Chile Forum

Could someone address advantages of states that are declared Tax Free Zones, I, X, XI, XII? Do I understand that vehicles can be imported to these locations w/o incurring tax? Also, does this apply to containers of personal effects, items for resale? Income? Thanks.

I thought there were only two tax free zones, one way up north near TomB in Arica and one way down south near the penguins (well maybe not that far).

What is the size of the geographical area that these tax free zones encompass?

I don't foresee that I will be taking advantage of the tax free zones, but I could be wrong.

Were these tax free zones set up to spur economic activity in these isolated regions because the bulk of the population of Chile centered around the middle.

What are some benefits?

In few words, there are two free zones (zona franca) and several extensions (zona granca de extension).

The free zones are phisically walled (or almost) areas called "recinto amurallado" (walled zone) where there are "presuncion de extraterritorialidad" which is a legal fiction to consider any goods into those zone as if they were out of Chile. The free zones are phisically located in Iquique and Punta Arenas , are relatively small areas for storge only.

The cities where those recintos amurallados are located are called "zona franca de extension" and includes also other nearby cities such as Arica, Futaleufu and probably (not sure) Aysen.

To clear from recinto amurallado to zona de extension you only pay a tax of 4% CIF or similar, I dont remember well, goods cleared do not pay IVA (19% VAT) nor 6% Import fee, but this applies only to the FIRST sale from recinto amurallado to extension, further resells must pay 19% IVA

The other advantage of zonas francas de extension is that there are the only places in Chile where you can import an use an used car, with certain restrictions on year and value you can import an used car not paying import fees nor VAT so, cars here are cheaper than in rest of Chile (not MUCH cheaper because car market in Chile is very competitive).

Those are, in general terms, the benefits of living in a zona franca de extension in Chile

Thank you Tombrad2,

I guess that what you have mentioned as the Zona Francas de Extension is really the bit I was looking for, and probably what came under the heading of Austral Law, even if I might be wrong, as I came across a very brief mention of it somewhere, probably on a property list, but those few words left the clear impression that tax benefits of some kind applied to a much larger area than specific Duty Free zones, like the 2 you have mentioned, and might apply to the whole of Southern Patagonia, so that is why I was trying to find out something more specific about it.

Perhaps the zona francas de extension are all there is to it, or maybe there are other benefits included in this Austral Law to encourage people to populate those particular areas, maybe our legal expert would be able to give a more definite answer.

Ah Ley Austral, yes, It is a law who -theoretically-gives you tax credit for up 40% of the amount you invest in Punta Arenas and nearby area, that is, if you invest 1 million dollars you may be exempt to pay taxes up 400,000.00 .-

Anyway in the practice is not operative because is very restrictive on kind of investment, amount required and the discretional resolution of local authorities may turn it into a nigthmare. In Arica there are similar special laws (Ley Arica 1 and 2) who seem very nice in paper but are barely aplicable in reality.

Anyway, as far as I understood, Ley Austral expirates in december 2008.

Other than companies looking to stage the storage of their products in an import tax free area, I am struggling to find a lot of advantages to these tax free zones. http://www.kishtpc.com/Free-En/free_chile.htm Here's some info.

Bye, G