Chile's Current Cryptocurrency Tax Regime, Reforms, and Market Outlook
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Chile's Current Cryptocurrency Tax Regime, Reforms, and Market Outlook
This article analyzes cryptocurrency taxation in Chile from three aspects: fundamentals, current status, and future outlook, exploring the development trends and challenges of cryptocurrency taxation in Chile.
Navigating Web3 tides with focused insightsAuthor: TaxDAO
1. Introduction
With the development of crypto assets, the Chilean government has gradually recognized that the crypto market represents innovation and opportunities for financial development, shifting its stance from firm opposition to inclusive acceptance. At the same time, in response to potential risks and challenges in the crypto asset market, the government maintains a cautious approach, continuously building and improving regulatory systems. In taxation, the Chilean government has established a tax framework for crypto assets based on its domestic tax system. This article analyzes Chile's crypto asset taxation from three aspects—foundations, current status, and future outlook—and explores the trends and challenges in the evolution of crypto taxation in Chile.
2. Major Taxes and Tax Rates in Chile
2.1 Overview of Chile’s General Tax System
Taxation in Chile is managed by the central government and follows a residence-based tax system. Chile's tax system differs from most countries and has unique characteristics. According to various measurement standards, Chile’s tax-to-GDP ratio is among the lowest in the OECD. Additionally, Chile’s tax structure significantly diverges from other nations, primarily due to differences in how VAT and personal income taxes are levied. For instance, regarding personal income tax, Chilean individuals face a relatively light tax burden because of a narrow tax base and low personal income tax revenue—including capital income. The main taxes in Chile include Value-Added Tax (VAT), First Category Tax (corporate income tax), Second Unique Tax (personal income tax), Additional Tax, Complementary Tax, and as of this year, a newly introduced Capital Gains Tax.
2.2 Value-Added Tax (VAT)
Value-Added Tax (VAT) is an indirect tax imposed on the value added during the production and sale of goods and services. In Chile, the standard VAT rate is 19%. Certain products or services may qualify for special rates or exemptions. For example, imported services provided from abroad are exempt from VAT if the payment is subject to withholding income tax. VAT registration is mandatory for all Chilean companies, with monthly filing requirements.
2.3 Income Tax
Income Tax in Chile is a direct tax levied on individual income, including investment returns, interest, dividends, salaries, and other forms of compensation. Individuals residing in Chile are taxed on their worldwide income regardless of its source. Non-residents are taxed only on income sourced within Chile. Foreigners living in Chile are required to pay income tax only on Chile-sourced income during their first three years in the country. Chilean-sourced income includes earnings derived from assets or business activities located in Chile, as well as indirect transfers of shares in Chilean companies or other Chile-based assets.
Chile’s income tax is applied differently depending on the type of income and consists of several components: First Category Tax (corporate), Second Unique Tax (labor income), Complementary Tax, and Additional Tax.
Capital income (from businesses) is taxed under the First Category Tax, while employee income (wages) falls under the Second Unique Tax. Generally, income earned by residents or domiciled individuals in Chile is subject to the Complementary Tax, whereas income earned by non-residents within Chile is taxed under the Additional Tax.
The Complementary Tax and Additional Tax are considered final taxes, while the First Category Tax serves as a prepayment toward these final taxes. To avoid double taxation at the national level, the system allows taxpayers to deduct First Category Tax paid on capital income when calculating their final income tax liability. The percentage of deductible First Category Tax depends on the taxpayer’s chosen tax regime.
2.3.1 First Category Tax (Corporate Income Tax)
This tax applies to income from capital, commerce, industry, mining, and other sources. It is calculated based on accrued or received income minus allowable expenses, and must be reported annually by April for the previous calendar year. The applicable First Category Tax rate depends on the taxpayer’s selected tax regime. Chile’s 2014 tax reform established a dual tax system, implemented starting January 1, 2017, offering two methods: the Integrated Income Regime (also known as the attributed income system) or the Partial Credit Income Regime.
Under the Integrated Income Regime, final taxes (i.e., Complementary Tax and Additional Tax) are due when capital gains are generated, regardless of whether dividends or profits are actually distributed. In this case, 100% of the First Category Tax paid can be credited against the final tax, eliminating further tax liabilities upon dividend distribution or profit withdrawal. The First Category Tax rate under this regime is 25%, applicable to limited liability companies, sole proprietorships composed entirely of individuals residing in Chile, or simplified stock companies (SPA).
Under the Partial Credit Income Regime, final taxes (Complementary Tax and Additional Tax) are due when dividends are distributed or profits withdrawn. In this scenario, only 65% of the First Category Tax paid on capital income can be deducted from the Additional Tax. Since 2018, the First Category Tax rate under this regime has been 27%, and applies to corporations, joint-stock companies, and any entity with at least one foreign owner, co-owner, partner, or shareholder who does not pay final taxes.
2.3.2 Second Unique Tax (Labor Income Tax)
The Second Unique Tax is a progressive tax levied on labor-related income such as wages, pensions issued by the Chilean government, and supplementary income. It uses a tiered rate structure: 0% for income below 1,300,000 Chilean pesos (CLP); 7% for income between 1,300,001–2,200,000 CLP; 14% for income between 2,201,001–3,500,000 CLP; and 27% to 35% for higher brackets. Employers or payers withhold this tax monthly from wages after deductions for social security and health insurance contributions.
2.3.3 Complementary Tax
The Complementary Tax is a final tax imposed on natural persons domiciled or resident in Chile. The taxable income is determined according to rules governing the First and Second Category Taxes and is assessed annually. The tax follows a progressive rate schedule, ranging from exemption at lower levels up to 35% at the highest bracket. It is declared and paid by April of the year following income receipt (with the same rate tiers as the Second Unique Tax but calculated annually). If corporate income tax has been paid, it may offset the corresponding Complementary Tax liability.
2.3.4 Additional Tax
Additional Tax is levied on income earned in Chile by individuals or entities not domiciled or resident in the country. Filing may be done annually via withholding or formal declaration, depending on the type of income.
The standard Additional Tax rate is 35%, applying to dividend distributions, profit withdrawals, and/or remittances by branch offices of foreign corporations, partnerships, or joint-stock companies. Lower rates apply to certain income types—for example, 30% for trademark usage and 15% for patent rights.
As a final tax, Additional Tax also allows credit for First Category Tax already paid, under either of the two payment regimes.
2.4 Capital Gains Tax
Capital Gains Tax applies to realized capital gains for taxpayers not primarily engaged in real estate or securities trading. It is considered a temporary tax. Previously, capital gains from listed securities in Chile’s stock market were tax-exempt. However, since September 1, 2022, Chile has imposed a new Capital Gains Tax on securities at a rate of 10%.
3. Chile’s Crypto Tax Framework
3.1 Chilean Government’s Definition and Stance on Cryptocurrencies
The Chilean financial regulator, the Commission for the Financial Market (CMF), has ruled that cryptocurrencies are not financial securities and therefore are not subject to regulations governing such assets. According to the Central Bank, cryptocurrencies do not qualify as legal tender or foreign currency. Both institutions, along with the Financial Stability Committee of the Ministry of Finance, have warned that due to their volatility, cryptocurrencies could pose indirect threats to financial institutions if derivatives become widespread, making their purchase and holding risky. The Central Bank has recommended legislation to bring these assets under CMF supervision, similar to other financial securities.
3.2 Taxation of Crypto Assets
In Chile, crypto assets are taxed using the cost basis method. There are three ways to acquire crypto assets: (1) purchasing with cash or its equivalent; (2) receiving in exchange for goods or services; and (3) swapping with other cryptocurrencies. The first and third methods use the amount of cash paid or the fair market value of the exchanged cryptocurrency as the cost basis. The second method requires adherence to revenue recognition principles related to the goods or services provided. The taxable base is calculated as the selling price minus the cost basis when the cryptocurrency is disposed of.
Situations requiring crypto tax payment typically include: converting cryptocurrency into Chilean pesos and realizing a gain; using cryptocurrency to pay for goods or services where the value exceeds the taxpayer’s acquisition cost; or receiving wages paid in cryptocurrency. However, transferring cryptocurrency between wallets does not trigger tax liability.
Unlike other jurisdictions, Chilean tax law applies the same income tax system to gains from cryptocurrencies as it does to most other forms of income. Therefore, taxation of crypto asset gains depends on the taxpayer’s status (individual or legal entity), applicable tax regime, nature of the transaction (creation, sale, payment, etc.), and whether there is a gain or profit. It is primarily collected through the First Category Tax (for corporations), Additional Tax, and Complementary Tax.
4. Historical Development of Crypto Taxation
Prior to 2018, Chile’s Supreme Court supported banks closing accounts of cryptocurrency exchanges, citing that cryptocurrencies were not legal tender and lacked fundamental characteristics of money. In 2018, the Internal Revenue Service (SII) issued Circular No. 963, stating that cryptocurrencies represent a new form of digital or virtual asset and excluding them from VAT liability. Consequently, gains from cryptocurrency transactions are subject to relevant income taxes, including the First Category Tax (for businesses), Complementary Tax (for individuals), and Additional Tax (withholding tax on remittances). The purchase cost of cryptocurrencies can be deducted from proceeds upon sale. As intangible goods, cryptocurrencies are exempt from Chilean VAT. However, taxpayers buying or selling cryptocurrencies must issue invoices and receipts.
In 2019, the SII released Circulars No. 36 and No. 1371, clarifying the methods and calculations for taxing crypto asset income and capital gains. Starting April 2019, Chilean residents became required to report crypto-related income. The Chilean government officially included crypto assets in its tax reporting system. According to SII documents, residents must declare crypto transaction income under the category “Other Personal Income / Third-Party Income.” All individuals owning cryptocurrencies—including traders and miners—are considered taxpayers.
In September 2021, the Chilean government submitted a bill to Congress aimed at regulating the fintech industry. Designed as a comprehensive framework, the bill sought to establish regulatory principles and foster innovative financial products and services with broader impact. The proposed regulatory framework included alternative trading systems for securities and financial instruments—such as invoices, derivatives, virtual financial assets, or crypto assets. Virtual financial assets were defined as digital representations of value units, goods, or services (in local or foreign currency) that can be digitally transferred, stored, or exchanged.
On January 4, 2023, Law No. 21.521—the long-pending "Fintech Law"—was enacted. It is currently being implemented, with regulations under development. Under this law, crypto assets are regulated, and a limited number of "fintech services" are clearly defined to promote financial competition and inclusion through technological innovation. Five of these services are particularly relevant to crypto assets, regulating activities involving crypto assets as financial instruments and payment methods. The law grants enhanced authority and responsibilities to the Central Bank, providing positive guidance for the future development of financial assets like cryptocurrencies. Furthermore, the Chilean government participates in international cooperation with the OECD and EU to enhance tax transparency and information exchange regarding crypto assets, combating tax avoidance and evasion.
5. Future Outlook: The Evolution of Chile’s Crypto Tax Regime
In Chile, cryptocurrencies do not have legal tender status, yet they are widely used across the country. The government is actively working to develop regulatory and supervisory frameworks aimed at consumer protection, fostering innovation in the financial sector, and promoting economic growth.
Due to the widespread use of cryptocurrencies, the Central Bank of Chile now views crypto assets as mechanisms for exchanging goods and services. In early November 2021, Congressman Karim Bianchi introduced a proposal to recognize and regulate Bitcoin and other cryptocurrencies as legitimate payment methods in the country. If passed, this law could provide a legal foundation for further regulatory developments, such as allowing banks to offer crypto custodial services. A week later, Congress referred Bianchi’s initiative to the Economic and Development Committee for discussion. The proposed legislation is concise and clear, aiming essentially to regulate Bitcoin as a means of payment “valid in any transaction and context involving private individuals or legal entities.” In addition to recognizing Bitcoin as a valid payment instrument, the draft law stipulates that its exchange rate will be determined by free market mechanisms, prices can be expressed in Bitcoin within the country, though they must also be displayed in Chilean pesos. This demonstrates that Chilean lawmakers are currently striving to legalize the use of Bitcoin as a payment method. Meanwhile, the Chilean government is already preparing to explore the development of its own central bank digital currency (CBDC)—essentially a digital version of the Chilean peso. In late September, the Central Bank formed a team to study its digital currency starting in 2022, viewing it as a tool for innovation and economic revitalization. Unlike traditional cryptocurrencies, CBDCs are digital equivalents of conventional fiat currencies. Issued and controlled by the central bank, CBDC users typically trade privacy for convenience, making them more efficient payment tools.
Moreover, the Fintech Law acknowledges that stablecoins can be part of the payment system and subject to prudential oversight by the Central Bank, as they form part of the national payment chain—highlighting the growing importance of cryptocurrencies in Chile’s financial markets. However, Chile’s current tax policies and regulatory laws regarding cryptocurrencies remain incomplete, posing challenges when using them for widespread, low-value payments.
Overall, the Chilean government maintains a cautious stance toward crypto assets—neither fully banning nor fully embracing them—but instead seeking to regulate and manage their development and associated risks through legal and tax measures. It can therefore be anticipated that Chile will continue along this path, gradually refining its legal and tax frameworks for crypto assets while monitoring international trends and engaging in global cooperation. This approach aims to adapt to the rapid evolution and innovation in the crypto space, creating a stable and favorable environment for cryptocurrency use and supporting steady national economic growth.
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