Market Entry Alternatives for Chile

International companies looking to expand their business and operations to Chile need to tackle a very important question from the get-go: What sort of footprint do they wish to have in the Country? Some key factors, such as timeframes and budgets, need to be considered, however, and generally speaking, companies looking to enter Chilean Markets have (4) distinct alternatives to choose from:

1. Subsidiary Incorporation.

2. Shelf Companies

3. Branch Opening

4. EOR (Employer on Record)

At South Gate Advisory, we like cutting to the chase. That is why we suggest establishing a Subsidiary Company if clients are not in a rush to start operations. On the other hand, if contracts, hires, and any other business activities need to happen yesterday, we recommend acquiring a Shelf Company.

When incorporating a Company from scratch, clients are looking at roughly 6-8 weeks to have it fully operational with active bank accounts. Shelf Companies, in contrast, are sold by us at South Gate Advisory with:

1. Legal Bylaws, proper registrations, and publications.

2. Local Tax ID (RUT) and “Initiation of Activities” Affidavit before local Tax Authorities.

3. Active Bank Accounts in CLP, USD, and EUR.

In other words, the company is completely ready and legally compliant from day (1) to:

1. Enter into any type of commercial agreement with local vendors and/or suppliers.

2. Enter into contracts with Public Entities.

3. Pay local and foreign vendors.

4. Hire local employees.

5. Pay salaries of local employees.

6. Pay legal deductions of local employees.

7. Pay local taxes.

Once the purchase of the Shelf Company is completed, we just need to proceed with the following simple steps. (Roughly 2 weeks)

1. Draft & Sign Power of Attorney. (By the international buyer - Company or individual)

2. Obtain a local Tax ID for the international buyer.

3. Execute and sign a share transfer private Deed to formally transfer ownership of shares.

4. Sign a Bylaw Modification Deed to formally update the company name, business nature, banking powers, and any other specified matters.

5. Register an official excerpt of the Bylaw Modification Deed with the appropriate registry.

6. Publish a summary of the Bylaw Modification Deed as required by local regulations.

7. Inform the local Tax Authorities about all recent company and ownership changes.

8. Update the company's banking powers and authorized profiles with the bank if they have changed.

9. Update the company books. (Shareholder´s registry)

Side note for the “Company in a day” platform: Fast track created by the Government to simplify things for very small local businesses. Whilst it is true that timeframes are shortened considerably, one has to note and consider the following:

1. The entire process takes more than a day.

2. The entire process cannot be completed online; a trip to the Public Notary is still required.

3. Clients do not get the chance to review an English draft of the Bylaws.

4. It was not created/intended for international companies.

5. The Bylaws or Articles of Incorporation produced are extremely simplified and short; there is no possibility of incorporating special clauses.

6. A Notary Public Deed is recommended if the Client engages in any kind of financial dealings with banks.

7. A Notary Public Deed is recommended if the Client engages with Public Entities.

8. A Notary Public Deed is recommended if the Client wishes to sell the business down the line.

9. Overall, and from a PR position, a Public Deed Bylaw is always recommended, especially for international clients.

Branch incorporations are typically a bit trickier and widely unpopular in comparison with Company (Subsidiary) establishments due to the following main reasons:

1. Incorporation timeframes are longer as more corporate documents are required from the foreign entity.

2. As a result, branch incorporations are also more expensive.

3. Since the branch is legally considered the same entity as the foreign company, there is a significant risk of horizontal liability.

4. Branches are still required to file monthly taxes and comply with accounting regulations. However, tax compliance for branches is more complex than for local companies because, for tax purposes, branches are treated as Chile-based entities. This means branches do not qualify for preferential tax rates.

Employer on Record (EOR) is certainly a very attractive option. However, EOR involves contracting with a local partner who becomes the formal employer, handling all local legal liabilities, payroll, and compliance for your workers. This arrangement, typically more costly, is best suited to specific needs and situations.

This option means having virtually no physical or legal presence in the country. Foreign companies use Employer of Record (EOR), so they are not subject to the local legal framework. Their role is typically limited to transferring the EOR employee's monthly salary to cover costs in Chile, while the EOR manages local employment compliance.

The main issues are cost and finding a willing local firm. EOR is not prohibited by law in Chile, so it is a valid option.

Outsourcing workers to local companies creates a series of problems, most notably confusion for employees and nightmarish duplication and redundancy in communications. Finally, this setup creates a lack of belonging, as employees do not truly feel part of the organization or, worse, feel like second-class citizens. Addressing this issue is vital, as this phenomenon inevitably weakens both individual and company performance