Income Tax for Expats Who Retire in Chile

Expats who retire and take up permanent residency in Chile would eventually be subject to Chilean income tax on their worldwide income. You are considered to be a resident of Chile if it can be assumed from your activities that you plan to stay in the country on a permanent basis, or you spend at least six months in Chile continuously during a calendar year or a total of at least six months over a period of two years.

But according to the Chilean Internal Revenue Service, for the first three years you would only be subject to Chilean income tax on your income from Chilean sources. In some special cases this period can be extended. Chilean source income includes income from goods or assets located within Chilean territory or income for activities performed in Chilean territory.

Pensions and retirement income sourced in another country do not constitute income subject to Chilean income tax. The income you earn on any investments you make in Chile with funds from pensions and retirement income from outside the country would be subject to Chilean income tax.

Residents of Chile who maintain their citizenship in another country may continue to be subject to income tax on their worldwide income in their country of origin, including the income they earn in Chile. But Chile has double taxation treaties with a number of countries and is in the process of negotiating or signing treaties with various others. You can find a list of the countries that currently have tax treaties with Chile on the website This is Chile.

If you work for an employer in Chile you are subject to the Second Category Tax, with progressive rates from 0% to 40%. If you work independently, you are subject to the Global Complementary Tax. Both taxes have the same brackets and rates. The Second Category Tax is withheld from salaries and wages according to tax brackets, and billings for independent services are subject to 10% tax withholding. An annual income tax return is filed to determine the actual income tax liability and to pay any additional tax due or to request a refund.

If you set up a business, your net business profits would be subject to the First Category Tax (20% for 2011, 18.5% for 2012 and 17% for 2013 and later years). This tax can be taken as credit against the Global Complementary Tax on your personal earnings from the business that you take as dividends if the company is set up as a corporation, or withdrawals that you take from a partnership.

Sources:

The Chilean Income Tax System, Servicio de Impuestos Internos Chile

Double taxation treaties, This is Chile

General Aspects of the Chilean Tax System, Concepts and Guidelines, Servicio de Impuestos Internos Chile