In Chile, unlike in Europe, a company cannot buy any car. Vehicles recognized as company cars are trucks, pick ups and jeeps, unless the company’s object is car rental.

Therefore, if a company buys a vehicle which does not fall under the aforementioned list, the Chilean IRS will not recognized it as a company’s vehicle and it will be seeing as a company’s investment, which can be depreciated within 7 years.

The VAT paid for that car cannot be recovered as well as the expenses related to the car.

If this car is assigned to some CEO and he uses it beyond the business, hours it will be seen as part of the CEO’s income and must be taxed accordingly.

We therefore advice our clients to buy those vehicles recognized as company cars by the Chilean IRS.

I.- Importation of goods.

The importation of goods is levied a tax in amount of 2.8%. This amount paid can be used as a credit when the goods are taken outside the Region and the 1,7% can be used as credit for the VAT payments.

II.- Hiring local work force

Until 2025 companies will receive a bonus from the State in amount of 17% of the workers’ salary. This amount should not exceed $182,000 for each worker’s salary. The workers should live and work in the Punta Arenas Region and the salary should exceed at least 20% the minimum salary, but should not be higher than 60 UF (approx. $1,320,000)

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III.- Tax credit for corporate tax

Companies rendering services in the Punta Arena’s Region shall have a tax credit on the chattels belonging to the fix assets of the company, including equipment, machinery and/or buildings.

If the price of the chattels is no more than 200,000 UTM (approx. $8,000,000,000) then the credit is 32%. Between 200,000 and 2,500,000 UTM is 15% and higher is 10%.

Also the monthly provisional tax payment can be suspended, if they exceed the amount of the tax paid last year.

To be able to use these benefits the company must summit to the Chilean IRS a technical description of the investment project, explaining the dates the project will start and finish, goods that will be acquired and the total amount of the investment. The investment project must be at least 500 UTM (about $20,000,000). They must also summit a plan with their salaries, qualification and social security policies towards their employees.

If the equipment or machinery is taken outside the Region, then the credits must be paid back, unless the equipment is send for repair.

In Chile is possible to obtain a resident permit as investor.

Foreigners can either apply for a visa after having a company formed in Chile or even before they formed it.

If the  investment is in a stage of an idea, then a description of the project must be summited. This description must include the location of the project, number of employees to be hired, capital to be invested and the profit projections of the project.

If the company has been already formed, then all the documents related to the incorporation must be summited along with the documents proving that the capital of the company has been already paid and the money has entered the country.

In the event of an investment in a stage of an idea or if the company has been already formed, but the capital has not been already summited, then suitable documents must be summited to prove that the person applying for the visa has enough means to start the project or pay his part of the shares of the company.

The application for the visa can either be summited when the person arrives in Chile as a tourist or at the Chilean consulate in the respective country.

All foreign documents must be legalized at the Chilean consulate and documents in a foreign languages need a legalized translation.

Scope of Application

This Regulation will apply to the storage of hazardous substances. The term of hazardous substances refers to those substances identified as such by the NCh 382 Of. 2004.

The storage of hazardous waste already has its own regulation contained in the DS. No. 148 which was passed with the Regulation of Hazardous Waste Management, meaning that this new regulation is not applicable to hazardous waste, but only to substances. Neither does this Regulation apply to radioactive substances, liquid or gaseous combustibles used as energy resources, port premises, infectious substances with pathogenic agents or the work of the mining industry, with the exception of support facilities in an urban environment.

The Regulation will come into effect the 11^th of March 2011 and in if major modifications are required in order to comply with the decree the deadlines to meet the new prescribed standards vary from 2 to 5 years. The deadline depends if the changes required are important, whether it requires the operation to change location, build new buildings, or if there are more than 2 branches that require modifications.

This Regulation is able to apply different regulations, depending on the quantity and types of stored substances, which is very positive, for it recognizes the diverse realities that exist at the moment of storing dangerous substances. It avoids from requiring smaller companies to make large investments for the storage of small quantities, and on the other hand, it avoids that the regulation of storage of large quantities of hazardous substances is too lax, which, in the case of an accident, could become an environmental calamity with grave consequences for the population.

This Regulation allows for a temporary storage zone for hazardous substances, under the condition that the substances are dispatched within the same day. This loading and unloading area must have a solid floor, be water resistant, and have a light roof protecting the stored substances from weather conditions, as well as, systems of manual spill control and fire-extinguishing.

Storage in Small Quantities

Companies that store less than 600 Kgs. or liters of hazardous substances are not required to have a warehouse for such substances, unless they are flammable gases, oxidizing substances, toxic gases o substances which, when in contact with water, disperse flammable gases.

The place where hazardous substances are stored must have manual systems of spill control system and fire-extinguishing. The stored substances must be properly indicated and the security date sheets must be available for whoever is managing the substances.

The containers with the capacity of 5 liters or Kgs., as well as glass containers must be stored in locked shelves or anti-roll bars with clear indication.

Storage of Medium Quantities

When the quantity of hazardous substances stored is up to 12 tons, it can be stored in an ordinary warehouse. The sector holding the hazardous substances must be clearly identified. The labels used will be in accordance with the Nch2190.

It is important to respect the distance between the substances that are incompatible, those that are hazardous and those that aren’t. A system must exist which contains local spills, avoiding the possibility of compromising the adjacent areas.

Outside of the warehouse, a written or electronic registry in Spanish must exist available to the working personnel, containing minimal information about the stored substances. Additionally, safety data sheets must be kept.

Storage of Large Quantities

A specialized warehouse is required when more than 12 tons of hazardous substances are being stored. These warehouses will require sanitary authorization, which will also apply to warehouses that hold flammables amassing up to 10 tons. In addition, both the temporary and permanent closure must be reported to the authorities. The same procedure applies when the warehouse is reopened. If the warehouse remains closed for a period longer than a year, the sanitary authorization will automatically expire.

This warehouse must have a closed perimeter, can only have a ground floor, cannot be subterranean and must have at least one emergency exit. The exit must open towards the exterior with anti-panic bars and must not lock. The warehouse must have a natural or implemented ventilation system, allowing the circulation of air. It must also have emergency showers and eyebaths.

A warehouse holding hazardous substances cannot be attached to cafeterias nor can it have offices in it.

These warehouses cannot be erected in the vicinity of houses, nurseries, playgrounds or any residential areas, as well as, any activity which does not correspond with the company’s line of work.

The warehouses must have a maintenance program with tasks performed quarterly, semi-annually and annually. Additionally, it must have written operation procedures available to all involved personnel.

An exterior registry, printed or digital, must be kept, showing which types of substances are being stored. Additionally, at the entrance of the warehouse safety data sheets and a blueprint of the warehouse must be kept, as well as other relevant information.

The personnel working in hazardous waste warehouses must receive appropriate training every three years which will be monitored in a registry.

An Emergency Plan must exist which shall be submitted to the local firefighter company. This plan must include, among other things:

· The layout of the facilities

· The layout of the warehouses holding hazardous substances

· The list of hazardous substances

· The chain of command

· The teams and elements available to confront the emergencies, their location and maintenance plans.

· Emergency procedures

· The maintenance of the Emergency Plan, with simulations every year, as well as periodical training and review, which shall be kept in an activity log book.

It will also be obligatory for the Director, or the emergency supervisor, to be continuously present in such procedures.

Special Rules for Storage

This regulation has special rules for the storage of hazardous substances in bulk, gas cylinders, liquid or solid flammables, oxidizing substances, organic peroxides and the storage of hazardous substances in commercial premises.

On January 26^th, 2010, Statute 20.417  was published creating the Ministry of Environment and the Environmental Superintendence, hoping to spur the protection of the environment and correct the weaknesses detected during the implementation of the Statute 19.300.

In order to join the OECD, a series of modification in our legislation have had to be carried out in different fields, such as bank secrecy, corporative management and as well in matters concerning the environment. Therefore this modification has been the result of our admission to the OECD.

However, it should be noted that this statute has also tried to correct the various weaknesses present in the original statute and that have been mentioned by the doctrine, as well as give legislative coverage to practices already implemented.

1.- New institutions

This statute creates the Ministry of Environment, which will have among other functions, that of devising environmental policies and programs and to keep a register of emissions and transfers of pollutants, in which the information of stationary sources will be registered. This Ministry will have an Advisory Council formed by representatives of various bodies (universities, trade associations, etc.), which will have a technical aspect.

A Council of Ministries for Sustainability will exist, which will pronounce on Bills that will have an environmental impact. This Council of Ministries will be chaired by the Minister of Environment together with the assistance of other ministers, whose portfolios have an environmental impact.

An Environmental Assessment Service will be created, which will be in charge of said assessment.

An Environmental Superintendent will be created which will conduct the monitoring and inspection pertinent to project authorization, the measures of prevention and decontamination plans, the quality and emission standards, including industrial liquid waste and management plans. In its auditing faculty, it is authorized to issue fines and order to closure of a facility, or the revocation a project authorization (RCA).

This system provides for the implementation of a specialized judiciary composed of Environmental Tribunals. The Environmental Tribunals have been issued by the June 28^th, 2012 publication of Statute 20600. In accordance with Art 1 of said legislation, the implementation of such a tribunal system will happen within six months of the date of publication.

2.- Environmental policy

The environmental policy always was a topic that was little clarified before the reform.

Today, a Strategic Environmental Assessment System is established at a governmental level. This system will clarify for companies what type of activities can be developed in each region. Furthermore, it will become much clearer what the environmental policies and plans will be, since these must conform to this assessment.

In the same sense, the projects that enter the Environmental Assessment System will have to be related to policies and plans at a regional level, what must be clearly described in the respective DIA or el the corresponding EIA.

3.- Citizen participation and access to information

One of the major criticisms caused by the old 19.300 Statute was the lack of citizen participation in the environmental assessment process of projects and the enactment of new regulations which had an environmental impact.

With this modification it is hoped that citizen participation will increase, allowing it even to participate in the projects that are subject to a Declaration of Environmental Impact (DIA) and making a new call for citizen participation when the explanations, extensions and corrections of both the DIA and the Environmental Impact Studies (EIA) substantially modify the project.

In addition, it establishes a new form of notifying which projects are subject to an assessment, through radio notifications.

Another constant criticism of our environmental regulatory system is the difficulty to its access and knowledge, for this a system to access environmental information will be created, which will be accessible through a webpage and will contain, among other things, the environmental legislation, jurisprudence and Comptroller reports.

4.- A preventative rather than coercive system

At first sight, and as the media have indicated, it is possible to think that the penalty system in environmental matters has been reinforced.

An Environmental Superintendence has been created, which will have the supervisory characteristics of a Public Notary and may apply sanctions to individuals discovered to be in breach or at fault. In the exercise of its supervisory powers, the Superintendence may, issue fines of up to 10’000 UTM, the temporary or permanent closure of projects or the revocation of the RCA (project authorization).

However, if the detention law is closely reviewed, it is possible to notice that the true spirit is not to punish, but rather, to prevent the actions of individuals that may damage environment.

Although a Bill is being considered that seeks to create Environmental Tribunals, the idea is not to end up in never-ending trials and to issue heavy fines, while the environment around us degrades.

It is for this reason that this amendment has a series of instruments at its disposal attempting to avoid environmental accidents and to encourage the prevention and reparation of damages, more than punishing them.

First nothing is trying to avoid the people seeking subterfuge to avoid the entry of their projects to the Environmental Assessment System (SEA).

Should the Superintendence detect a project submitting an application to SEA for a sectorial environmental permission, it may inform the respective public service and prevent from granting one.

Also, municipalities may not give the final approval of those projects that are subject to an Environmental Assessment.

Furthermore, it is forbidden to fraction projects in order to prevent them from entering into the SEIA as was previously done with real estate projects; the infraction of this prohibition is punishable.

Second, a private system of preventative investigation will be created.

A process of evaluation and certification of compliance with the environmental regulations, carried out by private auditors, shall be created to which the companies submitting a DIA are subject to.

The Superintendence may also compel certain companies to carry out programs of evaluation and certification of conformity with the environmental regulations, and the cost of such programs shall be borne by the holder of the project.

The advantage of this system is that sanctioning processes may not be started as a result of findings of the certification.

Third, it is hoped that persons will not conceal environmental accidents and shall take necessary measures to repair them.

The persons that report themselves will be exempted from the total amount of the first fine and a substantial reduction will be applied in the following instances if necessary.

In addition, starting a sanctioning process, a fine may be suspended if within ten days of initiating a program of completion is presented.

If a company is sanctioned, it may voluntarily present a plan for reparation guaranteed by a technical study, which will be revised by the Environmental Assessment Service. If the plan is satisfyingly executed, the lawsuit will be automatically dropped.

5.- Improvement of the Environmental Assessment System

This law seeks to rectify a series of weaknesses of the SEIA (Environmental Assessment System) that had pointed to the doctrine and gave legal support to a series of practices which were common and public knowledge in the former Conama.

With regards to SEA in general, projects that focus on the exploitation of genetically modified organisms, as well as those protected, have been added to the list of projects that have to be submitted to SEIA.

It is peremptory now that a consolidated report of the Evaluation exists, enabling the authorities to pronounce on the project submitted for evaluation.

The RCAs will have a validity of 5 years. Once the time has lapsed without beginning the project a new application is required.

It specifically provides that the SEIA will be carried out through electronic means and the information shall be freely available on the website, as has been the case.

In the case the projects to be submitted to the SEIA are urgent projects dealing with disasters or cannot be stopped, the time of their evaluation is reduced by half. This it is intended to give preference to projects of interest to the country.

With regards to the Declarations of Environmental Impact, a simplified system is created for the smaller companies presenting a DIA, allowing small and medium-sized business to be more competitive in this field.

The DIA will have to justify the reason for the project and it must not be subject of an EIA.

With regards to the Environmental Impact Studies, projects that are near wetlands, glaciers, and conservation sites will be subject to an EIA.

It is mandatory to have an EIA for all projects that have been granted a RCA and are in an area of influence, even if they are not running.

The projects that present a risk to people’s health and, when no other primary norm of quality exists in Chile, will have to establish a section indicating the potential health risks to the sorrounding persons.

6.- Conclusions.

It will only be possible to fully assess the benefits and advantages of this new law when all regulations will have been dictated, such as, for example, the certification of compliance with environmental regulations, the minimum work that must exist in a project so that the RCA doesn´t expire, etc…

Hopefully within the next few months, these Regulations will be identified.

A system was implemented which demands mining companies to have an approved plan by Sernageomin (a governmental agency that ensures mining and environmental safety), for the closure of mines prior to the implementation of a mining operation. This plan has to be planned and implemented progressively throughout the duration of the mining operation.

Furthermore, the mining companies must issue guarantees to the State in order to assure the fulfillment of the plan of closure. In order for the company to be refunded of said guarantees, it is necessary for the mining company to obtain a certificate issued by Sernageomin stating that it has fully complied with the plan. Nevertheless, part of the guarantees will be returned to its owners upon the fulfillment of these requirements.

Two types of procedure exist for the plan of closure to be approved. One is the procedure of general application, which shall apply to mineral deposits whose extraction capacity is superior to 10,000 tons per month. The simplified procedure shall apply to mining operations whose capacity is less than the above mentioned amount and mining explorations that enter the environmental impact assessment system.

The general procedure requires, among other requirements, that the plan of closure is accompanied by a technical report issued by a person competent in Recursos y Reservas Mineras (mining resources and reserves) in accordance with statute 20.235. The technical report shall incorporate information about national monuments and archaeological sites, a financial assessment of the closure and the post-closure costs, the amount of guarantees and which instruments shall be used as collateral and a plan to inform the local community. Among others, deposits, bank guarantee ballots, letter of credit stand-by, and even the assignment of contract of sale of minerals with Enami, may be handed in as collateral.

Once the plan for closure has been approved by Sernageomin, it will have to be audited by external auditors. Regular audits will take place every five years and extraordinary ones will take place when serious situations arise which warrant one. The audits are intended to verify that mining companies are in compliance with the plan of closure and update it if necessary. The audit reports shall indicate the technical standards that are applied upon: the parameters of certification, the control and verification procedure, and ways of verifying and guaranteeing the impartiality of the auditor. For this purpose a Public Register of External Auditors shall exist.

The simplified system only requires that the company be identified, along with the mining project and the set of activities that the company proposes in order to maintain the physical and chemical stability of the surroundings, as well as the protection of the wellbeing for both the local population and environment.

These plans will be prepared in accordance with methodological guidelines issued by the authorities.

The plan of closure will not be static, but rather be updated throughout the mining operation.

It is possible to request a temporary suspension of operations, for a period up to 2 years, with the possibility of it being increased after 3 years. However, should a temporary suspension be falsely requested with the intention of a permanent standstill, a fine of 1.000 to 10.000 UTM (in June 2012 1 UTM equaled USD $79) shall be issued.

It should be noted that not only is the company responsible for the fulfillment of the closure plan, but also that its legal representative can be subject to fine ranging from 100 to 1.000 UTM.

This law also regulates the closure of oil and natural gas operations.

Following the closure a fund shall be established for the maintenance of closed mines. Before the company is issued its certificate of final closure, it shall make a non-refundable payment which will cover the costs of the post closure activities. During the closing stage a monitoring and verification process will be developed that will ensure the physical and chemical stability is kept, as well as not harming the local population and environment.  

This law will come into effect a year following its publication in the Official Gazette. While the legislation enters into force, the mining companies currently in operation shall make an evaluation of their closure plans, incorporating the health and environmental issues, and obtain an environmental impact assessment of it issued by the appropriate authority, if pertinent.     

If the precautionary measures request is filed before the beginning of the trial, the plaintiff has to give a surety or any other guarantee, to secure that the lawsuit will be filed within 10 days this precautionary measure has been granted. If the lawsuit is not filled, then the plaintiff is liable for all the damage this measure may cause and the fine the judge will impose for not filling the lawsuit. Courts in Chile usually only accept as guarantees bank deposits or mortgages on properties in a similar amount of the precautionary measure requested.

If the precautionary measure is requested during the trial, then the guarantee is no longer needed.

The precautionary measures usually accepted are the seizure of an appropriate amount of money, the prohibition to enter any agreement in regard to some goods or the appointment of one or more auditors.

In accordance to law 19.983 the invoices shall be notified judicially. After the notification the defendant can only argue that he returned the invoice within the time permitted by law (8 days) in accordance to the law, that the invoice has been forge or that the services were never rendered. If the defendant argues those circumstances fraudulently, he will be sentenced to pay the double amount due plus interest.

If he does not argue those circumstances, then the executory process starts by filing at the same judge a subsequent claim for seizure. In that case, after the defendant has been notified, he has only 4 days to present a defense base on payment or the statute of limitations having run. While those allegations are proven to be wrong or right, goods or money can be seizure.

If the defendant does not present any defense or if he does not prove the defense alleged then the money will be transferred to the plaintiff’s account or the good will be auctioned and the money obtained will be transferred to the plaintiff.

If the equipment will remain in Chile for only a certain amount of time, then there is the possibility to apply for a temporary admission (ingreso temporal). The advantage is that the equipment only has to pay a percentage of the custom duties and taxes due. Nevertheless, it is only advisable to apply for a temporary admission, if the equipment will remain in Chile for less than 6 months, because after 6 months there is no reduction in the amount of custom duties and taxes and the company is oblige to return the equipment within the period it was declared when the equipment entered the country.

If someone wishes to bring equipment for less than 6 months, then temporary entrance of the equipment is advisable, because you pay only a percentage of the duty and taxes you paid in a normal entrance. The downside of the temporary entrance is that if you for whatever reason want to leave the equipment in Chile definitely, the custom duties and taxes paid can not be credited to the payment due for the definitive entrance of the equipment.

The taxes that are levied when equipment enters Chile are VAT in amount of 19% and customs duties, which are in average 6% of the CIF – price. Chile has free trade agreements with a lot of countries including USA. So if the equipment is from the States usually custom duties will be 0%, if the equipment complies with the rules of origin agreed in the Free Trade Agreement.

In accordance to the Free Trade Agreement, if the equipment has to be sent back to the US to be repaired when it returns to Chile no taxes are levied.

A wise way to import the equipment is via a lease agreement. The advantage of a lease agreements is that the payments can be credited as expenses and deducted from incomes. Payments of international leasing however are subject to a tax levied on every rate paid in amount of 1.8% (Impuesto adicional). These agreements must be informed to the Chilean IRS previously.