Income Tax on Foreign Income

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Lenny
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Income Tax on Foreign Income

Post by Lenny » Thu Oct 25, 2012 5:33 pm

Got this quote of the Spencer Global Website - Many Thanks!
Taxes in Chile are in almost every form much lower than most countries around the World. The tax system is fair, efficient, and corruption free. Among the many tax advantages of Chile, Chile has the lowest personal income tax of any OECD member country, foreign pensions are tax free in Chile, companies based in Chile but selling in other countries with no plans to establish operations in Chile pay no tax on their foreign sales and receive other special Chilean tax breaks, new permanent residents in Chile receive a three year tax holiday on all foreign sourced income outside of Chile. In certain circumstances the Chilean IRS ( Servicio de Impuestos Internos Chile or Sii ) has even granted longer special income tax wavers to foreigners residing in Chile, but receiving income from outside the country. These are just a few of the advantages of living and doing business in Chile in regards to Chilean taxes.
So is there an actual interpretation on new permanent resident? Three years after receipt of Residencia Definitiva ¿? Or three years from the day you recieve your first visa sujeto a contrato, which is effectively not permanent.....

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Fugger
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Re: Income Tax on Foreign Income

Post by Fugger » Thu Oct 25, 2012 6:59 pm

Not an answer to your question, but somewhat related.

You may have seen the attached graph from the Economist (http://www.economist.com/blogs/graphicd ... 10/focus-4) taken from an KPMG survey (http://www.kpmg.com/Global/en/IssuesAnd ... r-2011.pdf).

Well unfortunately Chile doesn't appear on it. The effective tax rate on a USD 100'000 income would be 15.2% (using an average 2011 exchange rate of 483,7 and applying the corresponding tax rate table from the SII http://www.sii.cl/pagina/valores/global/igc2011.htm). There is an argument to be made not to include the social security charges in the calculation, because of the capitalization principle. If you were to include it it would be another 4.5% because of the relatively low cap. Clearly one of the lowest income tax rates.
effective tax rate.jpg
effective tax rate.jpg (28.9 KiB) Viewed 7413 times
1531 pacta sunt servanda

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admin
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Re: Income Tax on Foreign Income

Post by admin » Fri Oct 26, 2012 8:06 am

First, it is ONLY foreign sourced income. Income earned in Chile is always taxed.

It is 3 years from the time you establish Chile as your "tax home".

Which is where the wiggle room comes in.

Say, you move to Chile you live under a tourist visa for years (working outside the country online or something), then change to residency visa, well in theory your tax home was established when you arrived in the country.

In practice, what typically happens is when you apply for residency, that is an easy and relatively undisputed intent to make Chile your tax home.

My advice is don't mess with it for a couple of reasons. One is the obvious get yourself in trouble with the IRS. The other, often times it is in your best interest to declare some income voluntarily and do the withholdings, because it speeds building a credit rating in Chile so you can normalize your financial life. For a lot of people, they will get it all or partially back at the end of the year.
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Steph
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Re: Income Tax on Foreign Income

Post by Steph » Fri Oct 26, 2012 9:15 am

As I stated in the other thread on this, our experience is as follows:

Came to chile on a visa sujeto a contrato. after 15 months, changed jobs, new visa required. another 9 months, another new job, 3rd visa required. at the 3 year mark from the FIRST visa sujeto a contrato, we started paying tax on our foreign incomeS.

Note that we were here under my husband's work contracts and I was a dependant under his visa, so for the first 3 years I had no tax issues in Chile, but at the for the 4th year we had in Chile I also had to lodge a tax return due to some of our investments in Aus being in my name. This is an often overlooked and potentially problematic and costly situation, so if you have a wife/other dependants on your visa, make sure they also lodge tax returns in Chile if they have investment income in their home country.

Lenny
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Re: Income Tax on Foreign Income

Post by Lenny » Fri Oct 26, 2012 5:26 pm

admin wrote:First, it is ONLY foreign sourced income. Income earned in Chile is always taxed.

It is 3 years from the time you establish Chile as your "tax home".

Which is where the wiggle room comes in.

Say, you move to Chile you live under a tourist visa for years (working outside the country online or something), then change to residency visa, well in theory your tax home was established when you arrived in the country.

In practice, what typically happens is when you apply for residency, that is an easy and relatively undisputed intent to make Chile your tax home.

My advice is don't mess with it for a couple of reasons. One is the obvious get yourself in trouble with the IRS. The other, often times it is in your best interest to declare some income voluntarily and do the withholdings, because it speeds building a credit rating in Chile so you can normalize your financial life. For a lot of people, they will get it all or partially back at the end of the year.
Thanks, that really helps and thanks Steph for your answers, the situation will be much like yours and as pointed out by admin the income in Chile has been taxed since day one.

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Re: Income Tax on Foreign Income

Post by Britkid » Wed Dec 05, 2012 7:04 pm

Hi everyone, so I am potentially going to be moving to Chile and working for an international company. My employer, an international company, will pay my salary ultimately in Chilean pesos. My company has no office in Chile and I may have to work from home so I will be employed by the company globally, not by a Chilean subsidiary or division. So I won't have to pay any taxes at all for 3 years, either in Chile or internationally?

Thanks for letting me know.

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Re: Income Tax on Foreign Income

Post by admin » Wed Dec 05, 2012 7:33 pm

Britkid wrote:Hi everyone, so I am potentially going to be moving to Chile and working for an international company. My employer, an international company, will pay my salary ultimately in Chilean pesos. My company has no office in Chile and I may have to work from home so I will be employed by the company globally, not by a Chilean subsidiary or division. So I won't have to pay any taxes at all for 3 years, either in Chile or internationally?

Thanks for letting me know.
most of the time, yes.
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Britkid
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Re: Income Tax on Foreign Income

Post by Britkid » Wed Dec 05, 2012 7:58 pm

Thank you for your response.

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Re: Income Tax on Foreign Income

Post by Britkid » Wed Dec 05, 2012 8:04 pm

Is there just one income tax deduction from salary? What other deductions might there be on salary? Like here in the UK I have "PAYE income tax" and "national insurance". Is there just one deduction in Chile if you don't have a pension?

It seems there is a tax of 1%+ on the value of your property. So if you own a $US100,000 house you would pay $1000+ a year. That probably roughly equates to the council tax in the UK.

When living in Chile, are there are any other major taxes, by "major" things that are at the level of US$hundreds or thousands in a year. Thanks.

paladin
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Re: Income Tax on Foreign Income

Post by paladin » Thu Dec 06, 2012 5:56 pm

Britkid wrote:Hi everyone, so I am potentially going to be moving to Chile and working for an international company. My employer, an international company, will pay my salary ultimately in Chilean pesos. My company has no office in Chile and I may have to work from home so I will be employed by the company globally, not by a Chilean subsidiary or division. So I won't have to pay any taxes at all for 3 years, either in Chile or internationally?

Thanks for letting me know.
I dont see how your international company will paying you in Pesos if they have no operations or bank account in Chile, as Pesos cant be bought outside within the banking system. I would guess that in practice, they will remit say USD to you, which on receipt you'd change into Pesos. You'd need a bank account, which is complicated for tourists, which is in effect what you would be coming in as. You should bear in mind that it's foreign sourced income which is tax free, and that doesnt just mean income that you happen to have been paid outside. The question is how did the income arise? In other words, why did you get paid the money? Where were you when you performed the work? If you are planning to be a tourist for a long time, you take the risk of being taxed on income sourced here whether you are a permanent resident or not.
To avoid tax in the Uk you'll need to advise HMRC that you are no longer resident, and they may or may not make you wait a bit to prove you have established residence outside the UK before they grant you that status. Until that time, you are always liable to be classed as a resident and taxed accordingly. If that happens and later you can prove you are in fact resident elsewhere, you can make a claim for a repayment, and normally such claims are dealt with quickly.

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Re: Income Tax on Foreign Income

Post by Britkid » Thu Dec 06, 2012 6:39 pm

Thanks for your comment on UK tax, hadn't thought of that.

They did tell me they would pay me in local currency, but this hasn't been looked to in depth, so they may be mistaken in terms of what ultimately works best.

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Re: Income Tax on Foreign Income

Post by Britkid » Thu Dec 06, 2012 6:51 pm

In reply to: "You should bear in mind that it's foreign sourced income which is tax free, and that doesnt just mean income that you happen to have been paid outside. The question is how did the income arise? In other words, why did you get paid the money? Where were you when you performed the work? If you are planning to be a tourist for a long time, you take the risk of being taxed on income sourced here whether you are a permanent resident or not."

I can do my work on my computer anywhere in the world, it's one of those jobs. I will be sat at my home in Chile doing this work. My international employer will pay the money to me. So on this basis do you agree I legally and normally pay no tax for three years?

Also, I should enter on a tourist visa even though I'm going to work, and then covert to something else later. Using the have a weekend in Mendoza every 90 days trick if needed to bridge the gap? I've read this http://www.spencerglobal.com/chile-immi ... visas.html and http://www.allchile.net/chilewiki/index ... s_in_Chile Any comment on whether I should do that or should I come in a tourist visa and get a work visa straight away, or apply for a work visa in advance?

If I was working in the country on 90 day tourist visas, would that be the simplest solution, or would that be in any way illegal or immoral?

(My wife is Chilean, we married in Spain, we have 2 children that do not (yet) hold CHilean nationality. Not sure if this is relevant but just mentioning in case.)

(I also found out today that I may have to be employed as a contractor rather than an employee, perhaps with wages paid via a third party agency, again, not sure if that matters.)

Any articles you can link to on these topics would be helpful.

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