ZONA FRANCA – TAKING ADVANTAGE OF IT – THAT IS, DEFERRING THE 19%
Companies must pay 19% IVA (VAT or GST) on all imports to Chile. When bringing imports into the Iquique Tax Free Zone, that is, the ‘Zona Franca De Iquique’, companies can defer payment of this tax. However, when bringing products into Chile from the Iquique Tax Free Zone, all products that leave the zone, headed to the rest of Chile, are considered imported goods and therefore subject to taxation. To that end, all taxes will be due upon leaving the zone (according to Law No 825). One of the main taxes to pay will be IVA (that is GST as we know it in Australia), which is 19%.
Due to the Free Trade Agreement between Australia and Chile (“FTA”) most tariffs and customs duties have been abolished. In each individual case you will need to determine whether your imported products are FTA exempted.
One advantage of having a Chilean company already set up is that you will be able to seek an imputed tax credit for the 19% when you sell the product to a third party. To take advantage of this credit, any sale must be invoiced from a Chilean entity.
The National Director of Customs regulates the entry/exit of all merchandise in the zone. It states that the sale of all foreign merchandise for the importation to the zone, the rest of Chile, foreign countries, and other free trade zones should be formalized before Customs Service by a ‘Solicitud Registro Factura a Zona Franca de Extensión (S.R.F.)’, ‘Factura de Importación’ or a ‘Solicitud de Reexpedición’ according to the corresponding circumstances of the entry/exit of the merchandise.
The Harris Gomez Group can provide you with advice on the general provisions of the Double Taxation Agreement between Chile and Australia and what specific matters that your company may need to attend to.
Harris Gómez Group is an Australian-Latin American legal and business advisory firm located in Santiago, Chile and Bogota, Colombia. In 2001, HGG was the first Australian law firm to have a local office in Latin America. The firm specialises in Common Law and Latin American cross-border issues in areas such as Mining and Energy, Corporate, Mergers and Acquisitions, Tax, Intellectual Property and Business Enterprises.
