead to excessive market concentration or anti-competitive practices. Failing to notify qualifying transactions can result in fines or the reversal of the deal.

Securities Regulation

For public companies, transactions are governed by the Securities Market Law, which emphasises transparency and shareholder protection. Requirements include disclosures, equal treatment for minority shareholders, and adherence to procedures such as tender offers.

Labour Considerations

M&A transactions must comply with labour laws under the Código del Trabajo, which safeguards employee rights during acquisitions. These provisions require that employment contracts are honoured and workers protected from unjustified termination as a result of corporate restructuring or changes in ownership.

Environmental Regulations

Certain industries, such as mining, energy, and infrastructure, are subject to environmental reviews under Law No 19,300 (the “Environmental Framework Law”). Projects requiring significant modifications or expansions may need approval through the environmental impact assessment system (SEIA), overseen by the environmental assessment service (SEA).

Tax Considerations

Under the Income Tax Law, capital gains from Chilean assets are subject to taxation, calculated as the difference between acquisition cost and sale price. Investors must evaluate the tax impact of different transaction structures, such as share purchases, asset acquisitions, or mergers. Additionally, bilateral tax treaties may reduce withholding tax rates.

Private M&A transactions in Chile, such as the acquisitions of private stock corporations, are guided by principles of autonomy and mutual agreement between parties. These deals are regulated by the Corporations Law, its regulations, and the Commercial Code. Unlike public companies, private transactions generally do not require prior approval by regulatory authorities, allowing for greater flexibility.

Corporate governance is the system that provides an appropriate way to manage the administration of the company and decision-making within the company, considering that conflicts of interest may exist and therefore, mechanisms to resolve them need to be put into place, to achieve a balance in the system and determine the company’s strategy to achieve its objectives.

Corporate governance finds its most complete and detailed form in the Corporations Law, although limited liability companies are also regulated by Law No 3,918 and joint stock companies are regulated by Law No 20,190and incorporated into the Commercial Code. The Corporations Law regulates the administration, those who exercise oversight, the rights of minority shareholders in situations that affect their rights, the rights of the controller, etc. The investor will then have to consider which type of company best protects their rights as a shareholder in terms of property registration, share transfer, right to information, participation, influence in administration, assurance of obtaining dividends, etc. For all these reasons, investors mostly prefer corporations over other types of companies.

Regarding the rules that regulate corporate governance, we can add:

• the rules established in the Securities Market Law such as the relationship rules established in Article 100;
• both public companies (companies created by law, state companies, and companies in which the state has a participation greater than 50% or appoints the majority of the board members) and private companies must comply with the corporate criminal responsibility rules contained in Law No 20,393 of 2009 and Law No 19,913 of 2003, which consist of establishing a crime prevention model that includes protocols, rules, and procedures aimed at ensuring that individuals perform their tasks avoiding the commission of crimes; a crime prevention officer with full autonomy and independence; a risk matrix and their respective controls; and a permanent audit system;
• in turn, public companies are required to provide the CMF or the Superintendency to which they are subject to oversight, the same information that open corporations subject to the Corporations Law must provide, including, for example, sanitary services companies and railway companies;
• they are also considered in the preparation of the annual national budget in which several institutions participate and is finally approved in Congress; and
• they must comply with the rules that originally applied to them and those specific to their sector. For example, the State Bank of Chile must comply with the General Banking Law.

In corporations, unless there are preferences established in series of shares, shareholders have the same rights, but limited to the amount of their contribution. The regulations therefore provide rights to minority shareholders and some tools against the actions of the majority. For example, the Corporations Law includes:

• the right to information that the company must periodically provide to shareholders (such as the consolidated balance sheet);
• the ability to make objections to the annual report;
• the existence of an audit committee with a majority of independent directors;
• the right to mandatory minimum dividends in case of profits;
• authorisation by the shareholders’ meeting (two-thirds of the shares with voting rights) to dispose of assets representing more than 50% of the company’s equity;
• certain transactions with related parties may give rise to legal actions against the company and directors;
• a legal prohibition on conducting transactions exclusively benefiting the controller; and
• the right of withdrawal for the minority when their rights are affected, such as in the case of a transformation, merger, creation of share preferences, etc, subject to prior payment of the value of their shares.

In turn:

• the Securities Market Law includes mechanisms for taking control that begins with the information that must be provided to minority shareholders;
• the public offering process for the acquisition of shares is also regulated;
• the CMF is the authority that ensures compliance with the rules regulating the market, and therefore, protects the minority of corporations under its control; and
• the FNE is responsible for controlling concentration operations.

The investor must register with the SII and submit a sworn declaration to start activities, along with proving their domicile. Additionally, they must register the entry of foreign currency, indicating under which concept the capital is entered, to comply with Chapter XIV of the International Exchange Standards of the Central Bank of Chile. This Chapter regulates foreign capital transfers entering the country.

The company, for its part, has certain special obligations such as reporting the investments made (composition, capital, and purpose of the company) along with providing the company’s background information.

The capital market in Chile consists of the demand for securities, the supply of securities, and intermediaries. The demand includes both domestic and foreign investors, such as banks, financial companies, insurance companies, national reinsurance entities, fund managers, and private investors.

Chile has two stock exchanges: the Santiago Stock Exchange and the Electronic Stock Exchange of Chile. These exchanges are supervised by the CMF, which merged with the Superintendency of Securities and Insurance in 2019. They also play a self-regulatory role, including suspending stock listings and sanctioning members.

Primary sources of financing in Chile include:

• bank financing: bank financing offers commercial loans, credit lines, leasing, and factoring for working capital and fixed asset acquisition;
• government programmes: institutions like Corporación de Fomento de la Producción (CORFO) and the Servicio de Cooperación Técnica (SERCOTEC) provide funds and subsidies to promote innovation and entrepreneurship, especially for small and medium-sized enterprises;
• private equity and venture capital: angel investors and venture capital funds are crucial for start-ups and growing companies with high potential;
• capital markets: available to public limited liability companies (S.A) that issue publicly traded stocks, suitable for more developed companies; and
• fintech: microfinance institutions and fintech platforms offer fast and flexible financing solutions, especially for small businesses and underserved sectors. In 2023, Chile enacted Law No 21,521 of 2023 (the “Fintech Law”), modernising the financial system, promoting competition, financial inclusion, and facilitating transparent customer information exchange among service providers.

Securities in Chile are primarily governed by the Securities Market Law which establishes the foundations upon which the Chilean capital market operates, including regulations related to publicly traded companies, the management of third-party funds (such as investment funds, mutual funds, pension funds, and others), the deposit and custody of securities and how various intermediaries are regulated.

The main supervisory entity of the Chilean capital market is the CMF. It regulates and supervises the securities, insurance, and banking markets in Chile, and contributes to strengthening the regulatory framework of securities through the issuance of administrative regulations, the most important of which are the General Character Norms (Norma de Carácter General or NCG) and Circulars. These provide instructions or interpretations of the applicable binding regulations for supervised entities.

As set out in 1.2 Regulatory Framework for FDI, foreign investors are not subject to any particular requirements to operate in the Chilean capital market other than those that also apply to local investors.

To make a public offering of securities in the Chilean market, issuers must be registered in the securities registry maintained by the CMF. In the case of a public offering of foreign securities, they must be registered in the foreign securities registry, which is also maintained by the CMF. NCG No 30 of 1989 and NCG No 352 of 2013 establish the registration requirements for Chilean public offering securities in the securities registry and the regulations for the public offering of foreign securities in Chile respectively.

Foreign investors structured as investment funds in Chile are primarily regulated by Law No 20,712 of 2014 (the “Unified Funds Law”) which provides a unified and modernised framework for domestic and foreign investment funds, which distinguishes between:

• investment funds, that can be private or public; and
• mutual funds. Under this framework, foreign investment funds are not subject to a specific regulatory review solely based on their status as FDI. They must comply with the same establishment and operational requirements as domestic funds.

However, certain regulatory requirements and oversight mechanisms may apply depending on the sector of investment, the nature of the activities, and the entities involved. These requirements apply equally to both foreign and domestic investment funds. In sectors considered critical to national interest, such as mining, energy, telecommunications, or financial markets, additional sector-specific regulatory reviews may be necessary. It is important to note that the Foreign Investment Promotion Law outlines what qualifies as FDI in Chile.

Chile enforces a stringent pre-merger notification regime, governed by Title IV of Law Decree No 1 of 2004 and Supreme Decree No 41 of 2021. The FNE referred to in 3.2 Regulation of Domestic M&A Transactions, is the relevant authority, responsible for safeguarding free competition through investigations and evaluations to ensure mergers do not pose undue risks to market competition.

Notification Requirements

Transactions must be notified if they cross specific thresholds. These are as follows.

• Combined revenues: aggregate revenues from Chilean operations must exceed 2,800,000 UF during the previous calendar year (UF (Unidad de Fomento) is a Chilean currency unit indexed according to inflation)).
• Individual revenues: the target company or its assets must have generated revenues exceeding 450,000 UF in the preceding 12 months.

The regime captures mergers, acquisitions of control, and influence agreements involving entities with notable operations in Chile, regardless of jurisdiction or investor nationality.

Review Process

The process unfolds in two phases:

• phase 1 (30 business days): a preliminary review focusing on apparent risks like market concentration and entry barriers. Transactions without such risks are approved quickly; and
• phase 2 (up to 90 additional business days): an exhaustive investigation if Phase 1 flags potential issues, examining unilateral effects, co-ordinated effects, and consumer impact. The total timeframe can extend to 120 business days.

Compliance

Clearance must be secured before executing the transaction. Non-compliance can result in hefty fines or unwinding the transaction.

Considerations and Analysis

The FNE uses several criteria to scrutinise transactions. They are as follows.

• Market concentration: the Herfindahl-Hirschman Index (HHI) gauges competitive impact.
• Barriers to entry: regulatory, technological, or logistical obstacles for new players.
• Impact on stakeholders: effects on prices, innovation, and consumer choice.
• Efficiencies: only demonstrable, consumer-centric efficiencies are considered.

Substantive Competition Review

Even transactions below notification thresholds or outside Article 47 of Law Decree No 1 of 2004’s definition can face review under Article 3 of Law Decree No 1 of 2004, which prohibits activities disrupting market competition. Investigations can stem from complaints or the FNE’s initiative.

Case Study

Resolution No 43 of 2012 involved SMU’s merger with Supermercados del Sur. The transaction was approved with conditions like divestitures and behavioural commitments to temper local market concentration. Non-compliance led to FNE sanctions, highlighting the seriousness of the non-compliance.

Chile’s merger control regime is designed to preserve competition while accommodating economic realities. The FNE operates with meticulous precision, and navigating this regime demands strategic foresight and thorough preparation.

Chile has a merger control regime, which often involves a comprehensive examination of substantive overlaps and competitive effects stemming from the investment. This regime is governed by Title IV of the Competition Law and Supreme Decree No 41 of 2021. However, the specific components of this assessment reveal a nuanced balance between technical scrutiny and the unpredictable local and global dynamics of the market.

The review delves beyond obvious risks, such as market concentration or collusive effects, to investigate how the transaction might profoundly alter competitive dynamics. For example, could one firm gain prolonged control over key inputs, effectively sidelining new entrants? The analysis also explores whether the deal creates incentives for anti-competitive co-ordination.

Though intangible, innovation often proves decisive for long-term market evolution.

In specific regions, the effects of concentration can diverge sharply from national-level impacts, adding layers of complexity to the analysis.

Beyond historical data, future scenarios are modelled to assess whether the transaction might indirectly fortify entry barriers.

For transactions with competitive risks, the FNE may impose approval conditions. These range from asset divestitures to restrictions on commercial strategies.

Even deals below notification thresholds may face scrutiny under Article 3 of the Competition Law, if they exhibit signs of restricting competition.

In jurisdictions with a merger control regime, such as Chile, authorities have a variety of tools ranging from market-shifting structural remedies to continuous behavioural obligations. These are not mere regulatory impositions but carefully calibrated interventions aimed at preserving competition while fostering innovation and economic growth.

Structural Remedies

Bold, direct, and often disruptive, structural remedies aim to reshape the market by eliminating competitive risks at their core. They are as follows.

• Mandatory divestitures: requiring the sale of strategic assets such as factories, brands, or even entire business units. These measures fragment market dominance while opening the door for new entrants.
• Business splits: even more radical, this forces companies to unwind mergers or divide combined entities into independent operations.

While effective, these remedies face logistical hurdles, such as ensuring viable buyers who can sustain the divested assets’ competitiveness.

Behavioural Remedies

Behavioural remedies focus on influencing the actions of the merged entities without dismantling their operations and are as follows.

• Access commitments: ensuring fair access for competitors to critical infrastructure like distribution networks or patented technologies.
• Contractual restrictions: prohibiting exclusivity agreements that block market entry or restrict consumer choices.
• Price caps: imposing ceilings to prevent abuse in pricing, especially in sensitive or highly concentrated markets.

However, their effectiveness hinges on continuous oversight, which introduces administrative complexity.

Hybrid Solutions

Competition concerns often require a dual approach. Hybrid measures combine structural divestitures with behavioural commitments. For example, a company might be required to sell part of its assets while committing to competitive pricing in specific regions for a defined period.

Monitoring and Compliance

The implementation of these remedies doesn’t end with their imposition. Authorities may appoint independent monitors, require periodic reports, or even audit key operations to ensure compliance. While intrusive, these measures are crucial to prevent remedies from becoming superficial fixes.

In Chile, Law Decree No 1 of 2004 and Supreme Decree No 41 of 2021 grant the FNE extensive powers to intervene in transactions that might jeopardise competition. These powers include blocking deals or imposing conditions to address competition risks, even for completed transactions.

If a transaction exceeds the thresholds in Article 48 of Law Decree No 1 of 2004, parties must notify the FNE before execution. The process starts with a 30-business-day review to identify competition risks. If concerns arise, the investigation can extend for up to 90 more days. The FNE can mandate asset divestitures, contract adjustments, or prohibit the transaction if substantial risks are found.

Failure to notify does not shield parties from intervention. The FNE can act ex officio, analysing whether the transaction undermines competition and may unwind the deal if necessary. Penalties for non-compliance include hefty fines and invalidation of the transaction.

The FNE’s decisions can be appealed to the Tribunal de Defensa de la Libre Competencia (TDLC), and even to the Supreme Court if necessary. This ensures a rigorous, multi-layered review process.

Chile’s system combines meticulous technical oversight with robust judicial support, ensuring decisions are thorough, equitable, and adaptable to market needs.

Chile has a foreign investment regime under the Foreign Investment Promotion Law, which promotes economic freedom, non-discretionary procedures, and non-discrimination rules for foreign investors. Relevant authorities include the Chilean Central Bank for foreign exchange operations and the CMF for financial market regulation. Most economic activities are open to foreign investment, but exceptions exist for sensitive sectors like border zones, natural resources (eg, lithium, hydrocarbons), nuclear energy, and maritime cabotage.

InvestChile also grants a foreign investor’s certificate. Applications for the certificate take up to 15 working days and can be submitted online.

For more details, please see 1.2 Regulatory Framework for FDI and 8.1 Other Regimes.

Chile does not generally differentiate its foreign investment review criteria, considerations, or analyses for partnerships, joint ventures, acquisitions by foreign governments or their affiliates, or non-controlling minority investments, except in specific cases regulated by the Foreign Investment Promotion Law. These regulated areas include border zones, hydrocarbons, lithium, and other natural resources, where restrictions are clearly defined.

FDI may be made in Chile through:

• freely convertible foreign currency;
• imported physical goods in any form;
• reinvested profits or capitalised loans;
• technology contributions eligible for capitalisation; and
• loans from related companies tied to the foreign investment.

These principles uphold economic freedom while maintaining safeguards in strategically important sectors.

Please see 7.1 Applicable Regulator and Process Overview.

Chile does not have a separate mechanism to block or challenge FDI differently from domestic investments, as the principles of equality before the law and non-discrimination apply. However, foreign and domestic investors are both subject to legal and administrative compliance requirements related to the nature of the investment or the source of funds.

If legal or administrative violations occur, the relevant administrative authority will intervene based on the applicable laws. Ultimate decisions on challenges can be escalated to the courts, depending on the specific matter. Foreign investors have the same rights as local investors to appeal decisions through administrative or judicial channels.

Investments made without proper legal or administrative compliance may face penalties or nullification of associated rights, but these consequences do not target foreign investors specifically and apply equally to all parties.

In addition to the benefits outlined in the Foreign Investment Promotion Law referred to in 1.2 Regulatory Framework for FDI, Chile has signed a large number of international agreements, treaties, and conventions, such as double taxation agreements and free trade agreements, to provide foreign investors with security and benefits.

In general, however, prior authorisation for FDI in Chile is not necessary, except for some vital industries such as hydrocarbon exploration and exploitation and nuclear energy production, among others. Specific limitations regarding sector-specific regulations are as follows.

• Article 7 of Law Decree No 1,939 of 1977, established the prohibition to acquire the ownership (or any other right), possession or tenancy of real estate bordering a neighbouring country, which only applies to the nationals (persons or companies) of the border country. This restriction could be raised by the President of the Republic of Chile, by passing a Supreme Decree based on national interests.
• Chapter XIV of the International Exchange Standards of the Central Bank of Chile regulates the foreign capital transfers entering the country from loans, deposits, investments or capital contributions originating abroad and exceeding USD10,000, establishing that those transfers must be through the formal exchange market and reported to the Central Bank.
• Law No 20,393 of 2009 establishes the criminal liability of legal entities. If an individual linked to a company commits an offence in a business context, the company can be held criminally liable. Penalties include fines, prohibition from contracting with the State, and even dissolution in severe cases. Companies can implement a crime prevention model to potentially exempt themselves from liability if it meets legal requirements and is properly implemented and disseminated.
• Law No 19,913 of 2003 requires certain economic sectors to implement a system to prevent money laundering and financing of terrorism (PLAFT or AML system). These sectors must comply with registration, due diligence, and reporting obligations to the Chilean Financial Intelligence Unit (UAF). Non-compliance can result in administrative fines based on the severity of the non-compliance. Implementing these compliance programmes is mandatory for sectors such as financial, real estate, insurance, automotive, casino, and fintech.

• Law No 18,168 of 1982 on Telecommunications considers the use of radio frequencies a strategic resource. Its administration is therefore the responsibility of the Chilean state. In this regard, the law mandates that the holders of broadcasting service concessions (television channels with frequency) must be Chilean, or the concessionary companies must be incorporated in Chile, or the control of these entities must predominantly rest with Chilean individuals.
• The Constitution of Chile grants the Chilean state exclusive, absolute, and inalienable ownership and control over the exploration, exploitation, and use of all mines, including guano sites, metalliferous sands, salt pans, coal and hydrocarbon deposits and other fossil substances, except surface clays. This principle implies that these resources cannot be subject to direct private ownership. Instead, the Chilean state maintains total control over their exploration, exploitation, and use, as a means of ensuring that their utilisation aligns with the public and strategic interests of the country. Although private investment is not completely prohibited, investors must therefore operate under strict regimes authorised by the Chilean state. This restriction affects both local and foreign investors.
• The Environmental Framework Law and the Supreme Decree No 40 of 2012 regulate environmental matters. Their main principle is to prevent the execution of certain projects or activities without having an environmental assessment and obtaining the mandatory permit. The SEA manages the SEIA, which evaluates projects and activities to ensure they comply with environmental laws and assess their potential negative impacts. Projects that may cause environmental impacts must be registered with the SEIA and obtain an environmental rating resolution (RCA), which sets conditions for project execution. Failure to register can result in fines or project closure.

Resident companies in the country are generally subject to a corporate tax on their net profits (income minus deductible expenses). The tax rate depends on the regime to which the entity is subject.

• Large businesses (Article 14A of the Income Tax Law): this tax regime is under full accounting records where the shareholders or quotaholders will be taxed on an accrual basis. They can deduct a partial amount (65%) of the corporate income tax paid up by the company as tax credit against its individual tax liability for Chilean tax residents or non-residents.
• Small and medium-sized businesses (Article 14D(3) of the Income Tax Law): this allows taxpayers to choose between simple and complete accounting records, with a fixed 25% corporate tax rate. Shareholders and/or quotaholders will be taxed on a receipt basis and may deduct 100% of the business income tax paid by the enterprise as a tax credit against its personal tax liability.
• Fiscal transparency regime (Article 14D(8) of the Income Tax Law): this tax regime is also focused on small and medium-sized entities (SMEs) whose owners are final taxpayers (individuals with or without tax residence in Chile or non-resident companies established abroad). In this case, the company will be exempt from corporate income tax and the taxpayers will be taxed with personal income tax according to their residence status in Chile or abroad.

The taxation also depends on whether the company is domestic or foreign. Domestic companies are generally taxed on all their income, regardless of where it is generated. Foreign companies are generally only taxed on income generated within Chile. However, dividends or profits remitted to foreign investors are subject to a withholding tax known as additional tax at a general rate of 35%. This can be reduced by the application of double taxation treaties in force between Chile and the investor’s country.

The type of entity or how it is organised as a corporation or partnership is not a determining factor for the application of tax regimes.

Interest and dividends paid to a foreign investor are subject to a withholding tax known as additional tax. The general rate of this tax is 35%. However, this rate can be reduced or even eliminated if there is a double taxation treaty between Chile and the investor’s country.

As for share ownership or the holding period, these are usually not determining factors for the application of withholding tax rates.

In relation to “treaty shopping” or the use of tax treaties to reduce the tax burden, Chile has measures to prevent these practices. These measures may include limitations on the availability of treaty benefits for entities that do not have a substantial presence or a legitimate commercial purpose in their country of residence.

There are certain special incentives or franchises established in the law that allow companies in Chile to mitigate their tax payments. Some of these include:

• special incentives for technology investments (R&D): business income taxpayers reporting their taxable income based on full accounting records and investing in research and development (R&D) may credit amounts invested in R&D against the business income tax liability;
• loss relief: in general, losses are deductible as an expense against the profits of the tax year and could be set off against undistributed profits. If the profits were not sufficient to offset the losses, the losses can be carried forward indefinitely. However, carry-back of losses is no longer available;
• imposed limits on deduction of interest: in general, there are no limits for the deduction of interest for a company, except for the excess indebtedness provision (thin capitalisation rule) of Article 41F of the Income Tax Law, which states that a company incorporated in Chile will be deemed to be in such position when the company has a debt ratio of 3:1 in relation to its financial equity; and
• consolidated tax grouping: Chilean tax law does not include provisions concerning taxation on a consolidated basis.

Other incentives include foreign institutional investors, special regimes for income from bonds, research and development credit, regional incentives and financial leasing and credit for investments in tangible fixed assets, training credits (SENCE), among others.

In Chile, capital gains derived by foreign investors from the sale or other disposition of FDI are generally subject to taxation being considered ordinary income and subject to corporate tax (impuesto de primera categoría) and final taxes. The tax treatment depends on the nature of the assets sold, the structure of the investment, and applicable treaties.

Capital gains are taxed under the Income Tax Law. Foreign investors are typically subject to a 35% withholding tax on capital gains unless a lower rate applies under a bilateral tax treaty. Although there are some provisions in the Income Tax Law (Ley de Impuesto a la Renta) that provide some tax relief or even a non-taxable income if some requirements are met. These are as follows.

• Article 107 of the Income Tax Law imposes a 10% single income tax on capital gains arising from the transfer of:
1. shares in publicly traded companies;
2. investment fund units; and
3. mutual fund units, provided the legal requirements are met. Institutional investors, whether Chilean residents or foreign entities, are exempt from this tax.
• The capitals gains from transfer of shares and corporate rights not covered by Article 107 of the Income Tax Law are considered taxable income, except when the transfer is carried out by individuals to unrelated parties. In these cases, approximately EUR8,000 of the gain is qualified as non-taxable income.

Foreign investors may use tax-preferred vehicles that can help defer taxation on capital gains, particularly in jurisdictions with favourable bilateral tax treaties. However, Chile’s anti-abuse rules and controlled foreign corporation (CFC) regime limit the advantages of these structures, ensuring transparency and alignment with global standards.

In Chile, the tax framework includes several measures to prevent tax avoidance in the context of FDI. While there are no specific anti-avoidance rules targeting FDI alone, Chile’s general anti-avoidance provisions apply broadly, including to foreign investors. These rules, established under Article 4 bis, ter, quáter of the Income Tax Law, allow the SII to challenge transactions that lack economic substance or are primarily structured to obtain tax benefits.

Transfer Pricing Rules

Chile has robust transfer pricing regulations, governed by Article 41E of the Income Tax Law. These rules require transactions between related parties, including cross-border dealings, to adhere to the arm’s length principle. This principle ensures that the terms and conditions of related-party transactions are consistent with those agreed upon by independent parties under similar circumstances. It states that the SII may challenge prices, values, or profitability set, or determine them in the absence of established values, in cross-border transactions carried out by taxpayers domiciled or residing in Chile with related parties abroad, when these transactions have not been conducted at market value. The regulation establishes that parties will be considered related when:

• one of them directly or indirectly participates in the management, control, capital, profits, or income of the other; or
• the same person or persons directly or indirectly participate in the management, control, capital, profits, or income of both parties, with all of them being considered related to each other.

Branches, agencies, and permanent establishments are considered related to their headquarters. Additionally, parties will be considered related when transactions are carried out with a party resident or domiciled in a preferential tax regime (Article 41H of the Income Tax Law).

Taxpayers must maintain proper documentation to justify their pricing methods and file an annual transfer pricing affidavit. The SII has the authority to adjust taxable income if transactions are deemed non-compliant, potentially leading to additional taxes and penalties.

Anti-Hybrid Rules

Chile has implemented anti-hybrid provisions aligned with the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan, particularly under its adoption of the multilateral instrument (MLI). These rules aim to counteract tax mismatches arising from hybrid instruments or entities, where income is either double-deducted or exempted in one jurisdiction. For example, deductions for payments made under hybrid arrangements may be denied if the income is not taxed in the recipient’s jurisdiction.

CFC Rules

Chile’s CFC regime targets offshore income earned through foreign subsidiaries, governed by Article 41G of the Income Tax Law. Under these rules, passive income derived by controlled foreign entities – such as dividends, interest, or royalties – is attributed to and taxed in Chile, regardless of whether the income is distributed. These provisions ensure that profits are not indefinitely deferred in low-tax jurisdictions.

General Anti-Evasion Measures

Chile enforces strict measures to deter tax evasion. Foreign investors must comply with reporting obligations, such as registering with the SII and disclosing beneficial ownership structures. Additionally, bilateral tax treaties may include exchange of information clauses, enhancing transparency and preventing base erosion through international co-operation.

Labour legislation in Chile is based on three principles: addressing the power imbalance between employers and employees, ensuring minimum and non-waivable regulations, and applying relative employment stability, meaning dismissals can only occur for specific legal reasons.

These principles are reflected in measures such as establishing a minimum wage, regulating maximum working hours, and classifying labour rights as non-waivable. Employment contracts can only be terminated for legally defined reasons. Labour courts handle disputes, and the DT monitors compliance, interprets regulations, and mediates disputes.

Collective labour rights are regulated at the company level, with no multi-employer or sectoral bargaining. The unionisation rate in Chile is low compared to other OECD countries. Collective bargaining occurs between unions and employers, with the Chilean state supervising procedural formalities and mediating if necessary. The right to strike is constitutionally recognised but strictly regulated. It is only allowed during collective bargaining if no agreement is reached.

Recent legislation emphasises protecting dignity in labour relations, with strict regulations to prevent, report, investigate, and sanction sexual harassment, workplace harassment, and violence. Employers must adopt preventive and corrective measures to eradicate these behaviours.

To understand labour compensation in Chile, it is essential to analyse benefits during employment, upon termination, and related to retirement.

• Benefits during employment: these primarily consist of remuneration, which can be fixed, variable, or mixed. Regulations impose restrictions – a minimum wage must be respected, remuneration must be monetary, conditions for earning must be objective and known to the employee, payment periods cannot exceed one month, and deductions must comply with legal limits. Remuneration is linked to the Chilean social security system, requiring employers to deduct amounts from salaries for social security contributions. Employers must also make additional contributions to fund benefits like health, disability, old age, and death.
• Benefits upon termination: termination of an employment contract is strictly regulated and can only occur for legally recognised causes. If a cause is unjustified, the employer may face penalties, including indemnities with a surcharge of 30% to 100%. Main compensation includes:
1. substitute compensation for prior notice: if the employer fails to provide 30 days’ notice, they must compensate the employee with one month’s salary;
2. compensation for years of service: employees with over one year of service are entitled to one month’s salary per year worked, up to 11 months, with a cap of approximately USD2,500; and
3. compensation for unused statutory leave: employers must compensate employees for any unused annual leave days in monetary terms.
• Benefits during retirement: retirement benefits are not the employer’s responsibility, as Chile’s pension system is based on individual contributions. Employees make mandatory contributions from their salaries to individual accounts managed by pension fund administrators (AFP). These accounts fund retirement pensions when employees reach the legal retirement age (65 for men and 60 for women). Retiring at this age is not mandatory, and employees can continue working if they wish.

As a general rule, Chilean legislation does not establish significant restrictions on the modification of a company’s corporate composition or ownership, respecting the principles of market freedom and the constitutional guarantees that protect property rights, as well as the right to engage in any economic activity not prohibited by law.

However, the recognition and protection of this entrepreneurial freedom also confers safeguards for workers. In this regard, labour legislation expressly provides that modifications, whether total or partial, concerning the ownership, possession, or mere holding of a company, will not alter the rights and obligations of workers derived from their individual employment contracts or collective bargaining agreements, which will remain valid and in effect with the new employer(s).

Consequently, it is recommended that, during preliminary negotiations to acquire or invest in a Chilean company, a detailed evaluation be conducted of the costs associated with the existing individual and collective labour contracts. This is because the contents of these contracts must be fully respected, and their enforceability cannot be disregarded merely due to a change in the company’s ownership. Nonetheless, this does not preclude the possibility of negotiating with workers or their trade unions to modify or adjust the terms of the contracts.

Intellectual property (IP) is an important aspect in screening FDI in Chile. The regulatory framework for industrial property rights is established by Law 20,254 of 2008 and international treaties signed by Chile. The main institutions responsible for IP matters are the Industrial Property Institute (INAPI) and the Intellectual Rights Department of the Libraries, Archives and Museums Directorate (DIBAM).

The process of review and the criteria will depend on the type of IP. The different processes can be summarised as follows.

Trade Mark Registration

Trade mark protection is territorial, meaning it only applies at the national level, and it is temporary, lasting ten years but renewable indefinitely for equal periods upon payment of the applicable fee. The registration process for a trade mark, designation of origin, or geographical indication involves the following stages.

• Application filing: filed in person or online through INAPI.
• Formal examination: INAPI reviews the application for completeness and compliance with regulations:
1. if accepted: the application is published in the Official Gazette, triggering a 30-day opposition period; and
2. if challenged: corrections or clarifications must be submitted within 30 days.
• Final resolution: INAPI’s national director decides to grant or reject the application. Appeals can be made to the Intellectual Property Court.

Patent Registration

Applications for patents related to inventions, utility models, industrial designs, industrial drawings, or integrated circuit designs and topographies can be submitted either online or in person. The process involves the following stages.

• Filing and preliminary examination: applicants submit detailed documentation, including technical descriptions. INAPI verifies formal requirements.
• Publication and opposition: abstracts are published in the Official Gazette. A 45-day opposition period follows.
• Expert review: if no opposition is raised, an expert conducts a substantive examination.
• Final resolution: INAPI grants or denies the patent, which is valid for 20 years from the application date.
• PCT applications: streamlines international patent filing, allowing foreign investors to secure IP protection in Chile as part of a global strategy, according to the framework provided in the Patent Cooperation Treaty.

Copyright and Related Rights

Copyright comprises the legal provisions that safeguard the rights of authors and their intellectual creations, as well as those of copyright holders, including the author’s surviving spouse, heirs, assignees, and legatees. It protects artistic and literary works, original software, databases, and other forms of intellectual property.

• Registration: managed by the Intellectual Rights Department under DIBAM.
• Evidence of ownership: registration serves as prima facie evidence of authorship and protects both moral and economic rights.

Sectors and Industries Subject to Particular Scrutiny

Specific sectors and industries are subject to particular scrutiny. They are as follows.

• Hi-tech and innovation-driven sectors: these industries rely heavily on patents and trade marks. Applications in these sectors may attract additional scrutiny, particularly in cases of high economic or strategic importance.

• Retail and manufacturing: special provisions under Chilean law for retailer names (establecimiento comercial) and manufacturing facility names (establecimiento industrial) underscore the importance of IP protection in these industries.
• IP-intensive industries: pharmaceuticals, biotechnology, and other sectors dependent on patents are likely to be subject to closer examination during FDI reviews due to their reliance on long-term IP rights.

In Chile, nationals and foreigners enjoy the same rights, and in matters of intellectual property protection, there is no exception, with property rights being prioritised over the nationality of the person exercising them.

Industrial property includes patents, utility models, trade marks, collective marks, industrial designs, trade secrets, certification marks, geographical indications, and designations of origin.

The agency responsible for the registration of Industrial Property rights, as referred to in Law 19,039 of 1991 and its Regulations, is INAPI. Additionally, there are other agencies that must approve designations of origin, geographical indications, traditional knowledge, and genetic resources with the Ministry of Agriculture, Agricultural and Livestock Service, the Office of Agricultural Studies and Policies, and the Department of Intellectual Rights and the Council of Culture (DDI).

In Chile, personal data protection is constitutionally recognised in Article 19(4) of the Constitution of Chile and primarily regulated by Law No 19,628 of 1999, recently amended by Law No 21,719, enacted on 13 December 2024. This amendment aligns Chilean regulations with international standards such as the General Data Protection Regulation (GDPR) of the EU, modernising the legislation by consolidating rights and obligations, introducing stricter sanctions, and establishing a specific institutional structure. The new law will come into effect on 1 December 2026, and will apply to public or private natural or legal persons, regardless of their size or sector.

This legal framework will also have international reach when it involves the transfer of data outside of Chile. It will apply in the following cases.

• When a representative, regardless of their location, processes personal data on behalf of a controller established or constituted in Chile.
• When controllers or representatives not established in Chile offer goods or services to data subjects located in Chile, regardless of whether a payment is required.
• When Chilean legislation is applicable to a controller not established in Chile by contract or international law.

Strict enforcement is anticipated with the creation of the Personal Data Protection Agency, which will have regulatory, supervisory, and sanctioning powers. Fines will range from CLP5,000 (approximately USD340,000) to CLP20,000 (approximately USD1.3 million). Smaller companies will have a 12-month adaptation period with warnings instead of fines.