Foreign investment in Chile

OVERVIEW

An open framework, no prior authorization

Chile maintains one of the region’s most open frameworks for foreign investment, with no general prior authorization and full freedom for a foreign investor to own one hundred percent of a Chilean company. The relevant question is not whether you can invest, but under which statute to channel the capital to secure access to the formal foreign exchange market, repatriation of profits and protection against regulatory risk.

Principle of non-discrimination The law allows investment in virtually every sector without restricting full foreign ownership. This openness is complemented by the constitutionally rooted principle of non-arbitrary discrimination, under which the foreign investor receives treatment equivalent to a national.

Narrow sectoral limitations nonetheless remain — maritime cabotage, media, fishing, border areas and strategic activities reserved to the State such as nuclear energy and hydrocarbons — whose details, including the corporate types required in each case, are covered in the Business legal structures chapter of this report.

E S TAT U TO L E Y N ° 2 0 . 8 4 8

The Foreign Direct Investment Statute

The Foreign Direct Investment Statute, contained in Law No. 20,848, is an elective protection framework for eligible foreign direct investment; it replaced the former Decree Law No. 600 of 1974. It was published on June 25, 2015, and the Foreign Investment Promotion Agency that administers it began operating on January 21, 2016. Its application is voluntary: the investor may opt in to obtain the certificate and the associated rights, or channel the capital through the general foreign exchange route.

Scope and concept of investor Under Article 3 of Law No. 20,848, a foreign investor is an individual or legal entity formed abroad, neither resident nor domiciled in Chile, that transfers capital into the country under the terms of Article 2, and includes companies, foundations, foreign States and international organizations. Unlike DL 600, it does not benefit Chileans.

Forms of investment and minimum amount Article 2 of Law No. 20,848 defines foreign direct investment as the transfer into the country of capital or assets of a foreign investor for an amount equal to or greater than USD 5,000,000 or its equivalent in other currencies, which is the minimum amount to opt into the statute. It may take the form of freely convertible foreign currency, physical assets, capitalizable technology, loans from related companies, capitalization of loans, reinvestment of profits, or the acquisition of a stake in a Chilean company conferring control of at least 10% of the voting rights. Access to the Formal Foreign Exchange Market derives from Article 6 and the exchange regulations.

Procedure and investor certificate An investor wishing to opt in must request the certificate under Article 4 of Law No. 20,848 from the Foreign Investment Promotion Agency. The application must evidence the completion of the investment and its supporting documents. The Agency issues the certificate within fifteen days of receipt; once that period lapses without a decision, the rules of Law No. 19,880 on administrative procedures apply.

INVESTOR RIGHTS

Rights that give the operation stability

The statute recognizes, in Articles 5, 6, 8 and 9 of Law No. 20,848, rights that give the operation stability.

Remit abroad the transferred capital and net profits, once tax obligations in Chile have been met.

Access the formal foreign exchange market to convert the investment’s currency and obtain the currency for remittances, at a freely agreed exchange rate.

Exemption from Value Added Tax on the import of capital goods, subject to the legal requirements.

Treatment under the common regime applicable to domestic investors, without arbitrary discrimination. Any claims must be pursued before local courts.

VAT exemption on the import of capital goods Article 8 of Law No. 20,848 ties the VAT exemption for capital goods to Article 12, letter B, No. 10 of Decree Law No. 825. It is available to investors and recipient companies with projects in sectors such as mining, industry, forestry, energy, infrastructure, telecommunications, technological research and development, and the medical-scientific field. The investment must reach at least USD 5,000,000 and the exemption applies to capital goods of projects that will generate revenue no earlier than twelve months after the acquisition of the first goods. To obtain it, the investor files an application with the Ministry of Finance, attaching its foreign investor certificate where applicable. The Ministry must decide within sixty calendar days of receiving all documents; failing that, the application is deemed approved.

Articles 10 to 14 of Law No. 20,848 govern the foreign investment promotion strategy and the Committee of Ministers advising the President of the Republic. In any event, every project must comply with general and sectoral regulations, and may therefore require permits beyond those of the statute.

CAPÍTULO XIV

The Central Bank’s alternative mechanism

A foreign investment may be registered under Chapter XIV of the Central Bank’s Compendium of Foreign Exchange Regulations, as an alternative to the Law No. 20,848 statute. These rules govern loans, deposits, investments and capital contributions from abroad, and do not apply to transactions of up to USD 10,000 or its equivalent. The transaction must be channeled through the formal foreign exchange market and reported to the Central Bank using the corresponding registration forms.

Chapter XIV allows capital inflows to be channeled and reported without requesting the Law No. 20,848 certificate, but it follows a different logic. It is only a foreign exchange and reporting route; by itself it grants none of the statute’s benefits and gives no access to the VAT exemption. Its contribution forms are narrower than the statute’s, since the investment is channeled through the inflow of foreign currency or pesos from abroad, and it also admits capital contributions paid in with shares or equity rights of companies formed abroad, pursuant to Chapter XIV of the Compendium. The statute, by contrast, guarantees access to the formal foreign exchange market to remit capital and profits and the option to request the VAT exemption.

COMPARINGTHEROUTES

The capital inflow routes, side by side Alternative mechanism — Chapter XIV of

↳ Comparison table available in the PDF

P R OT E C T I O N T R E AT I E S

Investment protection treaties and free trade agreements

Chile has an extensive network of international agreements that can give foreign investors additional protection, through Investment Promotion and Protection Agreements and free trade agreements with investment rules. These instruments typically complement domestic law with standards such as fair and equitable treatment, national treatment, most-favored-nation treatment, protection against expropriation without adequate compensation, free transfer of funds and investor–State dispute settlement, subject to each treaty’s requirements.

Coverage depends on the applicable treaty, the investor’s nationality or structure, the protected asset and the reservations agreed by Chile. Before structuring a significant investment, check whether an agreement is in force with the jurisdiction from which the capital will be channeled and whether it contains substantive protection rules or access to international arbitration. The agreements in force can be consulted on the website of the Subsecretaría de Relaciones Económicas Internacionales (SUBREI).