Chile: Custom Duties And Free Trade Agreements In Chile

Last Updated: 16 August 2016
Article by Cody Mcfarlane

Imports into Chile are subject to custom duties at a general flat rate of 6%, however, the Free Trade Agreements (FTA) that Chile has signed during the last 20 years lower this taxation. In most cases, and after a few years of implementation, the FTA´s often lower duty tax to zero.

To determine the exact amount of duty tax a product may be charged, the company must take into account the origin of the product and the FTA that may apply. In addition, considering that different products will be taxed differently, a careful look into each product must be done pursuant to the FTA´s that they may be subject to.

Below you will find all the FTA´s that Chile has signed:

  • (1) Mercosur: Argentina, Paraguay, Venezuela, Brazil and Uruguay. Chile participates as an associated country.
  • (2) European Union: Germany, Austria, Belgium, Bulgary, Cyprus, Croatia, Denmark, Slovakia, Slovenia, Spain, Estonia, Finland, France, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, United Kingdom, Czech Republic, Rumania, Sweden.
  • (3) EFTA: Iceland, Liechtenstein, Norway y Switzerland.
  • (4) P4: Chile, New Zeland, Singapore y Brunei Darussalam.
  • (5) Transpacific Partnership: Australia, Brunei Darussalam, Canada, Chile, United States, Malasia, Mexico, New Zeland, Peru, Singapore, Vietnam and Japan.
  • (6) Pacific Alliance: Chile, Colombia, Mexico y Peru.

To qualify for duty-free treatment under an FTA, an exporter has to certify that a certain percentage of the product to be exported was made in the exporting country. Rules of origin vary by FTA and by product.

With manufacturing supply chains getting increasingly spread out across countries, it gets harder and harder to figure out how much of a product was made in the exporting country and how much was made elsewhere.

There are two methods for determining domestic content – the build-up method and the build-down method, and they're both extremely complicated. It's easier to comply with rules of origin if your product is made entirely in your country using entirely domestic inputs. But those products are less common than they used to be, because supply chains have become increasingly international. Small companies might find it easier to comply with FTA rules of origin than big ones, because in some cases their inputs may be sourced entirely domestically.

Customs law is a complicated regulatory area in which companies are exposed to significant risk. Importers can often benefit from one or more legal opportunities to reduce their overall duty liability. Each of these opportunities, however, brings with it technical legal obligations involving reporting, record keeping, and due diligence in verifying asserted claims. Importers are, therefore, advised to work with internal and external compliance professionals.

Free Trade Zones

Using Chilean Free Trade Zones can be useful for foreign companies looking to export products into the Region. One of our suggestions is for companies to use the various free trade zones to hold stock for the Latin American Region. This allows the company to send product to a client at a much faster rate rather then sending from the home country.

There are several tax free areas with benefits and exemptions, on both custom duties and other internal taxes. Some of the regions that benefit from these incentives are Iquique, the provinces of Arica and Parinacota, the town of Tocopilla, the province of Palena and the Magallanes and the Antartica Region.

The main benefits of these free tax zones are as follow:

  • Customs: Exemption of taxes and other duties that levy imports operations (custom duties, VAT). There is also a simplified custom procedure.
  • Tax: The users under the tax free zone regime are exempt of VAT as long as the imported merchandise remains in the free trade zones (19% on VAT). The entities that set up in the area are also exempt of the 24% First Category Tax (corporate tax), however, there is no benefit for the final taxation, so the repatriation of profit must pay the 35% Additional Tax (withholding tax).
  • Currency Exchange: There is complete freedom to exchange foreign currency. No foreign exchange controls are applicable. In other words, the entry of merchandise into the tax- free zones is not subject to the money exchange regulations applicable to imports.
  • Duty elimination on waste, scrap, and yield loss. Since a manufacturer operating in an FTZ doesn't pay duties on imports until its goods leave the FTZ and enter the country, it essentially is paying for the duties on the raw materials after they have been processed. Thus, duties owed do not include manufacturing by products, such as waste, reducing the amount of goods taxed.

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 "non­ traditional exports" if the aggregate FOB value of exports for any calendar year does not exceed USD$18,000,000. The goods that 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, or ironing are completed.

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. Over the last 15 years we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.