Chile: second run

All things related to Moving to Chile, tips, tricks, FAQS. Here is where to exchange information between those that have already moved and those planning to move to Chile so you do not need to learn the hard way. Please also check Living in Chile forum for related information.
at46
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Re: Chile: second run

Post by at46 » Tue Mar 12, 2019 6:10 pm

tiagoabner wrote:
Mon Mar 11, 2019 9:51 am
Space Cat wrote:
Mon Mar 11, 2019 1:36 am
Welcome back, if you don't mind — what's up with Portugal?
tiagoabner wrote:
Sun Mar 10, 2019 9:54 pm
4. Is the "octavo básico" still the fastest way to get a Chilean driver's license? Has anyone went through the process in the last year or so?
If you have an apostille of your diploma, you don't need to pass the Octavo Básico exams. Otherwise, check out my guide.
Portugal is nice, but it's too "backwater" and retrograde for us. We've handled the family business we came here for, so we don't really have that much of a reason to stay. The fact that the country is amidst its craziest real estate bubble ever doesn't help.
Isn't it an officially socialist country, even though it's in the EU?

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tiagoabner
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Re: Chile: second run

Post by tiagoabner » Tue Mar 12, 2019 8:05 pm

at46 wrote:
Tue Mar 12, 2019 6:10 pm
tiagoabner wrote:
Mon Mar 11, 2019 9:51 am
Space Cat wrote:
Mon Mar 11, 2019 1:36 am
Welcome back, if you don't mind — what's up with Portugal?
tiagoabner wrote:
Sun Mar 10, 2019 9:54 pm
4. Is the "octavo básico" still the fastest way to get a Chilean driver's license? Has anyone went through the process in the last year or so?
If you have an apostille of your diploma, you don't need to pass the Octavo Básico exams. Otherwise, check out my guide.
Portugal is nice, but it's too "backwater" and retrograde for us. We've handled the family business we came here for, so we don't really have that much of a reason to stay. The fact that the country is amidst its craziest real estate bubble ever doesn't help.
Isn't it an officially socialist country, even though it's in the EU?
Yes, and in the worst possible way. They had controlled rent until a few years ago, which made the real estate business go to a halt. Now that the brakes are off, it's a bull market. Prices have increased as much as 100% in some areas. When I checked the rent prices for the first time, when planning my move here, you could find a small-but-decent apartment in Lisbon for 500€. Now you can find shitholes for 800€, and these are renting fast.

Salaries haven't kept up with inflation and people have crazy commutes. Also, Portugal has one of the highest migration rates in Europe: whoever can get away from here is doing it. The country has priced out its citizens. Strictly speaking, we can afford to live here comfortably, but I would rather not be price gouged, especially considering it can cost us twice as much to live here. We get much more for our buck when living in Santiago.
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.

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admin
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Re: Chile: second run

Post by admin » Wed Mar 13, 2019 4:25 pm

We get much more for our buck when living in Santiago.
Don't hear that around here much, to never.

I feel like i should send you a free t-shirt or something for being the first.

:lol:
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tiagoabner
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Re: Chile: second run

Post by tiagoabner » Wed Mar 13, 2019 5:18 pm

admin wrote:
Wed Mar 13, 2019 4:25 pm
We get much more for our buck when living in Santiago.
Don't hear that around here much, to never.

I feel like I should send you a free t-shirt or something for being the first.

:lol:
Well, then I think people aren't really crunching their numbers as well as they should. We did a very, VERY detailed financial analysis before deciding where to move to, and Chile had the best cost-benefit rate. Heck, it was in the first place even in the hypothetical situation of us getting kids and having them go to a medium to high-level private school.

Chile's incredibly low income tax & social security fees really help. I work for an American company, so I'm legally a self-employed person unless I choose to live in the land of the free. In Chile, that means I'll be paying 17% for AFP and income tax combined starting December when my 3-year holiday runs out, maybe lower, if I can get a good enough accountant. I pay 16% social security tax and 22% income tax in Portugal. Our living costs would need to be much higher in Chile for it to not end up being cheaper, and almost all of them will actually go down, based on the numbers we have from our previous stay·
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Re: Chile: second run

Post by admin » Wed Mar 13, 2019 5:44 pm

yea if you work as professional, the taxes are really low in chile.

if you break free of the u.s. self-employment tax by paying to the chilean afp system it is like finding 12.5% extra.
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Space Cat
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Re: Chile: second run

Post by Space Cat » Wed Mar 13, 2019 10:12 pm

As far as I understood it, the income tax for self-employed is peanuts because you write off 30% of your income as "gastos presuntos" when working as an "honorario". You also pay AFP contributions from 80% of your income ("renta imponible") with a 215k CLP cap (it's actually capped in UF). Then you also apply "cantidad a rebajar" to your tax amount.

I will verify my Excel-based estimation this April but so far it's (FONASA not included, I pay ISAPRE in UF):
  • 0.26%(!!) income tax + 10.1% to AFP and insurance from 1 million monthly (around $1.5k USD)
  • 3.3% + 9.1% from 3 millions (≈$4.5k USD)
  • 9.3% + 5.5% from 5 millions (≈$7.5k USD)
This is what I've found by reading SII's docs and this forum plus by asking an accountant about the overall process. It may be wrong but probably not 2x-3x wrong.

Chile still has the lowest income taxation in the OECD, you start paying it after earning 2x minimum wage (600k+ CLP monthly).

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tiagoabner
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Re: Chile: second run

Post by tiagoabner » Thu Mar 14, 2019 7:48 am

Would you mind sharing some reorder about this, specially about the 70% + 80% thing?
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Space Cat
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Re: Chile: second run

Post by Space Cat » Thu Mar 14, 2019 11:21 am

Sure, so for $3,000,000 CLP monthly...

Income tax (Impuesto Único de Segunda Categoría):

1. Reduce your profits by 30% of your "default" self-employed operational costs ("gastos presuntos"). As I understand it, you can reduce it even more by providing receipts from your work-related purchases, i.e. subtracting something like a new computer's cost from profits.

2. "Gastos presuntos" have a yearly cap of 15 UTA (about $8.703.540), let's divide it by 12 months for simplicity — $725.295.

3. Your profit in the eyes of SII is now $2,274,705 and it gets into the third tax bracket — 8%, from $1,450,590 to $2,417,650.

4. 8% from $2,274,705 is $181,976 but then there's also "Cantidad a rebajar" which is subtracted from the tax amount: $84,134.

5. The total tax to pay is $97,842 and it's 4.3% from $2,274,705. But then most remote workers have almost no operational costs, so the "real" tax from your $3,000,000 is 3.2%.

When you work with foreign clients as an "honorario" who issue "boletas", you have to pay 10% retention monthly from your total revenue. The 6.8% difference from this example will be returned to you in the end of the tax year unless you missed your AFP and insurance payments.

#####

AFP and Seguro de Invalidez y Sobrevivencia (this one is for sure because I consulted in my AFP):

1. Both of them are always calculated from the "renta imponible", 80% of your revenue (not profits, eh).

2. "Renta imponible" has a cap of 78.3 UF, i.e. its maximum value is $2,100,000 (right now, UF changes almost daily).

3. 80% of $3,000,000 is $2,400,000 but the limit is $2,100,000 and you have to calculate AFP, SIS, and FONASA from it.

4. AFP contribution is 10% + your fund's fee. The fees range from 0.77% to 1.45% and as a new contributor you have to start with the lowest one. Right now it's Modelo with 0.77%.

5. Your AFP payment is 10.77% and then there's this disability insurance which is always 1.53%.

6. The total is 12.3% from your "renta imponible" — $258.300, i.e. 8.6% of your total income of $3,000,000. And it becomes even less if you have a higher income.

#####

So, if you earn 10x Chilean minimum wage, you pay 3.2% + 8.6% (I assume that you opt-out for UF-fixed ISAPRE instead of 7% FONASA for healthcare). And then the 10% AFP isn't a social security contribution but a "forced investment" into a private fund which you or your inheritors will withdraw in the future.

at46
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Re: Chile: second run

Post by at46 » Thu Mar 14, 2019 11:29 am

Great info, Cat! You should start a side business in tax consulting :)

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Space Cat
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Re: Chile: second run

Post by Space Cat » Thu Mar 14, 2019 11:38 am

at46 wrote:
Thu Mar 14, 2019 11:29 am
Great info, Cat! You should start a side business in tax consulting :)
Thanks, yes, there's a serious lack of accountants who understand how to work internationally, so I had to learn all the basics.

Also, the boss of the local SII insisted that I have to pay IVA because I sell software, so it's "Primera Categoría". Jokes on him, my resellers already collect sales taxes for every country during the checkout, so I would have to pay double.

I decided that I will declare it as "royalties" because after all I don't sell anything myself. Apple does it for me and sends me the money after cutting their 30% in fees.

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tiagoabner
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Re: Chile: second run

Post by tiagoabner » Thu Mar 14, 2019 11:39 am

This is the most useful information I've ever read on this topic. I'll do more research to rerun my numbers, but that should skewer things even more in favor of Chile.
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tiagoabner
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Re: Chile: second run

Post by tiagoabner » Thu Mar 14, 2019 11:50 am

Space Cat wrote:
Thu Mar 14, 2019 11:21 am
And then the 10% AFP isn't a social security contribution but a "forced investment" into a private fund which you or your inheritors will withdraw in the future.
Strictly speaking, yes. But I've considered it to be a tax in the sense of it being deducted in a mandatory manner from my gross income.

I was aware of the upper limit for the AFP calculation, so that really didn't change my numbers, but the "gastos presuntos" is something I'll really need to read more about. It made the tax become ~3% lower over my gross income over the year on a quick calculation, so it has a lot of potential.
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.

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