Living in Chile, Working Remotely - My Experience

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Britkid
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Living in Chile, Working Remotely - My Experience

Post by Britkid » Tue Jul 07, 2020 12:25 am

Years ago, when living in the UK, my Chilean wife was interested in moving to Chile so I asked the company I was working for about working remotely. They initially said no but eventually said yes in 2013. However, since the company had no office or legal structure in Chile, I was required to become a contractor.

We had some debate about the cost of living in Chile and being a contractor and eventually it was agreed that I would keep the same salary but lose the benefits. So I lost 10%-20% of value on pensions, bonuses etc.

My company was planning to work with the agent CXC Global to arrange my move to Chile. CXC Global said I had to set up a company in Chile and be paid in Chilean pesos and it was looking a bit complicated with all the local paperwork needed. The contact at CXC at this time did not sound like he knew much about Chile. I contacted Spencer Global and was told that in fact (at least for my case at that time) there was no need to setup a company in Chile to receive my salary here in pesos.

My company was worried about tax evasion issues so they didn´t like the idea of just paying me the total gross amount outside of Chile. I offered to pay for them to have a consultation with Spencer Global so they would realize it was legit. They never took me up on that, but I did manage to persuade them to not use CXC Global, and to withdraw the request to pay me in pesos via a company I would have to setup in Chile. There was also a benefit for the company in reduced agency fees.

I finished as an employee at the end of December 2013 and we flew to Chile in early January 2014 and I started work as a contractor at the start of February 2014. We´ve lived in Chile since then.

In the end they paid me through a London agent just like other UK contractors to a UK bank account in UK pounds paying me gross as I wanted. I legally paid no tax in the UK because I didn´t live there. (I do pay voluntary national insurance so I will qualify for a UK state pension later.)

This went on fairly well until in 2019 when my division was transferred to a different company – who is also without office or legal structure in Chile. By February this year, I was told that they could not accept me to work in Chile while being paid pounds into a UK bank account – again the same typical big company irrational fear of being accused of tax evasion but this time I couldn´t talk them out of it or even get to talk to the decision maker.

As I wanted to be living in Chile, they could only accept to pay me in Chilean pesos to a Chilean bank account (which at least I had by this point) and deduct taxes and pay me net instead of gross. The new company looked into paying me in Chilean pesos via an agent, but the only one they could find that would do it was very expensive. In total, they had to pay the agent +60%-70% on top of my salary, which was again using CXC Global and a local partner, STT Group in Santiago. These fees were not acceptable to them in the long term, however they agreed to pay these high fees for a few months from April to June this year as a temporary arrangement because I had major projects to complete by June and it would have been bad for everyone if I left sooner.

I could have moved back to the UK, or maybe Spain, and kept the job, but we decided to stay in Chile and lose it. Although we did travel around Spain for a couple of weeks in February this year scoping out a place to live, but that was (and still is) more of a backup plan incase the social crisis in Chile gets worse.

I have since found a new job with a smaller company that I`m about to start and they have no problems with the arrangement of paying me foreign currency abroad. In fact, I have also spoken to a few other smaller companies about the possibility and none of them had an issue with it either. So possibly smaller companies are better. Or maybe it just depends on the company or the person deciding.

My case is fully remote. If the companies I worked for had an office in Chile, or were selling to people here, that may or may not change some things.

Related threads:
viewtopic.php?f=23&t=17498 (USA taxes and regulations for working for USA company while living in Chile)
viewtopic.php?t=9214 (tax on foreign sourced income and the tax holiday)

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Re: Living in Chile, Working Remotely - My Experience

Post by admin » Tue Jul 07, 2020 9:57 am

Yea, the U.K. company accountants are really strange.

I don't know how many times we have had to argue with accounts in the U.K. that are just absolutely certain they are going to be extradited to chile or something for tax evasion if they pay a remote worker living in Chile. Like they can not grasp the concept that some other country might have different tax laws. They insist on trying to apply U.k. law to Chile.

It is like they have friends that were extradited and are suffering from PTSD or something. It is a really strange level of anxiety.

I have never run in to it any other country. Typically once we explain the birds and the bees to a foriegn lawyer or account from some country, they sort of shrug their shoulders, 'great not our problem'. Not in the U.K.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

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tiagoabner
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Re: Living in Chile, Working Remotely - My Experience

Post by tiagoabner » Tue Jul 07, 2020 2:14 pm

Thanks for the very detailed report, I really appreciate it. There's just one item that isn't clear to me, which I would like to check with you:
Britkid wrote:
Tue Jul 07, 2020 12:25 am
In total, they had to pay the agent +60%-70% on top of my salary, which was again using CXC Global and a local partner, STT Group in Santiago.
Was the middleman charging that in order to withhold taxes, or was it to cover their "international transfer fees"? Because that seems to be rather high, even for middleman agencies. Haven't they ever handled contractors from outside the EU?

I'm currently in a similar situation, although I opened a company in Estonia a few years back so that my EU clients didn't make such a fuss when they needed to pay me. Phillips UK was one that was always baffled by the concept of having a contractor outside the EU, although they were fine as long as I had a company there.

It's interesting that we're also on the same boat in terms of looking into Europe as a back-up plan in case Chile implodes, although I was looking more into Portugal rather than Spain. Do you have any plans regarding this in case there's a hard, no-deal Brexit? Or do you hold another EU passport?
I'm NOT your lawyer, accountant or financial planner. All information at this post should be considered for your entertainment only. Consult a professional before making a decision regarding whatever topic was mentioned in this post.

Britkid
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Re: Living in Chile, Working Remotely - My Experience

Post by Britkid » Tue Jul 07, 2020 2:55 pm

Interesting to hear this is more of a UK thing.

I´m afraid I don´t know all the break down. All I know is that in order to get $1.00 gross to me they had to pay $1.60-$1.70 in total if they wanted to use an agent. Some of that is the agent´s fees and some may have been other charges.

I don´t have any plans for how to handle the immigration. I do have some points possibly in my favour in that we already lived in Spain in 2005 and 2006 so may have a still valid social security number and have had residence in Spain before. My daughter was already born in Spain so she may even be able to claim Spanish nationality. However, I don´t really know, I haven´t looked into this yet. Might make more sense to see what comes out of the current UK-EU negotiations first, and the social crisis in Chile.

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Re: Living in Chile, Working Remotely - My Experience

Post by admin » Tue Jul 07, 2020 4:01 pm

Now that I think about it, we have run in to a possibly related phenomenon with the U.K.

We have some U.K. companies for clients, and their accountants and auditors also seem to be very preoccupied that we are paid or that they don't owe us anything. Like their accountants send me emails like once month to make sure they don't owe me anything; and their auditors (one of the big international ones), like stocked me for several months to sign a declaration that they don't owe me anything and they have no liability. It is like they can not believe they don't have to pay more money or something.

By contrast, in dealing with American fortune 500 companies, I have to hound them for months to get paid, and then they only pay after pushing the invoice through a dozen sub-contractors. They don't seem the least concerned that they owe me money.

Then on very other extreme of corporate accounting culture, I have a korean company that I have been trying to give them their money back because they never sent us the info to even start working on their case. They don't seem to be the least concerned that I owe them money, nor do they want it back, nor do they want to send the info for us to do the work. I guess no one in the company wants to "own" the problem.

I have sort of come to the conclusion that when companies reach a certain critical mass, they tend to become extraordinarily inefficient in the same way government bureaucracies become extraordinarily inefficient. Like relatively small problems, require disproportionate large amount of resources to solve for them. Like turning the titanic I guess.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

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FrankPintor
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Re: Living in Chile, Working Remotely - My Experience

Post by FrankPintor » Wed Jul 08, 2020 10:07 am

I think this is a UK-specific thing, I understand there was a reform of the IR 35 tax code there, with this important change: "IR35 – as the controversial tax reform is called – will see financial liability for defining the employment status of a freelancer shift from the employee to employer upon its introduction on 6 April". So, of course, companies prefer not to be liable for anything and walk away from any potential involvement. There's been a lot of discussion about this on The Register.

A 60-70% agency fee is crazy though, there are a bunch of agencies like Access Financial, Hecuba Dawn, Mauve / White Coral, just to name a few, who can provide solutions for situations like these, and fees are generally in the 15-20% range.
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Britkid
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Re: Living in Chile, Working Remotely - My Experience

Post by Britkid » Wed Jul 08, 2020 3:17 pm

In my specific case I don´t think the new legislation, which in any case was deferred to April 2021, had any effect.

However at one stage I thought it might and so I did manage to get a response from the IR35 unit at HMRC (the relevant UK government agency) that said "should you conclude that you are not resident in the UK and the off-payroll working rules do not apply as you are not liable to tax then it will not matter if the wages are paid into a UK or Chilean bank account."

They also said that whether or not to use an agency was a "business decision" perhaps implying that it didn´t matter to HMRC either way whether I used an agent.

I asked HMRC if I could absolve the company of any responsibility by declaring that I will take care of taxation, and they replied "The client is responsible for consideration of the off-payroll working rules under the legislation and there is no way for you to remove this responsibility from them as it is the purpose of the legislation".

IR35 is aimed to stop a situaton whereby contractors require preferential tax rates compared to employees, and consequently some people were being defined as contractors for tax purposes when in reality they operated as an employee in many respects. I believe IR35 will force some of these people to become employees instead and/or make them pay more tax.

If you are a UK person from a UK company going abroad to work remotely in Chile, and especially if your company has no office in Chile, then in theory becoming a contractor should not be a problem because you have a legit case to be a contractor. However if a company is interpreting the rules very cautiously with a bit of irrational fear/panic thrown in then IR35 could in theory make it harder to get these type of remote working engagements.

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Re: Living in Chile, Working Remotely - My Experience

Post by Britkid » Wed Jul 08, 2020 3:22 pm

FrankPintor wrote:
Wed Jul 08, 2020 10:07 am

A 60-70% agency fee is crazy though, there are a bunch of agencies like Access Financial, Hecuba Dawn, Mauve / White Coral, just to name a few, who can provide solutions for situations like these, and fees are generally in the 15-20% range.
Are you saying that these companies will engage in situatins with contractors physically located in Chile specifically? I´ll have a look into them if I ever need them, but I would rather try and avoid agencies altogether.

I think that if either my last employer or myself had been very motivated to continue working together, we probably could have found a cheaper agency or some other solution eventually, but I think it was probably time for a change anyway.

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Re: Living in Chile, Working Remotely - My Experience

Post by FrankPintor » Wed Jul 08, 2020 5:44 pm

Britkid wrote:
Wed Jul 08, 2020 3:22 pm
FrankPintor wrote:
Wed Jul 08, 2020 10:07 am

A 60-70% agency fee is crazy though, there are a bunch of agencies like Access Financial, Hecuba Dawn, Mauve / White Coral, just to name a few, who can provide solutions for situations like these, and fees are generally in the 15-20% range.
Are you saying that these companies will engage in situatins with contractors physically located in Chile specifically? I´ll have a look into them if I ever need them, but I would rather try and avoid agencies altogether.
Yes, of course, I've done that in Chile. The agencies I've worked with also work together with local companies to provide local payroll if needed.
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Re: Living in Chile, Working Remotely - My Experience

Post by Britkid » Wed Jul 08, 2020 7:36 pm

ok thanks

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