Taxes in Chile for US Expats: A Complete Guide
- Living as an Expat in Chile
- Chile at a Glance
- What Are Expat Taxes like for Americans Living in Chile?
- Who Has to File Taxes in Chile?
- Who Qualifies as a Tax Resident in Chile?
- What Types of Taxation Does Chile Have?
- Essential Tax Forms for US Expats in Chile
- When Are Taxes Due in Chile?
- Does the US Have a Tax Treaty with Chile?
- Does the US Have a Totalization Agreement with Chile?
- What If I’m Behind on Filing My US Expat Taxes?
- Navigating Tax Compliance for US Expats in Chile
Living as an Expat in Chile
Living as an expat in Chile can be a great adventure, thanks to its diverse geography, rich culture, and welcoming people. Chile offers a high quality of life and a stable economy, which makes it an attractive destination for US expats.
However, it’s important for US expats to understand the tax laws in Chile and how they may impact their US tax obligations. For example, US expats in Chile may need to file a US tax return and report their worldwide income, in addition to complying with Chilean tax laws.
Some US expats in Chile may also be eligible for certain tax benefits, such as the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC), which can help reduce their US tax liability.
In this guide, we’re going to look at what taxes US expats can expect when they move to Chile.
Chile at a Glance
- Primary Tax Form for Residents: Form 22
- Tax Year: January 1–December 31
- Tax Deadline: April 30
- Currency: Chilean peso (CLP)
- Population: 18.4 million
- Number of US Expats: Estimated 12,000
- Capital City: Santiago
- Primary Language: Spanish
- Tax Treaty: No
- Totalization Agreement: Yes
What Are Expat Taxes like for Americans Living in Chile?
US expats living in Chile may have to file taxes in both the US and Chile, as well as report their worldwide income to the US government. Chile has a territorial tax system, which means that residents are taxed on their Chilean-source income only. However, US expats may still be subject to US taxes on their worldwide income, including any income earned in Chile.
To avoid double taxation, US expats may be eligible for certain tax benefits, such as the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC). The FEIE allows US expats to exclude up to a certain amount of foreign-earned income from their US taxable income, while the FTC provides a dollar-for-dollar credit for foreign income taxes paid.
US expats in Chile should also be aware of other tax obligations, such as filing Foreign Bank Account Reports (FBARs) if they have foreign financial accounts exceeding a certain threshold. Seeking professional tax advice can help US expats navigate the complex tax landscape in Chile and ensure compliance with both US and Chilean tax laws.
Who Has to File Taxes in Chile?
Chile taxes foreigners under different rules depending on whether they qualify as residents or nonresidents.
- Residents are taxed on their worldwide income.
- Nonresidents are taxed on only Chile-source income.
However, even after you become a resident, Chile will continue to tax you as a nonresident for the first three years of your residency. Once those three years have passed, you can request an additional three years of nonresident taxation. All told, expats can reside in Chile for up to six years before being required to pay taxes on their non-Chilean income.
Foreign pension and social security income you receive while residing in Chile are not subject to Chilean tax, no matter what your residency status is.
Who Qualifies as a Tax Resident in Chile?
To become a resident of Chile, you must meet one of the two following standards:
- Live in Chile for 180 consecutive days in one year
- Live in Chile for 180 nonconsecutive days per year for two years
Once you pass either milestone, you will be considered a resident for tax purposes. Otherwise, you will remain a non-resident. (As noted above, even after qualifying for residency, you will be taxed as a nonresident for up to six more years.)
What Types of Taxation Does Chile Have?
Chile taxes residents on their worldwide income at progressive rates. These rates range from 0% to 40%. The exact rates are based on the value of the Chilean peso (CLP), which is revalued every month.
For a sample, here are the rates applied to February 2021. (All amounts given in CLP).
|Income (CLP)||Tax Rate||Tax Rebate|
|0 – 690,268.50||0%||0|
|690,268.51 – 1,533,930||4%||27,610.74|
|1,533,930.01 – 2,556,550||8%||88,967.94|
|2,556,660.01 – 33,579,170||13.5%||229,578.19|
|3,579,170.01 – 4,601,790||23%||569,599.34|
|4,601,790.01 – 66,135,720||30.4%||910,131.80|
|66,135,720.01 – 15,850,610||35%||1,192,374.92|
|15,850,610.01 and over||40%||1,984,905.42|
Nonresidents are taxed at a flat rate of 15% for any income that results from “professional or technical services.” For all other forms of income, nonresidents are taxed at a flat rate of 35%. Regardless of the rate, nonresidents are only taxed on income that comes from a Chilean source.
There are no local income taxes in Chile, only the national income tax.
Social Security Tax
The Chilean social security system is a private pension plan funded by mandatory and voluntary contributions. Employees can expect to contribute 10%–20% of their monthly wages to social security. If you are self-employed, you may pay into the system voluntarily, but there are no mandatory contributions.
Because the US has a totalization agreement with Chile, expats won’t have to worry about paying into multiple social security systems.
Chilean property taxes are levied at the local level. The rate of this tax is calculated based on the cadastral value of the property.
Chile taxes corporate income at progressive rates ranging between 0%–40%. There are different tax categories for business income, each of which has its own rules.
In Chile, incorporating a company does not result in any taxes. However, all business entities must pay a local license fee. This fee ranges from 0.25% to 0.5% on tax equity.
Chile imposes a value-added tax (VAT). The standard rate for this tax is 19%.
The Chilean stamp tax applies to specific financial documents, such as provisory notes or bills of exchange. The rate for this tax varies, but it usually ranges between 0.033% and 0.4% of the amount represented by this document.
Chile taxes inheritances at rates ranging from 1% to 25% of the amount bequeathed. (There are deductions available if you meet certain conditions.)
Essential Tax Forms for US Expats in Chile
As a US expat living in Chile, it’s important to be aware of the tax forms you need to file to stay compliant with both Chilean and US tax laws. The most common tax form for expats in Chile is Form 22, which is used to report income earned in Chile. This form must be filed annually and covers income earned from employment, self-employment, and investments.
As for US Tax obligations, the primary form you will need to file is the US expat tax return, also known as Form 1040. This form is required to report your worldwide income to the IRS. In addition, if you have foreign bank accounts or assets with a total value of more than $10,000 at any point during the year, you will need to file the Foreign Bank Account Report (FBAR), also known as FinCEN Form 114.
Finally, if you have any foreign tax credits or deductions, you will need to file Form 1116 to claim those credits or deductions.
Navigating the US tax system as an expat can be complex, so it’s important to work with a tax professional who is experienced in US expat taxes to ensure that you are compliant and taking advantage of all available credits and deductions.
When Are Taxes Due in Chile?
Just like in the US, the Chilean tax year is aligned with the calendar year. That means the tax year begins on January 1 and ends on December 31. Annual tax returns are due on April 30 of the following year.
Does the US Have a Tax Treaty with Chile?
No. While the US and Chile did sign a tax treaty in 2014, it has never been ratified by the US Senate. Thus, it currently has no force. This means that Americans living abroad in Chile are at risk of double taxation on their income. Fortunately, the IRS offers several tax credits that expats can use to avoid double taxation. (More on those tax credits below.)
Does the US Have a Totalization Agreement with Chile?
Yes, the US has a Totalization Agreement with Chile. The agreement is designed to eliminate dual Social Security taxation, meaning that US expats in Chile who are subject to both US and Chilean Social Security taxes can avoid paying into both systems. Instead, they will only pay into the Social Security system of the country where they are working.
The Totalization Agreement also helps to protect the Social Security benefits of US expats who have worked in both the US and Chile. For example, if a US expat has earned enough credits in both countries to qualify for Social Security benefits, the Totalization Agreement can help to ensure that they receive the appropriate benefits from each country.
It’s important for US expats in Chile to understand the rules and benefits of the Totalization Agreement in order to take advantage of its protections and avoid paying unnecessary taxes.
What If I’m Behind on Filing My US Expat Taxes?
As we’ve discussed, all US citizens must file a US tax return. This is true no matter where you live. However, because most Americans are unaware of this requirement, many expats fall behind in their obligations after moving overseas.
Fortunately, the IRS provides an amnesty program to help expats come into compliance without facing any penalties. It’s known as the Streamlined Filing Compliance Procedures.
To use this program, all you have to do is:
- Self-certify that your failure to file was an accident, not a willful refusal
- File the last three delinquent income tax returns and pay any delinquent taxes you owed during that time (with interest)
- File Foreign Bank Account Reports (FBARs) for the last six years
This will bring you into compliance with IRS regulations.
If you’re behind in your expat taxes, don’t wait to use the Streamlined Filing Compliance Procedures. If the IRS contacts you about your delinquency first, you may lose the privilege of amnesty.
Navigating Tax Compliance for US Expats in Chile
Navigating tax compliance as a US expat in Chile can be a daunting task, but with the right information and guidance, it is possible to stay compliant and avoid penalties.
As an expat, it is important to understand your tax obligations both in Chile and the US. If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.