Working in Santiago de Chile?
Social Security and Taxation in Santiago
Once you are an official resident of Santiago — with a job and a fixed address — then you can start benefiting from the social security system. You will also have to start paying taxes. Read on for a full explanation of these systems.
A Pension System under Continuous Reform
Chile’s pension system, known as Sistema Previsional in Spanish, is completely privatized. Chilean workers are free to choose which pension-fund company they use. Their pension is based on the amount of contributions which they make; mandatory contributions are equal to 10% of the month’s income.
You can boost your pension through additional voluntary contributions, if you so wish. If you are self-employed, then your entire pension is made up of voluntary contributions. It is therefore entirely your own responsibility to ensure the sum of your pension at the end of your working life.
If you are a Chilean citizen and have contributed to your pension fund for at least 20 years, then you are guaranteed a minimum pension which you will receive when you retire — aged 65 for men and 60 for women. If you want to retire early, either as an expat or a Chilean citizen, your balance must be equal to at least 70% of your average real wage over the preceding ten years and at least 80% of the maximum welfare pension (PMAS).
Once you are in Santiago, you will probably learn about of the numerous changes and reforms the pension system has seen over the years. Some older citizens might even still be on the previous, completely state-run schemes. The current scheme has been formally implemented to run until 2045, so there’s plenty of time to get used to it.
Taxation: Benefits for Expats in Santiago
As an expat, the amount you are charged in taxes will largely depend on how long you intend to stay in Chile. If you are a resident of Chile, then you are subject to taxes on all of your income, whatever its source; for tax purposes, you are officially a Chilean “resident” if you spend more than six months in the country within two consecutive years.
Foreigners settling in Santiago will only pay income tax on their Chilean income for the first three years of residing in Chile. This is also the case if you are classified as a Chilean non-resident. It is possible that the tax authorities will extend the initial three-year term for another three years, after which you will be taxed on your entire worldwide income.
The main benefits of the Chilean tax system — foreign retirement benefits, pensions, and social security contributions — are completely tax free. Chile also has the lowest tax rate of all the OECD countries in the world (2015). This makes the nation something of a reputable tax haven, so enjoy it while you are in Santiago!
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