Chile
The country profile includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by the employers. Results reported include the average and marginal tax burdens for eight different family types.
It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.
The national currency is the Chilean Peso (CLP). In 2013, the average exchange rate was CLP 491.31 to USD 1. In that year, the average worker in Chile earned CLP 6 604 419.00.
The Report includes estimates of the tax wedge over the whole of the income distribution ordered by deciles of total labour income of formal wage earners derived from the household surveys.
Tax allowances and tax thresholds for the personal income tax system and upper earning ceilings for social security contributions are determined by using the Annual Tax Unit (Unidad Tributaria Anual – UTA) and the Foment Unit (Unidad de Fomento – UF). These are expressed in Consumer Price Index (CPI) units. The latter are subject to daily adjustments in line with CPI variations.
1. Personal income tax system
The fiscal year for the income tax is the calendar year.
1.1. Central government income tax
The income tax is separately applied in respect of the different categories of income. The first category pertains to capital gains and profits from commercial, industrial, mining and other companies. Labour income is taxed under the second category of income tax. It encompasses salaries, bonuses, allowances, shares and any compensation paid for personal services. The resulting tax liability is credited to the global complementary tax which is calculated and paid on an annual basis.
1.1.1. Tax unit
Each family member declares and pays taxes separately.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard tax reliefs
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Employee social security contributions regardless of whether they are paid to government or privately managed insurers.
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A tax credit on education of 4.4 UFs for each child aged 24 years or less possessing an enrollment certificate from an accredited education institution. This credit is paid to households whose combined income does not exceed 792 UFs (CLP 18 461 171.52).
1.1.2.2. Main non-standard tax allowances and tax credits
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Voluntary contributions to pension funds and retirement savings funds with an upper limit of 600 UFs (CPL 13 985 736).
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Taxpayers whose annual income falls below 90 UTAs (44 033 760) are entitled to a 100% deduction of mortgage interest paid. The percentage of the deduction is reduced as the taxpayer’s income increases.
1.1.3. Tax schedule
The annual income tax liability was calculated on the taxable income according to the following schedule in 2013:
1.2. State and local taxes
No state or local taxes are levied on wages.
2. Compulsory social security contribution to schemes operated within the government sector
2.1. Employee contributions
Employee social security contributions are levied on gross earnings. The upper earnings ceiling for contributions to the old age, disability and survivors program and AFP fees was 70.3 UFs (CLP 19 403 272). The corresponding ceilings for the healthcare program and the unemployment insurance were 70 UFs (CLP 19 320 470) and 105.4 UFs (CLP 29 091 108) respectively.
2.2. Employer contributions
Employers are required to contribute to the following public programs.
Employer social security contributions are levied on the payroll. The upper earnings ceilings were the same as those applying to the employee contributions.
3. Universal cash transfer
3.1. Amount for spouse and for dependent children
Family allowances are paid to workers with dependent children on a monthly basis. They encompass: a) adopted children; b) children up to the age of 18 or 24 provided they are students in an elementary, secondary, technical or specialised school or higher education in families whose income is less than or equal to half the minimum wage. The amount a household receives is contingent on the number of children and the household’s income. The modelling assumes that the benefit is assessed on the spouse with the lower earning level in the cases where both spouses are working.
4. Main changes in tax/benefit since 2013
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The tax schedules and upper earnings ceilings for social security contributions were subject to the CPI variations.
5. Memorandum items
5.1. Identification of an AW
The source of information is a survey conducted by the National Statistics Institute (INE) to determine the Salary and Labour Cost Index. This nationwide survey is carried out on a monthly sample and gathers information on salaries and labour costs. It applies to companies with at least 5-worker payrolls grouped in accordance with UN ISIC Rev. 3 international economic activity standard, covering workers in industry sectors C-O.*
The average gross earnings was obtained by multiplying the average hourly wage by the average number of hours worked. It covers both full and part-time workers.
The average deciles of income were constructed using the national household survey of 2011. The income deciles were adjusted using the Central Bank’s real wage index.