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A Blog Post

Chile Tax Reform: Salaries as an Expense

Written by Senior Tax Lawyer, Karem Duffoo.

Limited Liability Partnership – Partner Salaries

Limited Liability Partnership or more commonly known in Chile as Sociedad de Responsabilidad Limitada (SRL) is an important type of corporate vehicle in Chile. The drawback with this type of entity was that partners who were working in the business had certain restrictions on the salaries that they were able to claim as expenses. This was not the case for corporations (share type companies), where there are no limits applied to shareholders/owners who were working in the business.

The tax reform that was passed in 2020 makes an important change to this critical point for Partners of an SRL that work in the business. With Law No. 21,210, various amendments were incorporated into the Income Tax Law (LIR), one of which refers to the new tax treatment given to the so-called “Partners Salary”, which is no longer limited to the taxable cap and can be considered a necessary expense.

Therefore, reasonably proportionate remuneration allocated to the partner, shareholder or individual entrepreneur who actually work in the business is accepted as a necessary expense. 

Accepted Expenses for Family Employed in the Business

An additional part of the tax reform makes it an accepted expense for all types of companies when the salaries paid to the owner’s spouse, civil partner, or to his or her children, to the extent that it is reasonably proportionate remuneration and that they actually work in the business or enterprise. 

For many years, the tax office often questioned salary expenses of employees that were family members of the owners/shareholders. There was good reason for this as it was a common tax avoidance strategy for some to employ family members when they did not actually work for the company. The downside was that many family owned companies were reviewed by the tax office even when they legitimately had family working in the operations. 

The amendment to the law now allows companies to hire more freely the relatives of the owners as long as the requirements of the law are met. In this sense, we highlight a new demand or requirement that this reform incorporates which is: in order to accept the employer’s salary as a deductible expense, it needs to be reasonably proportionate remuneration.


There is no longer a limit as to the amount of the remuneration that is considered an accepted expense for Limited Liability Partnerships since the taxable cap is eliminated. This brings SRL´s more in line with the other type of corporate vehicles that are available in Chile.

In addition, the legislation goes further by clearly stating that all companies are able to hire family members and their salaries will considered expenses as long as the salaries are reasonably proportionate to their role and that these employees actually work in the business or enterprise.

There is still some questions regarding what is considered “reasonably proportionate” remuneration but in the most basic sense we assume that it means fair market rates based on the position or job. This is something that we believe will become clearer as the tax authority makes more pronouncements on the subject in the coming months. 

Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Peru, Ecuador, Brazil, and Argentina. Over the last 19 years, our team of English speaking Lawyers and Attorneys have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets. 

To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at cmm@hgomezgroup.com