How to Register a Sole Proprietorship in Chile?

Chile is a prosperous country that consistently ranks high on lists of political as well as economic indices concerning international businesses. Chile ranks as the 57th most accessible place to conduct or engage in business, per World Bank Report 2020. Chile is an active promoter of policies that encourage international trade besides being a member state of the Pacific Alliance, Rio Group, UNASUR, Mercosur, and APEC.

Foreign investors access productive activities in Chile freely, especially in energy, mining, food, tourism, and infrastructure sectors. For sectors such as media, maritime, and air transportation sectors, there could be specific restrictions. Chile marked a 14% spike in foreign investment in 2015 and became the third biggest FDI recipient in the region. By the end of this quarter of 2022, the FDI in Chile will touch 2000 million USD, per Trading Economics. 

The Chilean business environment promotes offshore investment across all sectors. It also has an active ecosystem of start-ups. Naturally, setting up a sole proprietorship in Chile might be on every entrepreneur’s list.  Read on to learn about how to register a sole proprietorship in Chile. 

Do you Have to Register Your Sole Proprietorship in Chile? 

An individual carrying out a commercial, legal activity is believed to be a micro company or Mipyme. In Chile, such companies where a single person runs the operations are called Empresario Individuals. This is a fundamental business model prevalent in Chile, as per the Internal Revenue Service. The sole owner is responsible for every obligation and duty involved in the company dealings.

For a sole individual, employers need to fulfill the following characteristics:

  • There must be no partners
  • You must pay taxes as per the First Category based on your income
  • The liability you have is unlimited

Sole proprietors have to register their companies with the Registro de Comercio. As part of the registration process,  you must obtain a taxpayer ID and fill out form 4415. You can perform this online or by visiting a local service office with assistance from SII agents while you start a sole proprietorship in Chile.

The laws regulating those who register a sole proprietorship in Chile are-

  1. Decree-Law No. 830 for Tax Code
  2. The Income Tax Law
  3. Sales and Services Tax Laws

Taxes that you must pay every month in Chile as a registered self-employed in Chile are:

  • VAT
  • PPM
  • Withholdings
  • You must have all sales documentation in place. You also bear an obligation to keep Purchase and Sales Books.

You also need to pay income tax annually as the owner of a registered sole proprietorship in Chile.

Benefits of Sole Proprietorship in Chile

Individual enterprises are set up by one person liable for all the business operations. Although not part of any corporate structure, this organization category is regulated under the Law 19587 of 2003. All personal liability stands limited to capital contributed to this company, and the entire company stands liable for all assets.  

Chile offers several reasons for entrepreneurs to expand operations in the country as sole proprietors. With Chile having received FDI inflows of more than $11 billion in 2019 as per data from The World Bank, setting up a sole proprietorship in Chile would be the best way forward.

The sole proprietorship is among the most straightforward business structures for an individual. Its top benefits are-

  • Zero capital needs: Chile has no capital specifications to register a sole proprietorship in Chile. 
  • Minimum obligation: Incorporating a sole proprietorship in Chile does not need any article drafting for association and legal requirements. 
  • Inexpensive process: Setting up a sole proprietorship in Chile involves less paperwork. The process becomes affordable and less time-consuming.
  • Minimum tax obligations: It is enough if proprietors file income tax under sole proprietorship taxes in Chile. Sole investment does not attract any tax liability in Chile
  • Low on bureaucracy: Sole proprietorship allows unlimited liability to the individual owner, making the latter liable for all profits and losses. Incorporating a sole proprietorship means lesser paperwork.
  • VAT Exemption: As a registered self-employed in Chile under sole proprietorship Chilean law, you might not be charged with VAT. Additionally, VAT exemptions are applicable when:
    1. A foreign investor certified under foreign investment law stands exempted from VAT for imports of capital goods usable in developing or operating specific projects in Chile. Related sectors include infrastructure, mining, industrial, energy, and forest projects. The investment must be of a minimum of US$5,000,000, while these projects must fulfill other criteria per VAT Law article 12.10.
    2. VAT stands exempted on receipts that are not considered as income per article 17 of LIR and those subject to the non-resident income taxation under article 59 of this law. This helps avoid double taxation internationally, too!

Documents Required for Registering Your Business in Chile

To start a sole proprietorship in Chile, single owners require certain documents to register their business. To register a sole proprietorship in Chile, owners must keep:

  • Memorandum Articles of Association
  • Chilean ID card (for native people)
  • Tax identity number
  • Licenses and permits (patente comercial) depending upon their business activities.  

When setting up a sole proprietorship in Chile, you must request a certificate from the Foreign Investment Promotion Agency. This needs issuance within 15 days at the most. It helps enable access to applicable systems for all direct foreign investments. With this certificate, you get access to-

  • Right for sending transferred capital abroad along with net profits from investments after you meet tax obligations as per domestic regulations
  • Right for accessing formal exchange market for settling currencies via which all investment stands denominated 
  • Right to remain exempt from all sales and service-related taxes on import of capital goods once such importation meets formal requirements or/and stands subject to procedures established via domestic regulations.
  • Right to non-discrimination as per the legal system applicable to all domestic investors

Other Criteria for Registering a Sole Proprietorship in Chile

While setting up any company such as a sole proprietorship entity, follow a few pointers for incorporating a sole proprietorship in Chile:

  • Company name and owner name – You must register with Chile’s Company Registry. The name availability and appropriateness are verified when setting up a sole proprietorship in Chile.
  • Description of activities – Explain the business nature and its activities.
  • Chile office address – Your setup in Chile must have a formally registered address.
  • Memorandum of Association and the Articles of Association – Present this document to the Conservador de Comercio for final approval when you register a sole proprietorship in Chile. 

How to Register a Sole Proprietorship Company in Chile?

Remember that a sole proprietorship doesn’t come under the Chilean corporate structure. You can also initiate setting up a company in Chile after obtaining a visa and work permit.  

Step 1: Draft business plan after market research 

  • Before setting up a sole proprietorship in Chile, companies should conduct a feasibility test. 
  • It should cover the market analysis, commercial program, and financial plan to set up a company as a sole trader. 
  • Now, draft a business plan to set up a sole proprietorship in Chile. It must have specific project ideation, environmental analysis, and a relevant financial plan.

Step 2: Get the RUT number

  • Sole proprietors can register their business either online or offline. 
    1. To start the online process, visit SII website. 
    2. For the offline process, owners need to visit the local service office. You must follow the same steps as online with SII’s agent assistance to help you with queries.
  • Sole proprietors in Chile need to visit SII website to get the RUT number. A company that will eventually pay taxes needs to have its Rol Único Tributario or RUT.  This comes with 7 to 8 digits, and another check digit. All identifiers must be presented sans punctuation and with this check digit in place.
  • Traders must go to the menu and select ‘RUT and start services’. 
  • Await the Servicio de Impuestos Internos or SII to process the RUT.
  • In about ten days from this, you will receive the identification tax number from the Chilean IRS, and you can begin operations as a sole proprietorship in Chile.

Step 3: Acquire ‘Patente Municipal ‘

  • Once a RUT number is obtained, companies must acquire ‘patente municipal’. 
  • ‘Patente municipal’ is an operating license a company requires to start a business. 
  • Sole traders can obtain a working license from the municipality. 

Step 4: Starting activities

  • Once the above steps are done, one must revisit the SII website. 
  • Go to the RUT e Inicio de actividades section, opt for the ‘starting activities’ option and fill out form 4415. 
  • Sole proprietors can also opt for the ‘declare assets’ option. 

Step 5: Start a bank account

  • Businesses are suggested to open a local bank account for easier transactions in Chile. 
  • It should be a separate bank account rather than a personal account to maintain financial bookkeeping.     

How Can Multiplier Help You Carry Out Business in Chile? 

While sole proprietorships can bring several benefits for foreign entrepreneurs setting up a business in Chile, sole proprietorship taxes in Chile are the same as personal income tax. 

Sole proprietorship Chilean laws have no minimum requirements for several employees or essential capital. However, you are responsible for any business activity as an individual owner.

While the Chilean registration process is straightforward with simple filing procedures, framing up teams, and hiring employees in Chile, payroll and team management could be real challenges you have to overcome. This is where Multiplier is of help. 

Multiplier is a global employment solutions provider exclusively meant to assist sole proprietors looking to expand globally. It offers EOR solutions to assist in managing recruits, onboarding employees, and managing HR-related responsibilities in Chile. Its one-click payroll services help make seamless payments to international employees and freelancers. Multiplier ensures compliance with the local rules and laws to manage any form of business in Chile. 

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Frequently Asked Questions

No, VAT laws and taxes aren’t applicable for a sole proprietorship in Chile.

Yes, the process is easy since a direct corporate structure does not govern this company type. It is taxed as per applicable income tax rates and norms. However, you need to have the relevant registration as Empresa Individual 11 de Responsabilidad Limitada, a tax identification number, and related documentation of compliance with local laws.

The sole obligation in this context is an annual income declaration, and relevant income tax payment is the tax-related compulsion for sole proprietors in Chile. Thus, the only compulsion is to declare income tax on all earnings annually.

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