Chilean Business Law: Key Concepts and Cases
Chilean Business Law Essentials
The following points address key aspects of Chilean business law, including taxation, employment, and consumer rights.
Taxation
- Income Tax: Accrued vacation can be taken after the first month of work. Income tax in Chile generally applies only when there is income.
- Taxation of Profits: Profits of a company like Pérez y Pérez Limited are subject to First Category tax.
- Inheritance Tax: Gifting property to avoid inheritance tax does not exempt the recipients from income tax or potential estate taxes.
- Travel Expenses: Payments made to a hotel in Canada during a business trip may be subject to additional taxes.
Employment Law
- Employment Contracts: Even without a written contract, the burden of proof for employment conditions lies with the employer.
- Overtime: Changing an employment contract to avoid overtime payments may not be legally valid if the employee continues to work extra hours.
- Social Security Contributions: Employers are responsible for withholding and paying social security contributions, even if they give the money to the employee.
- Union Formation: Companies cannot set higher quorum requirements for union formation than those specified by law.
Bankruptcy and Corporate Law
- Avoiding Bankruptcy: Agreeing with creditors on a payment plan may not prevent bankruptcy proceedings.
- Dividend Distribution: Shareholders can agree to distribute dividends up to 30% of a company’s profits.
- Corporate Ownership: A subsidiary is a corporation where another company owns at least 50%.
Consumer Protection and Competition
- SERNAC Fines: The National Consumer Service (SERNAC) can impose fines for consumer rights violations, which can be upheld by courts.
- Free Competition: Agreements between competitors to fix prices or control distribution can violate free competition laws.
- Monopolies: Monopolies are generally prohibited in Chile, except for natural monopolies.
Other Legal Considerations
- Debtor’s Prison: In certain cases, debtors in Chile can face imprisonment for not paying debts.
- Tax Authority: The Internal Revenue Service (IRS) is responsible for monitoring tax payments.
- Customs: Free Trade Agreements do not eliminate the role of Customs in auditing and applying other taxes.
Case Studies
Case 1: The Ministry of Health cannot impose additional charges without a legal basis established by law.
Case 2: A company hiring a cartonero (waste picker) should issue a receipt for services, and the cartonero is subject to income tax.