Chilean law provides special incentives for:

•               The oil industry

•               The radioactive substances industry

•               Operations in the Iquique, Arica and Punta Arenas free trade zones

•               Operations in the I, XI and XII Regions and in Chiloé Province

•               Exporters

•               The forestry industry

•               Research and development activities

•               Solar thermal systems


Oil industry

Companies that enter into a petroleum-operating contract with the Chilean State can opt between the normal systems of corporate taxation or be subject to a 50% tax applied on their retribution as contractors.

However, reductions of up to 100% of this substitute tax, or of the normal corporate taxes, can be granted, depending on the degree of risk involved for the contractor. Similar reductions can be granted on taxes, duties and levies on the import of machinery and equipment needed to fulfill the contract.

Foreign nonresident subcontractors are subject to a flat 20% tax on their gross fees.


Radioactive substances

Companies that enter into a contract with Comisión Chilena de Energía Nuclear to explore, exploit or process radioactive substances can be granted a tax treatment similar to that of the petroleum industry.


Free trade zones


A free trade zone is an area of territory surrounding a port or airport that for the purposes of import duties is deemed to be outside Chilean territory. Currently, there are free trade zones in the ports of Iquique, Arica and Punta Arenas.

Merchandise imported into a free trade zone can be held on deposit, exhibited, uncrated, packaged, labeled, divided, repackaged, or sold within the free trade zone. Also, within the free trade zone, imported goods and raw materials can be assembled, finished, connected, manufactured, or transformed.

Enterprises operating in a free trade zone are granted the following exemptions:

•               First Category Tax: all operations within the free trade zone are exempt

•               Value-Added Tax: all operations within the free trade zone are exempt

•               Import duties: foreign goods imported into the free trade zone are exempt

Sales and transfers of merchandise from a free trade zone to another area of the country are considered to be imports and generate import duty and Value-Added Tax when they are moved out of the free trade zone. However, the First Region and the Punta Arenas Region are considered free trade extension zones. Goods transferred from the free trade zones to these areas are taxed with a single 0.6% tax, which can be credited against VAT. This tax increases or decreases in proportion to the changes in the average customs duty rate.

In the year 2002, a free trade zone was created in the Second Region for the sale of mining products.

The free zone in Arica has benefits and tax incentives for manufactured products. Also, there are export centers with similar characteristics to those of the free trade zones, and it has a special regime for manufacturing industries to be installed in the area, among other measures whose purpose is to develop the local economy.


Regional incentives

Activities located in the extreme North (I Region) and extreme South (XI and XII Regions and Chiloé Province) are granted a partial exemption on the personal income tax of employees. A deduction equivalent to that granted to civil servants in the Region is allowed against personal taxable income.

In addition, employers receive a grant equivalent to 17% of taxable remunerations with annual limits.

These benefits will be lost if the taxpayer does not pay taxes on a timely basis.

Under the “Ley Austral” tax credits are granted for investments in fixed assets.

There are also special tax incentives for business in the Tierra del Fuego and Antarctic Territories. Effective January 1, 2002, industrial and manufacturing companies based in the Tocopilla Province, who produce supplies parts and pieces for the mining industry have the following benefits:

1              A 25-year period exemption from the Corporate Tax.

2              Exemption from customs duties on imports of goods related to their business.

3              Other free trade zone special regulations.


Export incentives

Private export warehouses allow exporters to use foreign raw materials and parts in their manufacturing processes without paying custom duties, provided the finished products are exported within certain time periods. 

As exports are zero-rated for VAT, exporters obtain reimbursement of all input VAT borne on purchases of goods and services relating to their export activities. This reimbursement is also available for companies that transport freight and passengers to and from Chile, supply food and beverages to planes and ships in transit, or render services deemed to be exports by the customs service to non-resident entities. 

As of January 1, 2003, the drawback has been reduced to 3% of the value of "non­traditional exports" if the aggregate FOB value of exports for any calendar year does not exceed $18,000,000. The goods which are excluded from this benefit are detailed in a list published no later than March 30 of each year.

Exporters can obtain reimbursement of customs duties paid on imports of raw materials, semi-manufactured products, and parts when these are used in exported products or services. The customs law allows for the reimbursement of duties on products which are re-exported after only minor processes, such as assembling, packaging, finishing, ironing and labeling.

The exporter must choose between this reimbursement and the "non-traditional exports" drawback when eligible for both benefits.


Forestry industry

There are incentives for reforestation of marginal and degraded land. Incentives have also been created for small farmers.

Research and development activities

Law No.20,241, published in the Official Gazette on January 19, 2008, establishes a tax incentive for private investment in research and development. Corporate taxpayers, who declare their taxes through full accounting records can benefit from this incentive. 

In general, the incentive consists in a credit against the corporate tax. This credit is equivalent to 35% of all payments related to research and development contracts duly certificated by The Corporation for Development and Production (CORFO). Additionally, these taxpayers must comply with other requirements established by this law.


Solar thermal systems

According to Law No.20,365 published in the Official Gazette on August 19, 2009, construction companies will have the right to deduct from the obligatory provisional payments established in the Income Tax Law, a credit equivalent to all or part of the value of the solar thermal systems installed in the real estate they built.