US Company Formation from Chile (2026): Using the New US–Chile Treaty, Pro Pyme at 12.5%, Article 41 G Passive Income Rules, Central Bank Reporting and the US LLC vs C-Corp Choice

For decades Chile was one of the few large Latin American economies without a tax treaty with the USA, even though the two countries have had a free trade agreement since 2004. That changed on 19 December 2023, when the US–Chile income tax treaty finally entered into force, 13 years after it was signed. It applies to withholding taxes from 1 February 2024.

The treaty changes the arithmetic for every Chilean with a US company: lower US withholding on dividends, interest and royalties, and protection from US tax on business profits without a US permanent establishment. At the same time, Chile has its own rules to consider: the temporary 12.5% Pro Pyme rate, Article 41 G on passive income of controlled foreign entities, the rising withholding on boletas de honorarios, and the Central Bank's reporting rules for investments abroad. This guide covers all of them, going further than our Latin America overview, and compares US LLC formation with US C-Corp formation for Chilean freelancers, SpA owners and start-ups.

In short: Chileans and Chilean residents can own 100% of a US LLC or C-Corporation, formed remotely. The US–Chile treaty limits US withholding on dividends to 15% (5% for companies owning 10% or more), interest to 4%, 10% or 15%, and royalties to 2% or 10%, and limits US tax on business profits to a US permanent establishment. Chilean companies pay first category tax at 27%, or 12.5% under the Pro Pyme regime for 2025 to 2027. Individuals pay the global complementary tax up to 40%. Article 41 G can attribute passive income of a controlled foreign entity to its Chilean owner each year. Investments abroad above set thresholds must be reported to the Banco Central. With UCB, a Wyoming LLC with EIN is $249 and a Delaware corporation with EIN is $358, all-in.

The US–Chile treaty in practice

To claim the rates, the Chilean owner gives the US payer a Form W-8BEN or W-8BEN-E with a treaty claim (see W-8BEN-E vs W-8BEN explained). The treaty has a limitation on benefits article, which a Chilean individual or a Chilean company owned by Chilean residents normally passes.

Chile's dividend clause

The treaty lets Chile keep its additional tax (impuesto adicional) of 35% on dividends paid by Chilean companies to US residents, as long as the first category tax remains fully creditable against it. That matters to US investors in Chile, not to Chileans with US companies, but it explains why dividend flows from Chile to the USA look different from the other direction.

Chilean rules that matter

Company taxes

• General regime (Régimen General, semi-integrated): first category tax (IDPC) at 27%, with 65% of it creditable against shareholders' personal tax.
• Pro Pyme General: for small and medium companies with average revenue under the legal limit, IDPC at 12.5% for commercial years 2025, 2026 and 2027 under Law 21.755, rising to 15% in 2028 and back to 25% in 2029 unless the law changes. The government has announced a bill to keep 12.5% permanently.
• Pro Pyme Transparente: the company pays no IDPC, and its owners are taxed directly on its profits.

Personal taxes

• Global complementary tax (IGC): progressive up to 40% on total income of residents, including foreign income.
• Boletas de honorarios: independent workers issue electronic fee receipts, and the payer (or the worker) withholds 15.25% in 2026, rising to 16% in 2027 and 17% from 2028, mainly to fund social security contributions.

Article 41 G: passive income of controlled foreign entities

Under Article 41 G of the Income Tax Law, Chilean resident individuals and companies that control a foreign entity must include its passive income (interest, dividends, royalties, capital gains on certain assets, rents and similar) in their own Chilean taxable income each year, as it accrues, whether or not it is distributed. Entities in territories or preferential tax regimes listed under Article 41 H are presumed to earn passive income. Active income, such as services or the sale of goods, is not attributed.

A US LLC that holds investments, receives royalties or earns rents is a typical 41 G case. A US LLC that sells services or goods is generally outside it, but its distributions are still taxable in Chile when received.

Reporting to the Banco Central

Under the Compendium of International Exchange Regulations, Chilean residents who make investments abroad above set thresholds must carry them out through or report them to the formal exchange market and inform the Banco Central de Chile. Capitalising a US company is an investment abroad. There is no exchange control in the sense of prohibitions, but reporting is mandatory.

US LLC formation from Chile

US tax position

The IRS disregards a single-member LLC with a non-resident owner. Under the treaty, a Chilean owner who works from Chile, with no US office, employees or dependent agents, has no US permanent establishment, so there is no US income tax (see effectively connected income explained). The LLC files Form 5472 with a pro forma Form 1120 every year, and the penalty for missing it is $25,000 (see Form 5472 explained).

How Chile sees the LLC

The SII has issued rulings on US LLCs. The treatment depends on the facts, including whether the LLC is transparent in the USA. Your contador must decide whether Chile taxes the LLC's income in your hands as it arises, as income of a foreign entity when distributed, or under Article 41 G. In all cases, income for work you do in Chile is Chilean-source income.

Example: a designer in Santiago

These are illustrative figures, not a client case, at CLP 950 to the dollar.

Camila is a brand designer in Santiago with US$50,000 (about CLP 47.5 million) a year from US clients, who want to pay a US vendor by ACH.

• With boletas de honorarios, her foreign clients do not withhold, so she pays the 15.25% retention herself through her annual return, which covers social security, and pays IGC on her net fees.
• Through a Chilean SpA under Pro Pyme, the SpA pays 12.5% IDPC in 2026, and she pays IGC on what she withdraws.
• Through a US LLC, there is no US tax. In Chile, her income is still Chilean-source because she works in Santiago. She declares it according to how the SII treats the LLC.

She uses an SpA that owns a small Wyoming LLC. The LLC invoices her US clients and pays the SpA for her work, and the SpA pays Chilean tax. She reports the investment abroad to the Banco Central through her bank.

US C-Corp formation from Chile

US tax position

A US corporation pays 21% federal tax on its profits plus state tax, and files Form 1120 and Form 5472 every year (see the 21% corporate tax explained and the C-Corp guide for non-residents). Under the treaty, its dividends to a Chilean SpA owning 10% or more carry 5%, and Chile gives credit for foreign taxes under its rules.

Example: a Santiago SaaS start-up

Take an illustrative case: a Santiago company that makes logistics software for retailers, a graduate of the Start-Up Chile programme, raises a seed round from US investors. They require a Delaware C-Corporation at the top:

• The founders exchange their SpA shares for Delaware shares, so the SpA becomes a subsidiary. The exchange needs Chilean tax planning.
• The SpA keeps the engineering team in Chile and invoices the Delaware company at cost plus a margin. Under the treaty, the Delaware company's payments for services are not subject to US withholding.
• Royalties for software licensed between the companies carry 10% US withholding under the treaty, instead of 30%.
• Dividends in the future carry 15% for individual founders.

See raising US investment as a foreign founder.

Example: a wine exporter's US importer

A Colchagua Valley winery that sells through US importers sets up its own Delaware corporation, registered in California, with a sales manager and a warehouse. The US company buys wine from the Chilean winery at arm's-length prices, holds the federal and state alcohol licences it needs as an importer and distributor, and pays US tax on its margin. Dividends to the Chilean company carry 5% US withholding under the treaty. See US subsidiary for a foreign company.

Which state

• Wyoming or New Mexico for a small LLC owned by a Chilean SpA.
• Delaware for a start-up or subsidiary.
• Florida or California where Chilean companies often place US staff.

See best state for non-residents and the state selector.

What it costs

UCB's prices include state fees and the first year of registered agent service:

• Wyoming LLC with EIN: $249, or $348 with a US bank account application.
• Delaware corporation with EIN: $358.

A Wyoming LLC costs $121 a year to keep active, or $421 with the annual federal return. A Delaware corporation costs $578 a year. A US business address with your own suite number is $60 a year. See what a US LLC costs every year.

Documents and banking

For an individual, your Chilean passport (US banks do not accept the cédula alone) and proof of address. For an SpA, its registration in the Registro de Empresas y Sociedades or Conservador de Bienes Raíces, its RUT and a resolution approving the US company, translated into English. US banks and fintechs accept Chilean owners readily. Transfers to Banco de Chile, Santander, BCI or Itaú arrive as US-dollar wires. See US business bank accounts for non-residents and Stripe for non-residents.

Mistakes to avoid

• Not claiming treaty rates on dividends, interest and royalties now that the treaty applies.
• Holding passive income in a US LLC without considering Article 41 G.
• Forgetting to report the investment abroad to the Banco Central.
• Treating income for work done in Chile as foreign because a US LLC invoiced it.
• Missing Form 5472 in a year when no US tax was due.

Frequently asked questions

Is there a US–Chile tax treaty? Yes. It entered into force on 19 December 2023 and applies to withholding taxes from 1 February 2024.

What does the treaty change for my US company? US withholding falls to 15% or 5% on dividends, 4% to 15% on interest and 2% or 10% on royalties, and US tax on business profits requires a US permanent establishment.

Does Article 41 G apply to my US LLC? If the LLC is controlled from Chile and earns passive income, generally yes. Active service or trading income is not attributed.

Do I need to tell the Banco Central? Investments abroad above the thresholds in the exchange regulations must be reported.

Does my US LLC pay US tax? Not if it has no US office, staff or agents. It files Form 5472 and a pro forma 1120 every year.

How UCB can help

We form US companies for Chilean owners and SpAs remotely, in Spanish or English: the state filing, EIN, registered agent, US business address and bank application. We prepare W-8BEN-E treaty forms, and each year we file the US returns through our US tax filing service. Your contador handles the SII side, and we give them the US records they need. See our formation, EIN and bank account package and the Peru guide.

Setting up a US company from Chile? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.