Banking, Money and Taxes in Chile
Although there are a lot of very good reasons for expats to relocate to Chile, 'ease of banking' and 'convenient financial services' are certainly not going to feature on that list. Expats are warned that banking in Chile is a complicated and frustrating proposition at the best of times, and an absolutely nightmarish one at the worst.
The currency used in Chile is the Chilean Peso (CLP), which is subdivided into 100 Centavos. However, centavo coins are no longer in circulation, and, when necessary, prices are rounded up to the nearest peso.
Banking in Chile
Along with the Central Bank (Banco Central de Chile), major Chilean banks include Banco de Chile, Banco Santander Chile, Banco Estado, and Banco Santiago. Of the foreign commercial banks, HSBC and Scotiabank have the largest presence in Chile, and it is possible – in theory, although hardly ever in practice – to open an account with them before leaving home, and then to open a (linked) local account after arriving in Chile.
Chilean banks are generally open from 9am to 2pm, on weekdays only.
ATMs are widely available, even in the smallest Chilean towns – which is just as well, as you might be forced to use money from an overseas account for the duration of your stay in Chile. ATMs typically operate on a 24-hour basis, and accept Visa, Mastercard, Cirrus, Switch and Solo cards. Credit cards are widely accepted in Chile.
Opening a bank account in Chile
Opening a bank account in Chile is extremely difficult. Most banks will only let you open an account with them if you have had Chilean residency for two years – but even then, it is not a straightforward process.
First of all, expats must have a RUT (Rol Único Tributario) number, which will function as your tax identification number and your national ID number while in Chile. RUT numbers can be applied for by filling in the tax administration (SII) form F4415 – but the process can be lengthy, and doesn't always end in success. It helps to have stable employment and confirmed residency in Chile before applying for your RUT number.
However, even if you are fortunate enough to have obtained your RUT number, it does not necessarily follow that you will be able to open a bank account in Chile. Most Chilean banks will insist on proof of two years' residency in the country, proof of Chilean income, and a substantial amount of credit (as much as USD 30,000) before issuing a bank account to a foreigner – and even then, it will take an inordinate amount of paperwork and legwork to accomplish.
It is therefore unsurprising that many expats do not even bother with opening a 'proper' bank account in Chile, and instead, opt for one of the following alternatives:
- With a RUT number, it is possible (although still a far cry from 'easy') to open a Fondos Mutuos (Mutual Funds) account at a Chilean bank. These are basically savings accounts set up on a fixed-term, fixed-rate basis. You will earn interest on your money, but you will not be allowed immediate access to it – and if you request a withdrawal before the investment term is up, you will forfeit the interest earned, and incur penalty fees.
- In a similar vein, expats might try to set up a Cuenta RUT account through Banco Estado. This is basically a very simple savings account, that comes with an ATM card (for domestic use only). There are restrictions on the amount of money you can have in this account, and how much you are allowed to deposit into it each month. The Cuenta RUT option is not as versatile or convenient as a full-on current account – but it beats lining your mattress with peso bills.
- If both of these options fail, expats might simply choose to have their salaries paid into their overseas bank accounts (or to be paid in cash, which they can then send home themselves) – and then access their money using foreign debit or credit cards. Note that if you are planning on this approach, you MUST ensure that you inform your bank of your intention to travel before leaving home, and that you take at least two or three working ATM cards with you to Chile (and keep them in separate places). If these precautions aren't heeded, you could find yourself stuck in Chile without any access to your hard-earned money.
Taxes in Chile
Expats will not be taxed on their worldwide income for the first three years they live in Chile. However, they will be taxed on the income they earn from Chilean sources, on a progressive scale:
- Lower than 13.5 units 0%
- 13.5 - 30 units 5%
- 30 - 50 units 10%
- 50 - 70 units 15%
- 70 - 90 units 25%
- 90 - 120 units 32%
- 120 - 150 units 37%
- Beyond 150 units 40%
Note that the value of a “unit” is recalculated all the time, but tends to hover between the 35,000 CLP to 40,000 CLP mark (i.e. 3.8 million pesos gross pay = roughly 100 units = 32 percent income tax levied). It is also important for expats to realise that even though these are the official tax brackets, the way things operate on the ground in Chile might not always be so 'official', and further deductions from your salary are an unfortunate, although very real, possibility.
After three years, expats will have officially made Chile their 'tax home', and will be taxed on their worldwide income. However, as Chile has double taxation avoidance agreements (DTAAs) in place with many countries, expats who hail from a country with such an agreement in place will not be taxed on the same income twice.
Expats looking to retire in Chile will be relieved to know that foreign pensions, of any amount, are never taxed.