How to Set Up a Subsidiary Company in Chile?

When setting up a subsidiary in Chile, understanding the different types of structures is crucial. The choice of structure will affect the operational control, ownership, and tax obligations of the subsidiary.

Chile offers various subsidiary structures, each designed to suit different business needs and goals. This guide will explore the most common types of subsidiaries in Chile, step-by-step process, benefits legal structures available and much more.

By gaining an understanding of this information, you can make an informed decision that aligns with your business strategy and objectives.

Key Takeaways

• Chile offers access to key Latin American markets, making it an attractive base for regional expansion with over 200 million potential consumers.
• Setting up a subsidiary in Chile involves registering with the authorities, obtaining a tax ID (RUT), and complying with labor and financial reporting regulations.
• Chile’s corporate tax rate is 27%, with incentives for sectors like renewable energy and R&D, making it favorable for foreign investment.
• Comprehensive labor laws require subsidiaries to meet employee benefits, contracts, and social security obligations for compliance.

Choosing the right structure for your subsidiary in Chile depends on your goals, operational needs, and the level of control you want to maintain.

What Are the Types of Subsidiaries in Chile?

When setting up a subsidiary company in Chile, it is essential to understand the different types of subsidiaries available and their implications. Below are the most common types of subsidiary structures in Chile:

1. Wholly-Owned Subsidiary

A wholly-owned subsidiary means the parent company retains full ownership and control of the subsidiary. This structure allows for the complete autonomy of the subsidiary’s operations and the implementation of global strategies without external interference. It is ideal for businesses that want to operate independently while still benefiting from Chile’s favorable investment climate.

2. Joint Venture Subsidiary

In a joint venture subsidiary, the parent company partners with a local business in Chile. This structure allows companies to share ownership and responsibilities. Joint ventures are often used to mitigate financial risks and leverage local knowledge and networks. However, managing decision-making and profit distribution can sometimes be complex.

3. Limited Liability Company (LLC)

The LLC, known as “Sociedad de Responsabilidad Limitada” (SRL) in Chile, is a popular structure for small to medium-sized businesses. It offers limited liability to its shareholders, meaning their personal assets are protected. The minimum capital required is relatively low, and the governance structure is flexible, making it an attractive option for foreign investors.

4. Corporation (S.A.)

A Corporation, or “Sociedad Anónima” (S.A.), is more common for larger subsidiaries that wish to raise capital through public offerings. This structure requires more regulatory compliance and a higher minimum capital investment but allows businesses to access public capital markets and offers a more complex governance structure, suitable for large-scale operations.

Step-by-Step Guide to Setting Up a Subsidiary in Chile

Setting up a subsidiary company in Chile involves several essential steps. The process is designed to be straightforward, but understanding the legal and regulatory framework is crucial for smooth operations. Below is a simple guide on how to set up a subsidiary in Chile.

Step 1: Choose the Right Business Structure

Select a business structure, often a Limited Liability Company (LLC or SRL), while setting up a subsidiary company in Chile. Other options include joint ventures or wholly-owned subsidiaries, each impacting your tax obligations and management.

Step 2: Register the Parent Company’s Documentation

Submit key documents such as the incorporation certificate, articles of association, and proof of good standing from the parent company. These must be translated into Spanish for approval.

Step 3: Reserve the Company Name

Before moving forward, it’s essential to reserve a company name with the Chilean Company Registry (Registro de Comercio). Ensuring your company name is unique is a necessary step in how to set up a parent company with subsidiaries in Chile, ensuring that the name is available for use.

Step 4: Prepare and Notarize the Articles of Incorporation

Draft and notarize the Articles of Incorporation and Memorandum of Association, then submit them to the Conservador de Comercio for formal registration. Once approved, the company will be officially recognized and registered in the commercial registry.

Step 5: Register with the Chilean Tax Authority (SII)

For setting up a subsidiary company in Chile, register your subsidiary with the Servicio de Impuestos Internos (SII) to obtain a RUT, necessary for VAT and corporate income tax compliance.

Step 6: Appoint a Local Representative

Appoint a Chilean resident to act as the local representative for the subsidiary, managing legal and tax matters and ensuring compliance. This individual will serve as the primary point of contact with local authorities and handle day-to-day regulatory requirements.

Step 7: Register the Subsidiary with the Civil Registry

Once all necessary documents are in order, the subsidiary must be officially registered with the Registro Público de Comercio. This step is essential when opening a subsidiary in Chile. The company will be assigned a unique identification number (RUT), making it a legally recognized entity in the country.

Step 8: Open a Business Bank Account

Another crucial step in how to start a parent company in Chile or setting up a subsidiary company in Chile is opening a business bank account. Appoint a Chilean resident to act as the local representative for the subsidiary, managing legal and tax matters and ensuring compliance.

Step 9: Obtain Required Licenses and Permits

Apply for necessary permits or licenses based on your business type, such as health or environmental permits, to comply with Chile’s regulatory framework. This may involve submitting specific documentation to local authorities, undergoing inspections, or meeting industry-specific regulations. It’s crucial to understand the requirements for your sector, as non-compliance can lead to fines or operational delays.

Step 10: Ongoing Compliance and Reporting

After setting up a subsidiary in Chile, ensure ongoing compliance by filing annual tax returns, submitting financial statements, and following labor regulations. The SII requires regular VAT and corporate tax filings to avoid penalties.

Key Benefits of Establishing a Subsidiary in Chile

Setting up a subsidiary company in Chile offers several advantages for foreign businesses aiming to expand into the Latin American market. Below are the key benefits:

• Access to Latin American Markets: Chile offers access to its market and over 200 million consumers in Latin America, supported by strong trade relations and free trade agreements.
• Favorable Tax Policies: Chile’s 27% corporate tax rate and tax treaties minimize liabilities and double taxation, providing a stable environment for efficient business operations.
• Stability and Transparency: One of the strongest selling points for how to establish a subsidiary company in Chile is the country’s stability. It creates a secure investment climate and simplifies compliance with local laws.
• Skilled Workforce: Chile has a skilled, educated workforce in sectors like technology and engineering, offering competitive labor costs for businesses.
• Limited Liability Protection: Subsidiaries in Chile are separate legal entities, protecting the parent company from liabilities, litigation, and financial risks while operating in the market.

Essential Documents for Registering a Subsidiary in Chile

Setting up a subsidiary company in Chile requires the submission of several key documents to ensure compliance with local regulations. Below are the essential documents you will need to provide:

• Power of Attorney: Signed and notarized by the parent company’s representative, granting authority for registration.
• Certificate of Good Standing: A recent certificate from the parent company’s home country, apostilled for use in Chile.
• Incorporation Deed or Bylaws: Notarized and apostilled document outlining the parent company’s structure and governance.
• RUT Registration: The subsidiary must obtain a Rol Único Tributario (RUT) from Chile’s SII for tax and operational purposes.
• Tax Number for Foreign Shareholders: Each foreign shareholder must obtain their own RUT.
• Company Address in Chile: A physical address, verified by a lease or utility bill.
• Translation and Notarization: All documents must be translated into Spanish and notarized.
• Incorporation Deed for the Subsidiary: Must be drafted, notarized, and registered with the Commercial Registry.

Legal Structures Available for Subsidiaries in Chile

Chile offers several legal structures for subsidiaries, each suited to different business models. When setting up a subsidiary company in Chile, choosing the right structure is crucial as it affects liability, taxation, and regulatory compliance. Below are the most common legal structures:

• Limited Liability Company (LLC or SRL): Best for smaller businesses, requiring 2-50 shareholders, offering limited liability, and no minimum capital. It’s flexible with fewer regulatory obligations.
• Corporation (S.A.): Suited for larger companies or those raising capital, allowing unlimited shareholders, limiting liability to capital contributions, and requiring a board of directors. It has strict financial reporting requirements.
• Branch Office: Operates under the parent company’s name with no separate legal status. The parent is fully liable, and it requires no capital but must register and obtain a tax ID. Ideal for businesses seeking a direct presence in Chile.

Taxation Rules and Incentives for Subsidiaries

Chile provides an attractive tax environment for foreign businesses setting up subsidiaries. The following outlines the key tax rules and incentives available for companies operating in the country:

1. Corporate Income Tax (CIT)

• Standard Rate: 27% under the general regime.
• SMEs: Companies with sales under USD 2.8 million can opt for a 25% rate.
• Tax Credit System: Allows credit for taxes paid at the corporate level against dividend tax.

2. Value-Added Tax (VAT)

• Standard Rate: The standard VAT rate in Chile is 19%, applicable to most goods and services.
• Exemptions: Includes exports, education, healthcare, and specific financial services.

3. Investment Incentives

• Foreign Investment Promotion Law (Decree Law No. 600): Foreign investors can secure a fixed 42% tax rate for up to 20 years.  
• Research and Development (R&D) Incentives: Tax credits for up to USD 1 million annually on eligible R&D expenses.  
• Renewable Energy Incentives: VAT refunds and potential tax exemptions for renewable energy projects.

Regulatory and Compliance Requirements

While setting up a subsidiary company in Chile, remember that they are required to adhere to local tax regulations, labor laws, and financial reporting standards to operate legally. Here are those regulations:

• Legal Representation and Formation: A legal representative (Chilean or foreign with a visa) is required. The subsidiary must have 2 to 50 shareholders and register with the SII for a RUT.
• Tax Compliance: Corporate tax is 27%. Subsidiaries must file annual returns and monthly/quarterly VAT returns at 19%.
• Labor Laws: Written contracts, social security contributions, and employee benefits (leave, holidays, maternity) are mandatory.
• Financial Reporting: Audited financial statements must be submitted to the SII. Larger companies may need an external auditor.
• Post-Incorporation Compliance: A public deed is registered with the Chilean Registry of Commerce and published in the Official Gazette after incorporation, and parent company documents must be notarized and translated.
• Ongoing Obligations: Quarterly VAT and annual tax returns must be filed. Changes in ownership or directors must be reported.

Do You Need a Physical Address for a Subsidiary in Chile?

Yes, a subsidiary in Chile must have a registered physical address for receiving official correspondence, tax notices, and handling legal matters. 

A large office space is not required, and many businesses use virtual offices to meet this requirement while minimizing overhead costs.

Operational Setup for a Subsidiary in Chile

After registering your subsidiary in Chile, you need to set up operations. This involves securing office space, hiring staff, and ensuring compliance with local laws. Choose a location based on accessibility and market demand.

You must comply with labor laws, including contracts, benefits, and social security. Additionally, set up accounting and reporting systems, and register with relevant tax authorities for VAT, social security, and other obligations.

How to Open a Business Bank Account for a Subsidiary?

To open a business bank account for your subsidiary in Chile, follow these simple steps to ensure a smooth and efficient process.

• Choose a Bank: Select a bank offering business accounts. Consider fees, services, and language support.
• Required Documents: Prepare these key documents:
  • Incorporation Deed: Proof of subsidiary formation.
    
  • RUT (Rol Único Tributario): Tax ID number.
    
  • Legal Representative’s ID: Identification for the authorized representative.
    
  • Proof of Business Address: Lease agreement or utility bill.
    
  • Power of Attorney: Notarized authorization for the representative.
    
• Submit Documents: Present the required documents to the bank. Additional paperwork may be requested.
• Review Process: The bank will review your documents. This process takes 5-10 business days.
• Account Setup: Once approved, the account will be created, and you’ll receive the necessary details.

Is an Operating Agreement Necessary for a Subsidiary?

An operating agreement is not mandatory for a subsidiary in Chile, but is recommended, especially for LLCs (SRLs). It clarifies:

• Shareholder Roles: Defines shareholder responsibilities and rights.
  
• Profit Distribution: Outlines how profits and losses are shared.
  
• Decision-Making: Establishes decision-making processes.
  
• Dispute Resolution: Provides a framework for resolving conflicts.
  
• Management Structure: Specifies the management setup.

Though not legally required, it helps prevent disputes and ensures clear governance.

Opening a Branch vs. a Subsidiary: What’s the Difference?

When considering setting up a subsidiary company in Chile, foreign businesses may wonder whether to establish a subsidiary or a branch. The main differences include:

Feature	Branch	Subsidiary
Legal Identity	No separate legal entity.	Separate legal entity.
Liability	Parent company is fully liable.	Limited liability for the parent.
Taxation	Taxed as part of the parent company.	Taxed separately, typically 27%.
Setup Time	Faster, fewer requirements.	Longer setup, more requirements.
Costs	Lower setup and maintenance costs.	Higher setup and ongoing costs.
Control	Full control by the parent.	More operational autonomy.
Regulatory Compliance	Fewer regulations.	More regulatory obligations.
Long-Term Growth	Not ideal for growth.	Better for long-term growth and expansion.

How Commenda Can Help You Expand in Chile

Setting up a subsidiary company in Chile can be a complex process, but Commenda simplifies it by offering tailored support to ensure your expansion is seamless. Whether you’re looking for expert guidance on how to create a subsidiary in Chile or need assistance with local regulations and compliance, Commenda is here to help. We provide the necessary tools and services to make the process efficient and stress-free.

Here’s what Commenda offers:

• Fast Business Incorporation Process: We simplify registering your subsidiary with Chilean authorities for quick, accurate submissions.
• Compliance Dashboard: Track important deadlines for tax filings and reports to stay compliant and avoid penalties.
• Secure Document Storage: Store your business documents securely in an encrypted cloud system for easy access.
• Local Expert Network: Access a network of Chilean notaries, accountants, and legal advisors to assist with subsidiary formation.

With Commenda’s support, setting up a subsidiary in Chile becomes a smooth and straightforward process. Talk to an expert for free today to get started on your business expansion in Chile.

FAQs

Q: How much does it cost to set up a subsidiary in Chile?

The cost of setting up a subsidiary company in Chile depends on several factors, including the type of business structure you choose and the complexity of your operations. However, additional expenses such as permits, licenses, and ongoing operational costs may apply.

Q: How long does it take to register a subsidiary in Chile?

The process of setting up a subsidiary in Chile typically takes around 2-4 weeks, assuming all required documents are prepared and submitted correctly. This timeline can vary depending on the business structure, local government processing times, and whether all necessary permits are obtained in advance.

Q: Can a foreigner fully own a subsidiary in Chile?

Yes, a foreigner can fully own a subsidiary in Chile. Chile allows 100% foreign ownership of companies, making it an attractive destination for international investors looking to expand into the South American market.

Q: What are the common challenges when opening a subsidiary in Chile?

Common challenges when setting up a subsidiary in Chile include navigating local regulations, complying with labor laws, understanding the tax system, and securing the right permits.

Q: Do subsidiaries in Chile need a local director or representative?

Yes, subsidiaries in Chile must appoint a local representative or director. While this person does not need to be a Chilean citizen, they must reside in Chile and handle day-to-day legal and operational duties on behalf of the subsidiary.

Q: What are the annual compliance requirements for subsidiaries in Chile?

Subsidiaries must file annual tax returns, submit audited financial statements, and comply with labor regulations, including registering employees with the social security system.

Q: Can a subsidiary hire employees directly in Chile?

Yes, a subsidiary can hire employees directly, but it must comply with labor laws, including contracts, benefits, and social security contributions. Work visas are required for foreign employees.

Q: What happens if a subsidiary fails to meet compliance rules in Chile?

Failure to meet compliance rules in Chile can result in penalties, including fines, suspension of operations, or even the dissolution of the subsidiary.

---