When companies make the decision to set up a Chilean subsidiary, we often receive requests to set up simple and generic corporate structures. We try to work with our clients to help them understand that the corporate structure is something that needs to be considered because of asset protection considerations for the parent entity as well as the future tax implications it can have on the business.
Tax planning is a complex field, especially when different jurisdictions are involved. Which is why without professional advice, unexpected tax problems can arise and tax liabilities can occur. An effective tax planning strategy could possibly reduce your tax liabilities, but doing so requires companies to establish the optimum corporate structure.
In proper tax planning, you should first start by analysing your business plan and understanding which economic sector that your business falls into. Chilean law offers certain tax benefits that are unique to each structure. For example, Limited Liability Companies allow withdrawals of earnings in excess of the shareholdings of each partner. Legal Contractual Mining Societies qualify for special tax regimes that are set according to extraction quotas. Private Investment Funds are not taxed by the sale price of real estate.
There are tax benefits that also depend on the economic sector in which the company aims to develop. For example, the mining sector, education, professional consultancies, private investment and so on.
In Chile, similar to other countries, you choose a corporate structure depending on the objectives of the business owners and of course future goals. Good tax planning requires us to take these factors into consideration from the beginning when the corporate structure is first established.
As companies plan for their tax liabilities, it is importantto always keep in mind that a responsible tax strategy should also avoid exposure to tax risks. To ensure that you are not exposing your company to unnecessary risk we recommend having a professional assess your company’s situation.
This advisor should be someone that understands both the local tax laws as well as the implications they could have on the parent company’s jurisdiction.
Harris Gomez Group is a Common Law legal and business advisory firm with offices in Santiago, Chile and Bogotá, Colombia. We were the first Australian law firm to have an office in Latin America and we specialise in providing corporate and commercial advice in cross-border transactions including international taxation, asset protection, mergers & acquisitions as well as business enterprises.
What makes us unique is that our offices have a combination of both Common Law and locally trained bilingual lawyers, which allows us to take a Common Law perspective when working with our multinational clients.
We represent the legal interests of over 50 multinational clients, the majority of which are active within the mining and energy sectors. Our client base ranges from mining technology service providers, exploration companies to educational/ government institutions. We pride ourselves on being active within the local business community and with international trade organisations present in both Chile and Colombia.
The Harris Gomez Group strives to provide management teams with the information they need to operate in Latin America.