Article 19 of the Political Constitution of Chile establishes economic public policy and the principles of economic freedom and the right of ownership, thus providing the framework for foreign investment rules in Chile. The Political Constitution also gives the law establishing the functions and powers of the Central Bank of Chile the rank of a constitutional organic law.

Foreign Investment Statute or Decree-Law 600

Law on Expropriation Procedure

Law No. 18,657 on Foreign Capital Investment Funds

Compendium of International Foreign Exchange Rules of the Central Bank of Chile.

Article 1 of Decree-Law 600 establishes that "Foreign natural and legal persons, and Chileans resident and domiciled abroad, who transfer foreign capital to Chile and enter into a foreign investment contract shall be governed by the provisions of this statute." Also, foreign investment is identified as capital brought into the country and duly valued in accordance with the modalities established in Article 2 of that law.

Chapter XIV of the Compendium of International Foreign Exchange Rules of the Central Bank of Chile regulates all capital contributions in foreign exchange coming from abroad.

Yes, the Foreign Investment Committee, representing the State of Chile, signs a "contract-law" with the foreign investor wherein the investor and the investment are identified. For its part, the Central Bank registers investors and their investments when the capital is channeled through the mechanisms established in the Compendium of International Foreign Exchange Rules.

Yes, see point 2.1.

Yes, provided that the national provides evidence of domicile and residence abroad in accordance with Article 1 of Decree-Law 600.

Under Article 8 of Decree-Law 600, enterprises which are beneficiaries of both local and foreign capital are entitled to the benefits established in this Article up to the amount of the foreign investor’s share in the enterprise. These benefits correspond to the invariability of the Value Added Tax and Tariff regimes in force on the date of the contract for the capital goods in the investment project, provided that such goods are on the Ministry of Economy’s list of products eligible for those benefits and that they are not produced in the country.

There is no limitation on the percentage of the foreign investment share, hence the composition of the capital of beneficiary enterprises may be 100% foreign.

Foreign investment contracts have no limit on their duration. However, the fixed tax mechanism, which investors can opt for, expires after 10-20 years, depending on the case.

In general, foreigners working in Chile are subject to the same laws as Chilean employees. That notwithstanding, presidents, managers, and the majority of directors or board members are required to be Chilean nationals under the following legal rules: Decree-law 3,059 on the Merchant Marine; National Television Council Law 18,838; Law 16,643 on Advertising Abuses; and Law 18,916, the Aeronautics Code. Similarly, the Navigation Law states that, in order to fly the national flag, the captain of the ship, officers and crew, must be Chilean.

On the other hand, the Labor Law requires that at least 85% of the employees of a particular employer must be Chilean nationals. Companies with no more than 25 employees are exempted from this rule.

There are no restrictions on remittances abroad. Chapter XVII of the Compendium of International Foreign Exchange Rules of the Central Bank establishes procedures (not mandatory) for paying salaries in foreign currency.

Article 19, No. 21 of the Political Constitution of the State establishes the principle of economic freedom. This guarantees every national or foreigner the right to practice any economic activity that is not contrary to morals, public order, or national security, abiding by the legal rules regulating that activity.

The principle of economic nondiscrimination in Chile is enshrined in Article 19, No. 22 of the Political Constitution, which establishes that the State and its agencies may not be arbitrarily discriminatory in economic treatment.

Most economic activity in Chile is conducted by the private sector. Public enterprises and private enterprises (national or foreign) compete under the same conditions. Under Article 19, No. 22 of the Constitution, only by virtue of a law passed by a qualified majority can the State and state entities conduct business activities subject to ordinary law.

Foreign investors generally enjoy national treatment in the conduct of their economic activities, under the same conditions as national investors. Thus, foreign equity can be found in the different areas or activities that produce goods and services in the economy.

There are no economic sectors or activities reserved exclusively for the State.

That notwithstanding, the Political Constitution establishes that all mines are under the absolute and exclusive control of the State. All persons, nationals and foreigners alike, have the right to concessions for exploration or exploitation of mines. All metallic and non-metallic mined substances are subject to concession, with the exception of liquid or gaseous hydrocarbons and lithium, all sorts of deposits on national ocean space, which is totally or partially located in important zones national security (in the latter case, there are administrative concessions). Also, natural atomic materials (uranium and thorium) cannot be subject to any type of legal act unless the Chilean Nuclear Energy Commission is party thereto.

No sectors or economic activities exclude foreign investment. That notwithstanding, foreign investors must adhere to the rules regulating access to some specific sectors:

1) Decree-Law 1939 of 1977 on acquisition, administration, and disposal of State property.

2) Decree-law 3,059 of 1979 on the National Merchant Marine. Decree-law 2,222 of 1978, Navigation Law.

3) Law 18,892 of 1992 on Fishing and Fish Farming; Decree-Law 2,222 of 1978, Navigation Law.

4) National Television Council Law 18, 838 and Law 16,643 of 1967 on Advertising Abuses.

5) Law 18915 of 1980 on Aeronautics Code and Decree-Law 2,564 of 1979 on Commercial Aviation.

Yes, in maritime fishing and transportation (air and maritime).

No.

Yes. In addition, the foreign investor that participates in privatization processes under Decree-Law 600, shall enjoy the benefits provided by that rule.

The Constitution establishes national treatment for both national and foreign investors. Article 9 of the Foreign Investment Statute establishes that foreign investment and the enterprises participating in it shall also be subject to the regular legal regime that applies to national investment, and may not be discriminated against either directly or indirectly.

The Chilean government and its agencies grant the foreign investor treatment no less favorable than that afforded to nationals. For due protection of this right, the law establishes that any legal or regulatory provisions applicable to most of a particular productive activity and that excludes foreign investment shall be deemed discriminatory. Similarly, those rules that establish sectoral or zonal exception regimes are discriminatory if foreign investment does not have access to them.

Ownership is fully and absolutely protected by the provision contained in Article 19 No. 23 and 24 of the Political Constitution of Chile.

The only grounds for expropriation are constitutional, namely: public utility and national interest. In both cases a law is required authorizing expropriation.

If the parties fail to reach an agreement, compensation is determined by the courts after an expert report; said amount must be equivalent to the total value of the property and be paid in advance and in cash.

No.

Yes, this is expressly established in the Chilean Constitution in Article 19, No. 24. Article 19, No. 25 establishes constitutional protection of intellectual and industrial property.

Copyright and related rights.

These are regulated by Law 17,336 of October 2, 1970 and its regulations, Education Decree 1,122 of May 17, 1971.

Chile is also party to the following conventions:

Industrial property.

Regulated in Law 19,039 of January 25, 1991 and its regulations, Supreme Decree 177 of 1991 of the Ministry of Economy. The rules regulate trademarks, patents, utility models, and industrial designs.

Chile is party to the Paris Convention on the Protection of Industrial Property.

The Compendium of International Foreign Exchange Rules recognizes capital contributions in foreign exchange or credit.

Similarly, under the rules of Decree-Law 600, foreign investment may enter the country and be valued in accordance with the following modalities:

1) Freely convertible foreign currency brought into the country through its sale at an entity authorized to operate on the formal foreign exchange market, at the most favorable exchange rate available to foreign investors at any such entity.

2) Tangible assets of any description or condition, which shall be brought into the country in accordance with the general provisions governing imports without foreign exchange cover. Such assets shall be valued in accordance with the general procedures applicable to imports.

3) Technology in its various forms when eligible for capitalization shall be valued by the Foreign Investment Committee based on its actual price on the international market within a 120-day period, after which time, if no such valuation has been issued, the contributor’s sworn estimate shall be used. The ownership, use and enjoyment of the technology forming part of a foreign investment may not be transferred in any way separately from the enterprise to which it has been contributed, nor shall it be eligible for amortization or depreciation.

4) Credits associated with a foreign investment. The general provisions, time periods, interest, and other terms applicable to external credits, as well as any fees that may be charged in respect of the total cost payable by the debtor for the use of external credits, including commissions, taxes and expenses of any kind, shall be those authorized or to be authorized by the Central Bank of Chile.

The Foreign Investment Committee has the power to determine the proportion of own capital to debt in foreign investment projects. Since 1995, a minimum of 30% was established for capital contributions to the authorized investment and a maximum of 70% for credit related to the authorized investment.

Article 11 of Decree-Law 600 establishes that access to domestic credit by foreign investors may be limited when warranted. This provision has only been invoked in the case of mega-projects, however, there are currently no restrictions in this regard.

5) Capitalization of credits, external debts, and profits eligible for transfer abroad.

Capital may only be remitted one year after it was brought into the country and liquidated on the formal exchange market. Profit remittances are not subject to any restrictions. A special procedure for loan servicing is set out in Annex II.

The Foreign Investment Statute, or Decree-Law 600, and the international foreign exchange rules guarantee investors access to the formal foreign exchange market for the purpose of repatriating capital, remitting profits, carrying out foreign trade operations, and other transactions.

The Central Bank’s Compendium of International Foreign Exchange Rules defines the formal foreign exchange market as the market comprising the banking institutions and exchange bureaus authorized to operate in that market. Any international exchange operation carried out through these entities is deemed to be an operation conducted on the formal foreign exchange market in and of itself.

Furthermore, any transfer not expressly described in the Organic Law of the Central Bank of Chile and the Compendium of International Exchange Rules and which does not require information or registration under said law may be freely conducted on the foreign exchange market.

a) Profits, gains, dividends, and remittances abroad.

b) Reinvestment of profits

c) Interest on foreign credit

d) Royalties

e) Services contracted abroad

f) Capital contributions in tangible goods

g) Customs duties

There are no special taxes. Under Decree-Law 600 the investor has the right to opt for a fixed tax regime. Through this system, foreign investors maintain their overall tax burden unchanged at a rate of 42% (the regular regime = 35%) for a maximum period of 20 years. Investors opting for this benefit have a one-time opportunity to voluntarily withdraw and be governed by the regular regime.

Chile has signed an agreement with Argentina to prevent double taxation of income. It is currently in force.

Chilean economic policy does not envisage major incentives for foreign or domestic investment. Nevertheless, and notwithstanding the response to question 4.4 b) on the fixed tax rate, foreign investors and enterprises receiving foreign investment enjoy VAT exemption (VAT=18%) on the capital goods forming part of a foreign investment project formally agreed with the State, in accordance with the provisions of Decree-Law 600. These goods must be on the list drawn up by the Ministry of Economy by supreme decree. Decree-Law 600 also contemplates some benefits for foreign investment projects of over US$50 million for developing industrial or extractive projects. These benefits consist of: a) the possibility of contracts for up to 20 years; b) fixed tax arrangements; and c) authorization to hold abroad foreign exchange, from export earnings.

In addition to this, it should be borne in mind that both national and foreign investors benefit from such incentives as the following:

1) In forestry, state grants equivalent to 75% of the forested area in the management plan and, in the case of desert areas to be forested, grants covering the prior stabilization studies and tax exemption for land to be forested, which is exempted from land tax.

2) Incentives for industries establishing plants in some remote areas of the country through exemption from income tax, VAT, and wage bonuses.

3) In addition, recipient enterprises that conduct export activities are eligible for some customs benefits (system of refunds of customs duties and other charges, deferred payment of customs duties on capital goods, and VAT refunds).

In Chile, foreign investors have the same procedural recourse as local investors. That notwithstanding, and before resorting to the relevant judicial entity, investors may appeal to the Foreign Investment Committee concerning the issue of discriminatory rules.

Article 10 of Decree-Law 600 establishes that in the event legal provisions are issued which foreign investors or enterprises with foreign capital may consider to be discriminatory, they may request the Foreign Investment Committee to eliminate the discrimination, provided that no more than one year has lapsed since the provision was issued.

Chile is an ICSID signatory, as well as for the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the Inter-American Convention on International Commercial Arbitration.

Agreements in effect:

Agreements approved by the National Congress:

Agreements signed:

The Constitution does not refer to the legal nature of international treaties but, considering that they must go through the same process as laws, that is, approval by the National Congress, most authors and case law give treaties the same rank and value as domestic laws. However, a large area of Chilean doctrine ranks them above domestic laws. In effect, a treaty cannot be put on par with a mere law because it incorporates the will of others outside the nation State. A State cannot refuse to comply with a treaty. If it does not agree with the treaty it must repudiate it in the manner set forth in the treaty itself.

If the treaty is in conflict with a previous domestic law, the treaty prevails.

If a later law is in conflict with the treaty, it must be clear whether the law formally supersedes the treaty or if it has provisions which are incompatible with the treaty. In the first case, the treaty is violated and international liability is incurred. In the second, the legal conflict should be resolved by the prevalence of the treaty over the law.

The treaty may supersede the domestic law but not vice versa.

Yes, like any treaty, investment protection agreements may be invoked by the parties directly before the courts. With reference to Chilean domestic legislation, a treaty is binding on the State, the courts, and individuals as soon as it is published in the official gazette.

The Foreign Investment Committee is an autonomous public entity, comprising a council of ministers, which includes the ministers of Economy, Finance, Foreign Affairs, and National Planning, and the President of the Central Bank. The Committee establishes the policy and procedures for foreign investment and has the authority to approve or reject the investment applications submitted. In accordance with the rules, the approval of any investment application for a total value of over US$5 million, or its equivalent in other currencies, requires the Committee’s agreement.

The Foreign Investment Committee, through the Executive Vice Presidency, is authorized to audit and request all kinds of information from foreign investors when it deems this necessary. Operational functions related to the procedures for registration and processing of investment applications are performed by the Executive Vice Presidency. This office has the power to authorize investments of less than US$5 million, with the President’s consent.