Chilean property in your own name or through a company: what each one costs you

Short answer: for one property bought to keep, your own name is usually the better answer, and the reason is a single number. The allowance that makes the first 8.000 units of account of gain non taxable is written for natural persons. A company does not have it, and it pays corporate tax on the whole gain and then a further tax when the money is distributed. A company earns its keep for other reasons, such as several owners, several properties, or planning what happens on death, and those reasons are real. Buying a holiday home is usually not one of them.

Nothing stops you owning in your own name

This is the first thing to settle, because a surprising amount of advice starts from the assumption that a foreigner needs a vehicle. The Civil Code says that the law recognises no difference between a Chilean and a foreigner as regards the acquisition and enjoyment of civil rights, and it says elsewhere that assets situated in Chile are subject to Chilean law even where their owners are foreigners and do not reside in Chile. The second provision assumes the first.

What you do need is a Chilean tax number and a representative domiciled in Chile with power to act before the tax authority. Those are procedural requirements, not prohibitions, and the route is described in getting a Chilean RUT without travelling. The rest of the purchase works as we set out in buying property in Chile as a foreigner.

The one genuine ownership restriction in Chilean law that turns on nationality is the border zone rule, and it does not reach most foreigners at all. We took it apart in buying land in Chile's border zones.

What a SpA is, and why it is the usual vehicle

The sociedad por acciones, universally shortened to SpA, was added to the Commercial Code in 2007 and now occupies articles 424 to 446. It is the form almost every adviser will suggest, for two reasons that matter to a foreign owner.

The first is that it can be created by one or more persons, so a single owner does not need to invent a second shareholder. The second is that its rules are flexible: where the statute and the articles are silent, the rules of closed corporations apply, but within wide limits the shareholders write their own. Its name must end in SpA, its object is always commercial, and there is no requirement that any shareholder be Chilean or resident.

Setting one up: the one day route and the deed route

Chile has two parallel systems, and the SpA can use either.

The simplified regime under Law 20.659 works through an electronic form incorporated into a public registry. The registry is free by law, and incorporation into it replaces the registration in the Commercial Registry and the publication in the Official Gazette that the general regime requires. The tax authority assigns a tax number automatically and without further formality when the company is incorporated, and the same form can be used to give notice of commencement of activities.

Signature is the part that catches a non resident. The form is signed with a Chilean advanced electronic signature, and whoever does not have one must sign before a notary, who stamps their own. The notarial tariff for that is set by supreme decree and expressed in units of account: 0,26 units for the signature of the form and connected activities, whatever the number of appearers before the same notary for the same act.

The route that actually works from abroad is the third one the same article provides: signing through an attorney in fact. Where the power of attorney is granted abroad, the law requires compliance with the general rules on legalisation of foreign public documents or on authentication by apostille. The apostille route and the consular route are compared in inheriting a Chilean property from the United States, and the analysis is the same here.

One trap worth naming: contributing the property itself to the company is not free of formality. The simplified regime says that where the contribution requires special formalities according to the type of asset, those formalities must be complied with. Transferring a property into a company means a public deed and a registration at the Registrar of Real Property, with everything that implies, including a possible taxable gain on the way in.

What a company owes every year, even holding only a house

This is the part that is undersold when someone recommends a structure. A company is a taxpayer with a life of its own. It has a tax number, it gives notice of commencement of activities, it files an annual income tax return whether or not it had income, it keeps accounts, and depending on the municipality and the activity it may owe a municipal licence. None of that is dramatic on its own. All of it together is an annual cost and an annual obligation that does not exist when the property is in your name.

Filing an annual return with no movement is not optional, and it is the obligation people forget first. A dormant company that stops filing accumulates a problem that surfaces at exactly the wrong moment, which is when the property is being sold.

The 8.000 units you give up

Here is the decisive number. The provision that makes the first 8.000 units of account of gain on a property sale non taxable opens by saying that it applies to amounts obtained by natural persons. A company is not a natural person.

The tax authority spelled out the consequence in its Circular 43 of 2021: gains obtained by sellers who do not meet the conditions of that provision are classified under a different article and taxed as ordinary business income, subject to corporate tax and then to the final tax. The same circular confirms the other half, which is that the allowance does apply to a natural person regardless of the place of their domicile or residence. So the choice is not between resident and non resident. It is between person and company.

What that looks like in practice on the way out is set out in selling Chilean property as a non resident, which is written for the person who holds in their own name.

Selling the property from inside the company

Two layers, not one. The company pays corporate tax on the gain, at 25 per cent under the regime for smaller companies or 27 per cent under the general regime. Then, when the profit is distributed to a shareholder without domicile or residence in Chile, the additional tax of 35 per cent applies, with a credit for the corporate tax already paid.

And here is the point that matters specifically to a United States shareholder. The credit normally carries an obligation to restore to the Treasury an amount equal to 35 per cent of the credit, which raises the real burden. That restitution obligation does not apply to additional tax taxpayers resident in countries with which Chile has a double taxation treaty in force and who are beneficiaries of the income. The treaty between Chile and the United States entered into force on the nineteenth of December 2023, which puts a United States resident shareholder on the better side of that rule.

One more thing worth checking before assuming a sale from a company is tax free of value added tax. The tax reaches the transfer of constructed immovable property by a habitual seller, and the law leaves it to the tax authority to determine whether a seller is habitual. Land itself is not reached. A single sale from a company whose stated object is real estate is a question of fact, not a settled answer.

Selling the shares instead of the property

The obvious alternative is to sell the company rather than the house. It works, and it is taxed under a different letter of the same article.

The gain on the sale of shares is the price less the contribution or acquisition value, adjusted for inflation and for later capital increases and reductions, and it is taxed with the final tax on a received basis, which for a non resident means 35 per cent. There is an exempt amount, and it is small: where the combined results of the year from those disposals do not exceed 10 annual tax units, they are treated as non taxable income. That is nothing like the 8.000 units available on a property sold by a natural person.

Practical points. The withholding rules are the same ones described for the property sale, meaning 10 per cent provisional on the whole amount or 35 per cent on the gain where it can be determined. If the company was set up under the simplified regime, the transfer is recorded in the electronic shareholder register, and once recorded it is treated as reported to the tax authority. And the Commercial Code requires the transferee to declare in the transfer that they are aware of the rules governing the company and of its articles.

Be careful with a holding company abroad

A structure that comes up often is a company in a third country holding the Chilean company, or holding the Chilean property directly. Chile legislated for that and the rules are demanding.

Where a non resident sells shares or interests in a foreign entity, and the value of what is sold derives to a sufficient degree from Chilean underlying assets, the gain is taxed in Chile as a single 35 per cent tax. The thresholds are set out in the statute: broadly, at least 20 per cent of the market value of the foreign titles coming from Chilean underlying assets, together with the transfer of at least 10 per cent of the entity, or alternatively a Chilean underlying value at or above 210.000 annual tax units with the same 10 per cent transfer. And the relevant underlying assets expressly include any movable or immovable property situated in Chile whose owner is a company without domicile or residence in Chile.

The sting is in the enforcement. If the tax is not declared and paid, the authority may, after formal notice, assess and charge it to the buyer, and the Chilean company whose shares are the underlying asset is jointly and severally liable. A structure built to keep Chile at arm's length can end with the Chilean company on the hook.

Property tax: what actually changes with the owner

The annual property tax itself does not care who owns the property. It is levied on the assessed value and paid by the owner or the occupier, with no distinction of nationality, residence or legal form. Three things do change.

• Liability of the people running the company. Where the property belongs to a company or legal person, its administrators, managers or directors are jointly and severally liable for the tax. That risk does not exist when the owner is a natural person, and it is worth saying out loud to whoever agrees to be your representative in Chile.
• The surcharge on large holdings. There is an annual surcharge on the part of the total assessed value that exceeds 670 annual tax units, and the total is the sum of the assessed values of all the properties of the same taxpayer. Because it is computed per taxpayer, how ownership is split between persons and companies changes which bracket applies.
• Deducting the tax. A taxpayer determining income on an effective basis may in certain cases deduct the property tax as an expense. A natural person who simply owns a house, with no first category activity, has nothing to deduct it against.

How the tax is calculated, who does not pay it and how an assessment is challenged is the subject of contribuciones in Chile, and for the specific position of a foreign owner, property taxes in Chile for foreign owners.

How to decide

The honest test is what you plan to do with the property, not what sounds more sophisticated.

1. One property, bought to keep or to use. Your own name. You keep the allowance, you have no annual filings, and there is nothing a company would add.
2. Several properties, or an intention to buy more. Worth modelling, because the surcharge is computed per taxpayer and because the allowance is a lifetime one that will run out anyway.
3. Several owners, or partners who may change. The company usually wins, because moving shares is far simpler than moving undivided interests in land, with all the friction described in shares and rights.
4. Thinking about what happens on death. Also worth modelling, but not in isolation: an estate with a Chilean property in it is its own procedure, and we set it out in inheriting a Chilean property from the United States.

Whatever the answer, the analysis is worthless if the title does not survive a reading. That comes first, and it is the subject of the checks before money moves.

How we work on it

We answer this question on figures rather than on principle: what you paid or will pay, what you expect the property to be worth when you sell, whether there will be one property or several, and who else is involved. From that, the comparison between the allowance you keep as a person and the flexibility you buy with a company stops being abstract.

The reading of the title that has to precede any of it is our title study service, and the annual tax position is our property tax service. If the property turns out to need regularisation before it can be safely transferred at all, that is our title regularisation service, and a first indication comes from the regularisation test.

The restitution of the credit is the clearest difference between a United States shareholder and a German one, because Germany has no tax treaty in force with Chile. The full case is in whether a German can buy land in Chile.

Frequently asked questions