Chile – New Institutional Framework for Foreign Investment

Chile – New Institutional Framework for Foreign Investment

Since the beginning of March 2015, a new framework for Foreign Investment is in debate in the Chilean Parliament, having passed the previous approval of the Financial Committee and recently the approval of the Chamber of Deputies.  


The Law is divided into five Sections referred to scope and coverage, definitions and applicable rules to the foreign investment, a foreign investment development strategy, the setting up of a Committee of Ministers for the promotion and development of foreign investment in Chile, a new investment promotion agency and other legal amendments.


In this sense, the new framework considers the implementation of a Committee of Ministers, which assesses the President in the definition of a national policy of foreign investment, as well as the creation of a specialized agency for its implementation. According to this, the current Comité de Inversiones Extranjeras, CIE, will assume further responsibilities, above all in promoting Chile actively abroad.


In its principal points, the project guarantees investor the access to a formal foreign exchange market and remittance of capital and earnings, the right to freedom from arbitrary discrimination and exemption from sales and service tax on imports of capital goods. The bill also regulates the effects of the contracts signed under DL 600 defining a period of 4 years for its implementation.


Nevertheless, it is not yet very clear yet, how specific articles will be applied in practice, and there remain uncertainties to be taken into consideration, above all respecting the following points:


  • The establishment of a “Certificate” as proof of the foreign investor/investment status. The Certificate enables the foreign investor, as qualified by the investment promotion agency, to access to the new legal framework. Under the current legislation in force, it is doubtful that a certificate issued by an agency can be understood as an administrative act.     
  • The derogation of the formal exchange market access guaranty established in the DL 600. The new legal framework subjects any foreign exchange operations to the Central Bank of Chile’s exchange restrictions. 
  • The modification respecting the Value Added Tax (number 10, letter B, from article 12 of Decree Law N° 825). The  new text proposed makes in practice inapplicable the VAT exempt granted to the import of capital goods set aside for investment projects, requiring income within the following 12 months from the acquisition or import of this/those first capital good(s).     
  • The option granted by the State of Chile of requesting foreign investment’s authorisations for four years from the enactment of the Law though the DL 600 will be repealed (under the terms of Article 3 of DL 600 but with a 44,45% locked-in tax rate).”


Sources: CIEChile , legal analysis: Baraona Abogados