Fewer rules for business creation

Already one of the most business–friendly countries in Latin America, Chile is moving forward on making business creation simpler and more affordable for foreign investors.

The process for setting up a business in Chile is becoming one of the simplest in Latin America. This is particularly true since the passage of a law (number 20.494) in March 2011 that reduces costs and simplifies requirements for the publication and registration of the articles of incorporation.

“Setting up a business in Chile used to be difficult but with the new law it’s getting a lot easier,” says Zandra Valenzuela, a lawyer with the Spencer Global law firm in southern Chile who specializes in setting up small, foreign-owned businesses.

The total process for setting up a business in Chile takes at least three weeks. This is much shorter than the six weeks or so it took before the reform but longer than in the United States, for example, where a company can be set up in a matter of days. However, the Chilean Congress is currently considering additional reforms to further simplify the process.

“We need further improvement because it is still a bit complicated,” Valenzuela says. “Specifically when foreign companies want to set up a small business the articles of incorporation and certificates of good standing take time.”

Reducing red tape

A new Chilean law simplifies the process of starting a business. It reduces the time required to get a business license to one day instead of 14. It also eliminates the 16-day process to verify activities for tax purposes and lifts the $150 charge to publish an extract of the company’s foundation in the Diario Oficial (Official Gazette). And a new business that has all the corresponding permits can obtain its definitive municipal license immediately.

First steps

Still, the process for setting up a business in Chile is one of the simplest in Latin America. The first step is to obtain a Tax Identification Number. This is known in Chile as a RUT (Rol Unico Tributario). This is obtained from the National Tax Service or SII (Servicio de Impuestos Internos), which has offices around the country. The next step is to define the type of company to be created. In Chilean, there are three main types of company (see chart below).

While there is no minimum capital required for any type of company, the SII requires that the capital on hand is sufficient for the type of business created. Service companies will need less capital, for example, than manufacturing companies.

The costs of establishing a company include the legalization of its deed, its publication in the Diario Oficial (Official Gazette) and its inscription in the Companies’ Register. It is recommended to use an attorney for the drafting of the articles of incorporation for all types of companies. Attorney fees depend on the complexity of the business and the location since fees are set by the regional Bar Association. Standard incorporation contracts cost from about $250 to $5,000.

While it is not necessary to speak Spanish to set up a company, the articles of incorporation and the publication and registration of the articles must be written in Spanish.

Once a company has been established, a business start-up statement must be submitted to the SII stating that the taxpayer plans to undertake activities that may be liable to taxation. The company will also need to open a bank account with a Chilean bank.

Some economic activities in Chile may be subject to special permits or requirements. These include health, environmental and municipal permits. Investors should obtain advice about permits required before starting their business.

Employees

In companies with more than 25 employees at least 85 percent must be of Chilean nationality. There are exemptions for specialized technical personnel not available locally, as well as for foreigners married to a Chilean. Foreigners who have been resident in the country for more than five years are also exempt. The minimum working age is 18.

Chile has four types of employment contracts, including indefinite contracts; fixed-term contracts that have a maximum duration of one year or, exceptionally, two years; piecework contracts are used when a worker is hired for a specific task of a finite duration; or professional services contracts.

Employees must be paid at least the minimum monthly wage. For workers between 18 and 65 years of age this is 165,000 pesos (about $350). For those over 65 or under 18 it is 123,176 pesos (about $260).

Employees with more than one year on the job are entitled to 15 working days of vacation a year on full pay. Workers in the Chilean Antarctica and certain regions are entitled to 20 working days.

Contributions

All workers must contribute to a pension fund (AFP or Administradora de Fondos de Pensiones). The worker is free to choose the AFP. The employer deducts the contribution from the employee’s earnings and pays it to the AFP. The minimum total deduction is approximately 12.3 percent of the worker’s gross wage.

Employees also contribute at least 7 percent for health-care coverage, although they can pay more. The employer pays this amount monthly into either the National Health Fund (FONASA or Fondo Nacional de Salud) or to a Health Insurance Institution (ISAPRE or Institución de Salud Previsional) of the worker’s choice.

Foreign investors must enter Chile under a tourist visa. These are issued on arrival by the immigration authorities. After entering Chile as tourists, investors and businesspeople can apply for a Temporary Visa for Investors and Businesspeople which allows them to reside in the country for a year. At the end of the year, they may apply for permanent residence.

Registering websites

An organization called Nic Chile is responsible for registering websites that operate under the ‘.cl’ domain. To register a name under this domain, individuals must be legally domiciled in Chile. Public and private legal entities legally authorized to operate in Chile can also register a website name. Individuals or legal entities not resident in Chile may apply to register a website through a representative domiciled in the country. ●

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For more information:
Bank accounts see www.sii.cl and www.sbif.cl
Legal formalities and services for entrepreneurs and
businesspeople see www.chileclic.cl
Employment contracts see www.inspecciondeltrabajo.cl
Visas see www.extranjeria.gov.cl and www.minrel.gob.cl