Tax benefits / Investment Incentive laws
Benefits that promote investment and entrepreneurship in the region
Free Zone characteristics:
The Free Zone of Punta Arenas is located to the North of the city, with a total surface of 51 hectares.
It is defined as the area of territory covered by customs extraterritoriality. In these places the merchandise can be placed, transformed, finished, or commercialized, without any restrictions. Therefore, if the goods remain in the Free Zone they will be considered as if they were abroad and, consequently, they will be exempt from payment of duties, taxes, rates and other charges that apply to the import of goods under the country’s general foreign trade regime.
Specifically, the tax benefits associated with the Free Zone include:
- First Category Tax Exemption (27%).
- Credit for partners/shareholders 50% First Category
- Exemption from payment of VAT (19%).
According to 2019 statistics, almost 10 million people visited the Free Trade Zone: registering total sales of approximately US$410 million.
Investment Incentive laws:
Ley Austral (Austral Law) (Law Nº 19.606/1999).
This law establishes incentives to stimulate the economic development of the Aysén and Magallanes Regions, along with the Palena Province.
It is addressed to taxpayers who declare First Category Tax on the Income Tax Law, on net income determined by complete accounting records, for investments destined to the production of goods or services within those Regions and Province, in accordance with the provisions established by the law.
This benefit may only be granted to the taxpayers whose investment in goods derived from the tax credit exceeds 500 Unidades Tributarias Mensuales (UTM).
The benefit consists of a tax credit for assets incorporated to an investment project, until December 31, 2025, destined to the production of goods or provision of services. The amount of the credit will be 10%, 15% or 32%, depending on the tranche of investment of the project.
Ley Navarino (Navarino Law) (Law Nº18.392/1985).
By means of this law, a series of tax and customs exemptions were established for a period of 50 years in favor of the taxpayers settled in the Territorio Regional de Magallanes y Antártica Chilena (Magallanes Regional Territory and Chilean Antarctica), located to the south of the limits indicated by this legal body.
It is aimed at companies that exclusively develop industrial and mining activities, exploitation of sea resources, transport, and tourism, provided that their activity means the rational use of natural resources and ensures the preservation of nature and the environment. The term ‘industrial companies’ is defined as those that carry out a set of activities in factories, plants or workshops for the preparation, conservation, transformation, assembly and manufacture of substances, products or articles in their natural state or already manufactured, or for the provision of industrial services, such as milling, dyeing and finishing of articles and others, that are necessary for the implementation of the production processes of the mentioned companies.
The benefits of the exemption are as follows:
- First Category Tax Exemption from the Income Tax Law for profits earned or received in their respective business years.
- The owners will have the right to use, in the determination of their Global Complementary or Additional Tax, the credit established in No. 3 of Article 56 or Article 63 of the Legislative Decree No. 824 of 1974, considering, for that purpose only, that the referred income has been affected by the first category tax.
- The import of foreign goods will be free of customs duties.
- Tax Exemption for Stamp Law affecting imports.
- Exemption from taxes of the Legislative Decree N° 825 of 1974. When the goods are transferred to the Free Zone Extension from the Punta Arenas Free Zone not included in the preferential territory, they shall be taxed as if they were being imported from the Primary Free Zone (Art.21 DS. N° 341 de 1977).
- Reduction of the taxable income under zone gratification of the taxpayers classified in the Second Category of the Income Tax Law.
- Exemption from the additional tax rate of Ex. Article 21 of the Income Law: 20% supplement on the value of the goods produced by them, or on the value of the services rendered, as the case may be, which are carried out or rendered from the benefited territory to the rest of the country.
Law Tierra del Fuego (Law Nº19.149/1992).
This law establishes a preferential customs and tax regime for the districts of Porvenir and Primavera located in the province of Tierra del Fuego, Región de Magallanes (Magallanes Region) and Antártica Chilena (Chilean Antarctica).
It is aimed at companies that exclusively develop industrial, agro-industrial, agricultural, livestock, mining activities, exploitation of marine resources, transport and tourism activities, that are physically settled in lands located within the administrative limits of the indicated districts, provided that their activity means the rational use of natural resources and ensures the preservation of nature and the environment.
The benefits of the exemption are as follows:
- Exemption from the First Category Tax of the Income Law for the profits accrued or received in their commercial activities.
- Owners shall be entitled to use the credit to determine their Global Complementary or Additional Tax, as established in Article 56, paragraph 3, or Article 63 of the Legislative Decree No. 824, considering for that sole effect that the referred income has been affected by the first category tax.
- The import of foreign goods will not be affected by the payment of duties, taxes and other charges levied by Customs, as well as the taxes contained in the DL. N° 825 of 1974.
- Exemption from Land Tax for real estate intended for the business of companies authorized to be established in the territories favored by this law.
Bonus for the hiring of labor (Law Nº19.853/2003).
It is a bonus that encourages the hiring of local labor, granted to current or future employers located in the territories of the Region, in the province of Chiloé and Palena, and in regions X, XI and XII.
It is targeted towards employers in the areas indicated in the previous item, who hire staff on a permanent basis, and must also be residents of that same area.
The benefit for the exemption consists of a bonus of 17% applied to the part of the taxable remuneration that does not exceed $147,000, for the salary paid to the workers with domicile and permanent residence in the corresponding region or province.
This benefit will be incompatible with the one established in Art. 14 of the Navarino Law, thus having to opt for one or the other.