Setting Up a Corporation

by Aldunate y Compañía Abogados

part 2 of 2

Part 1 looked at three types of legal entities that companies can choose: corporation (Sociedad Anónima), limited partnership (Sociedad de Responsabilidad Limitada), and branch of a foreign corporation (agencia).—Editor

II. Foreign Investment Procedures

To incorporate any of the entities described above, the foreign companies or foreign individuals must make a foreign investment in the amount of the original capital of the company. These contributions can be entered into Chile through the Foreign Investment Status procedures or through the regulations of Foreign Exchange. Both regulations provide the free remittance abroad of all profits, but the capital may only be remitted abroad after one year from the original investment. Foreign investments will be liquidated into Chilean currency (pesos); foreign investors may repurchase such foreign currency to remit profits and capital abroad.

III. Taxation

The entities described above are subject to income tax to be paid at a rate of 15% of all annual profits. The amounts distributed to non-resident or non-domiciled shareholders or partners are subject to the Additional Tax, as a total tax, which is 35% of the distributed amounts, less a credit on the amount already paid by the local company.

IV. Common Questions

The following questions regarding Chilean companies frequently arise.

• Is it possible to set up a limited company, wholly-owned by foreign partners?

  There is no problem setting up a limited company (limited partnership or corporation) in Chile, wholly owned by foreign partners who are individuals or juridical entities. To organize its incorporation, all the information required under this report is necessary. With that information, a draft in both English and Spanish can be prepared, along with a complete report including all other necessary details about foreign investment procedures, taxes, accounting rules, etc.

  A power of attorney is granted by each of the foreign companies or foreign natural persons in favor of the representative(s) who will incorporate the Chilean Company on their behalf, duly legalized before the Chilean Consulate abroad. The foreign investor can be provided a draft of that power of attorney containing all necessary attributions required under Chilean law, to be executed as a decision of the board of directors of each foreign company or as a simple mandate granted by individuals.

• Can the documents/papers be sent abroad for the partners to review?

  The draft of the bylaws and the draft of the power of attorney are remitted by facsimile for partners to review as soon as the information requested under this report has been received.

• How much does it typically cost to set up a company?

  Formation of a company, including Notary Public, Commerce Registry, Official Gazette and power of attorney translation expenses, normally will not exceed US$2,000. but that amount may increase according to the capital of the local entity. If foreign investment is executed through Foreign Investment Status, US$200 is added to that amount. Fees are determined in accordance with the client.

• How long does it take?

  It takes approximately 20 business days to set up a company.

The law firm of Aldunate y Compañía Abogados is located in Santiago, Chile. Its practice areas include taxes, commercial, banking, finance, mining, and foreign investment.