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Legal-Economic Aspects of Investing in Chile Gustavo Cuevas InvestChile March 2012
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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
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First Part: Why Chile?
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1. Dynamic Politics
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A. Political Stability Chile stands out in the region Chile stands out in the region Peaceful cohabitation of all political sectors Peaceful cohabitation of all political sectors Continuity of public policies Continuity of public policies
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B. Legal Safety Well-defined political and legal structure Well-defined political and legal structure Clearly separated powers Clearly separated powers Legalistic culture Legalistic culture Special protection for foreign investors Special protection for foreign investors
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C. State Support There is political will. The necessary Instruments to implement innovative and technological transfer businesses 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 Existences of instruments that favour setting up industries in different regions of Chile
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D. Flexibility of Labour Law Freedom to hire and dismiss employees Freedom to hire and dismiss employees Low employer contributions Low employer contributions Solutions to impartial conflicts Solutions to impartial conflicts Clear, uniform and stable regulations Clear, uniform and stable regulations
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2. Economic Model
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A. Open Economy Widespread national consensus on the importance of free trade Widespread national consensus on the importance of free trade Low import duties Low import duties Free movement of capital, goods and people Free movement of capital, goods and people No discrimination against foreigners No discrimination against foreigners
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B. Taxes Low corporation taxes Low corporation taxes Trade agreements to prevent double taxation Trade agreements to prevent double taxation No tax discrimination between locals and foreigners No tax discrimination between locals and foreigners Clear, uniform and stable regulations Clear, uniform and stable regulations Modern technologies applied in tax inspection. Modern technologies applied in tax inspection.
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C. Banking System An autonomous Central Bank with a clear, constitutional mandate An autonomous Central Bank with a clear, constitutional mandate Strict banking regulations Strict banking regulations Autonomous and professional regulatory organisation Autonomous and professional regulatory organisation Professional and capitalised banks Professional and capitalised banks Important technological leadership Important technological leadership Nationwide coverage Nationwide coverage
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3. Trade Relations
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A. Communication Infrastructure Extensive coverage of low-cost, data communication Extensive coverage of low-cost, data communication Appropriate road infrastructure Appropriate road infrastructure Appropriate and low-cost port and air infrastructure Appropriate and low-cost port and air infrastructure Infrastructure planning based on Chile’s growth needs Infrastructure planning based on Chile’s growth needs Proximity between production centres and shipping areas Proximity between production centres and shipping areas
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B. Free Trade Agreements Chile has signed the most free trade agreements in the world, covering 89% of the world GDP. 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 The contents of these agreements is extensive and they cover key economic sectors There is a free trade agreement between the EU y Chile. There is a free trade agreement between the EU y Chile.
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C. Tax conventions tending to avoid double taxation Agreement to avoid double taxation between Chile and Belgium (since 2011) Agreement to avoid double taxation between Chile and Belgium (since 2011) Tax Variable without negative effect Tax Variable without negative effect Clear and specific regulations to ensure tax neutrality Clear and specific regulations to ensure tax neutrality
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D. Common Cultural Values with Europe Intolerance of corruption Intolerance of corruption Respect agreements Respect agreements Work culture Work culture Efficient State Efficient State Integrated society Integrated society
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E. Chile : Investment Platform Time zone for the Americas Time zone for the Americas Knowledge Knowledge Language Language Agreement with MERCOSUR and free trade agreements Agreement with MERCOSUR and free trade agreements Personal safety Personal safety
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Second Part : Setting up Business in Chile
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1. Protection of Foreign Investments
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A. Constitutional Level Property rights Property rights Economic freedom Economic freedom State’s subsidiarity principal State’s subsidiarity principal
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B. Legal Level Foreign Exchange Regulations at Banco Central de Chile (Chapter XIV) Foreign Exchange Regulations at Banco Central de Chile (Chapter XIV) Decree Law No. 600 (DL.600) Decree Law No. 600 (DL.600)
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C. Contents of Foreign Investment Contract No discrimination No discrimination No discretion in procedures No discretion in procedures Free access to production sectors Free access to production sectors Contract with the Chilean State Contract with the Chilean State Access to the formal exchange market Access to the formal exchange market Repatriation of capital and profits Repatriation of capital and profits Choice of taxation system Choice of taxation system Various investment methods Various investment methods
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2. Different Types of Businesses
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Joint stock company Joint stock company Public Limited company Public Limited company Limited liability company Limited liability company Incorporation period Incorporation period Incorporation expenses Incorporation expenses Foreign participation in companies Foreign participation in companies
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3. Residency for Foreigners in Chile
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A. Visa For investors For investors Subject to a work contract Subject to a work contract
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B. Taxes Taxes are mandatory in Chile Taxes are mandatory in Chile Agreement to avoid double taxation Agreement to avoid double taxation Agreement to recover retirement funds Agreement to recover retirement funds Specific work contract regulations Specific work contract regulations
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End Gustavo Cuevas InvestChile March 2012
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