Chile is one of the most important economies in South America, with crucial sectors such as mining and manufacturing. Known for being prosperous, Chile continues to play an important role in globalization. It has the region’s highest human development index, as well as some of the best universities in the world.
Setting up a subsidiary in Chile can be a complicated, costly and time-consuming process. There are a number of laws and regulations that you will need to follow. However, there are many advantages to operating as a subsidiary in Chile, especially if you’re looking to expand in the market.
As with the formation of any new business, opening a subsidiary in Chile is a complicated process with many steps. Businesses need to follow many laws and government regulations when establishing new legal entities in the country, but there is a robust online government portal that makes it possible to set up a Chilean entity from anywhere in the world, including the United States.
To set up a new company in Chile, you will need to follow these steps:
New businesses in Chile will need to register with the Public Commerce Registry and follow the Inicio de Actividades process with Servicio de Impuestos Internos (SII).
To obtain an RUT number, or Rol Unico Tributario, which is the official tax ID for the business, you must first publish a notice in the Official Gazette of Chile. Once the publication has run, visit the SII website to register your taxpayer account.
Businesses which are operating in Chile will need to have a bank account in the country to pay employees and tax obligations.
You will need to contact a citizen residing in Chile or a foreigner with a valid visa to act as your company agent in the country. Often this is a legal professional to whom you have issued a power of attorney to act on your behalf. Some professionals have spent their careers performing this vital role and can prove to be valuable advisors as you establish business operations in Chile.
There is an online service under the Chilean Government Ministry of Economy, Development and Tourism called Tu Empresa En Un Dia (which translates as “your company in one day”). Through this website, business owners can connect with all the necessary resources and filings to establish a business in Chile, including opening a company bank account, applying for a commercial patent, and registering to compete for public tenders.
The Tu Empresa En Un Dia portal presents a simpler alternative to business formation and offers a faster and less expensive method for starting a business in Chile. Some entities with more complex tax situations or that are of a larger size may not be eligible for this method of incorporation.
Under the terms of Chile’s General and Transparent Pro Regime laws governing business activities and taxation, companies need to publish their business in the Official Gazette and obtain a signed public deed. The securing of the public deed is one operation for which your Chilean representative will need power of attorney. The application to obtain your RUT (Rol Unico Tributario) number and set up your taxpayer accounts with Servicio de Impuestos Internos (SII) cannot be initiated until this step has been completed. After that, it takes 10-20 days for the registration to be affirmed.
Once established, you will need to ensure that you follow all of the country’s laws and regulations in order to maintain compliance.
When considering whether to set up a subsidiary entity, it is helpful to outline the drawbacks and advantages of different legal structures. With regard to the decision of whether to establish a subsidiary as opposed to a branch office, here are some insights to consider:
Liability. A separate local Chilean entity can protect the parent company from liabilities that may arise from operating in Chile. This may include legal challenges, financial losses and tax liabilities.
Branding. Having a separate company name for your operations in Chile can help you adapt your company image to Chilean culture and consumer attitudes.
Applicable Laws. Chilean law states that a subsidiary is only governed by the domestic laws of Chile, whereas a branch office connected to the parent company will be regulated by laws governing foreign businesses as well as domestic regulations.
Financial support. A subsidiary may not have as easy access to capital from the parent company or financial markets as a branch would.
Cost. Forming a new and separate legal entity to conduct operations in Chile can be costly and time-consuming.
Taxation. For some global operations, there may be tax advantages to operating in Chile as a branch of the parent company. While the legal structures may be more complex, the tax savings could be beneficial.
If you’re considering expanding your international business to Chile, you may want to consider using an EOR to help establish your operations.
An EOR operates as the employer of record for your operations in a foreign country. The EOR assumes all legal liabilities, including tax and regulatory filings, and will often perform payroll, benefits and other HR administrative tasks on behalf of your company. Your employees in Chile will work for the EOR, and the EOR will charge your company a management fee for administering your employees.
Here are some questions that can help guide your decision-making process.
If you’re planning to hire fewer than ten employees in Chile, a PEO or EOR service would typically present a better option for your international expansion. If you plan to have more extensive options, you would be well served to weigh the pros and cons of setting up your own subsidiary.
If you are expanding your business globally and your existing financial and legal staff are overloaded, they may not have time to learn all the ins and outs of Chilean business regulations and to search for the appropriate information and resources. They may also not be able to keep up with the ongoing work of hiring and payroll functions for your new entity. If your management is already stretched thin, you may want to consider hiring a third-party service to help with these administrative tasks.
Hiring a service to assist you with employee operations in another country will increase the costs of doing business in that country. If you are running on very thin margins and don’t have private equity or venture funding, you may not be able to absorb the added costs of PEO or EOR services.
Companies of all sizes want to hire employees in Chile, but are unsure of how to navigate the country’s payroll and labor laws. Via makes hiring Chilean talent and building your global team seamless. Our easy-to-use platform helps you manage the local HR processes for benefits, payroll, background checks, and more. We have a local team of lawyers and on-the ground experts that understand compliance as you expand abroad.
As your employer-of-record/entity in Chile, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Chile with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.
A subsidiary is a local, independent legal entity that operates separately from a parent company and has its own legal structure. It is not a branch business, which is simply an extension of the original parent company.
There are many steps to setting up a subsidiary in Chile. From publishing your business in the Official Gazette, to obtaining an RUT (Rol Unico Tributario) number and following the Inicio de Actividades process with Servicio de Impuestos Internos (SII), you will need to make sure you have studied the applicable laws closely to establish your business.
Just as in America, the term “sister company” refers to two or more legal entities which are owned by the same parent company, forming a group of companies. Sister companies may benefit from their relationship, such as sharing advertising or marketing campaigns, or even negotiating deals or special pricing together. However, sometimes sister companies have no connection other than that they share the same parent company; they may even compete with each other.
A parent company is liable for the operations of a branch in Chile, which is united with the parent company. But since a subsidiary is a separate legal entity, the parent company is not liable for a subsidiary. In fact, the limit of liability between a subsidiary and its parent is one of the primary advantages of operating in Chile as a subsidiary rather than using an alternative corporate legal structure.