The Structured Products Law Review: Chile


The Chilean market for structured products mostly consists of products specifically designed and issued by foreign financing institutions (primarily major financial banks in the US and Europe) with the characteristic of having an embedded derivative that provides economic exposure to retail customers in Chile for reference assets, indices or other economic values, including commodities, equities, currencies, credit and interest rates. No market for structured products issued in Chile has developed.

These types of instruments are commonly designed by issuers and generally distributed by Chilean intermediaries in Chile (normally the major Chilean banks and financial institutions through their investment managers or funds administrators) for their potential clients in Chile, which include, among others, high net worth individuals, other intermediaries, corporations, pension funds, insurance companies, financial institutions (including banks) and asset managers (such as mutual funds and investment funds). The Chilean market for structured products also includes instruments that are manufactured by the same Chilean intermediaries in Chile to service the perceived investment needs of their clients, and are even sometimes requested and structured by experienced and sophisticated investors who are willing and able to bear the economic risks of such an investment.

Structured products can be highly illiquid and are not suitable for all investors. Therefore, for the purposes of unlocking the possibility of solutions tailored just for retail and institutional investors, and in order to extend the market to less sophisticated retail clients seeking access to certain non-traditional streams of return, or anxious to improve transparency, credit risk and liquidity, fund administration companies have structured access to foreign structured notes through the creation of investment vehicles (public or mutual funds duly registered with the Chilean Commission for the Financial Market (CMF)) that, although still very illiquid, trade in the Santiago Stock Exchange and are subject to the reporting obligations imposed by the CMF. These funds also combine the returns offered by a foreign stock market together with those of the foreign debt instruments market, guaranteeing 100 per cent of the nominal capital initially invested, a minimum gain (per cent) plus an additional return related to the variation of some stock index (i.e., S&P 500). However, although the vast majority of these funds guarantee 100 per cent of the capital invested by a client at the end of the fund's life, it must be taken into account that it is the nominal capital (not readjusted) that is guaranteed, so great care must be taken with the inflation factor.

The principal types of instruments that are marketed and sold in Chile include total return swaps (TRSs), over-the-counter (OTC) options, principal protected notes, certificates (CDOs), leveraged certificates, warrants, credit linked products and hybrids (or combinations of these). Structured products in Chile are essentially sold over the counter.

For the purposes of this chapter, we do not consider any types of derivatives such as foreign currency derivatives and interest rate derivatives.

Beginning in October 2019, Chile experienced a wave of protests and social unrest. These protests were initially sparked by the Chilean government's announcement of an increase in subway fares in Santiago but have since evolved to express broader concerns over inequality. Following consultations in the Chilean Congress with members of the opposition, on 22 October 2019, the President announced a series of measures to address social demands (the Social Agenda), including:

  1. increases in government-subsidised pensions;
  2. new insurance programmes to cover severe illnesses and related medications;
  3. a guaranteed minimum monthly income for low wage earners;
  4. the reversal of a previously announced 9.2 per cent price increase in regulated energy distribution tariffs; and
  5. a tax reform.

On 15 November 2019, representatives of Chile's leading political parties entered into an agreement to hold a referendum on whether the Chilean Constitution should be replaced, which is expected to occur in October 2020. The political parties that signed the agreement pledged their commitment to vote in favour of a constitutional amendment that would allow for the agreed referendum process to be implemented. According to a constitutional amendment adopted on 23 December 2019, if a majority of voters elect to replace the Chilean Constitution at the referendum, the final draft of the new constitution will be submitted to a further public referendum for its approval by a two-thirds majority vote, in the second half of 2021.

The medium- and long-term effects of the covid-19 pandemic, as well as the effects of the prolonged restrictive measures put in place in order to control the pandemic in Chile, have heavily impacted individuals and companies, despite the measures adopted by the Chilean government, the Central Bank, the pension funds regulator and the Commission for the Financial Market (the CMF) on the Chilean economy.

Furthermore, the pandemic has impacted Chilean Pension funds, which is the biggest investor in the Chilean market. Although current regulations have been adopted for the purposes of extending the scope of investments that approve certain restricted products for eligibility, in July 2020, the Chilean Congress approved a one-time withdrawal of up to 10 per cent of the funds under their administration, in order to mitigate the economic impact on the population. This has obviously affected capital markets in Chile as well as the search for new financial structured products as an alternative for investment. Investors were more reluctant to take a position on structured notes in the middle of the pandemic, but now, and in light of the current stock exchange's better performance, investors have returned. Nevertheless, Chile is still far from having a developed structured products market.

Legal and regulatory framework

Both the marketing and sale of structured products in Chile, as well as the purchase of such instruments by Chilean investors, are subject to different legal and regulatory frameworks from the issuer or distributor point of view and the point of view of investors on the other side.

i Marketing and sale of products in Chile

Special attention should be paid to the possibility that the marketing and sale of products in Chile could be considered either a public offering of securities or brokerage of the same, which are thus subject to the provisions of the Chilean Securities Market Law;2 or the solicitation or intermediation of money, thus being subject to the provisions of the General Banking Law.3

Based on the above, the following is a general overview of the Chilean laws and regulations governing public offerings of securities, the brokerage of publicly traded securities and money intermediation.

Public offering of securities

The Securities Market Law governs, among other things, the public offering of securities. Private offerings of securities and public offerings of instruments that do not qualify as securities are, therefore, outwith the scope of the Securities Market Law.

For the purpose of determining the scope of its provisions, Article 3 of the Securities Market Law defines the term security as 'any transferable instrument, including shares of stock, options for the purchase and sale of shares of stock, bonds, debentures, quotas of mutual funds, savings plans, commercial papers and, generally, any investment or credit instruments'.

The Securities Market Law distinguishes between private and public offerings of securities. Article 4 of the Securities Market Law provides that an offer of securities constitutes an offer to the public when addressed to the public at large or to a certain sector or specific group of the public. If the marketing efforts of the issuer or the distributor when offering the structured products are addressed to the public at large or to a certain sector or specific group of the public in Chile, they will fall within the scope of the Securities Market Law as an offer to the public and will be subject to registration requirements. Otherwise, the rules applicable to public offerings do not apply. Any other offering constitutes a private offering of securities and, therefore, is excluded from the scope of the provisions of the Securities Market Law, unless otherwise provided therein.

Pursuant to Article 6 of the Securities Market Law, no public offering of securities can be made in Chile unless the securities themselves and the issuer thereof are duly registered in the Securities Registry or in the Foreign Securities Registry of the CMF.

Notwithstanding the above, the CMF is vested with the authority to determine, through a general regulation, whether a certain issuance or placement of shares or of other securities constitutes a public offering within the meaning of the Securities Market Law. Pursuant to General Regulation No. 336, the local regulator has determined the conditions that must be met for an offer of securities not to be considered a public offer (private offer exemption).

The securities being offered under a private offer exemption shall not be registered under the Securities Market Law in the Securities Registry or in the Foreign Securities Registry of the CMF and, therefore, are not subject to the supervision of the CMF. Unregistered securities in Chile are not required to disclose public information about the notes in Chile and, accordingly, such securities cannot and will not be publicly offered to persons in Chile unless they are registered in the corresponding Securities Registry. The securities may only be offered in Chile in circumstances that do not constitute a public offering under Chilean law or in compliance with CMF General Regulation No. 336. Pursuant to the Securities Market Law, a public offering of securities is an offering that is addressed to the general public or to certain specific categories or groups thereof. Considering that the definition of public offering is quite broad, even an offering addressed to a small group of investors may be considered to be addressed to a certain specific category or group of the public and therefore would be considered public under the applicable law. However, pursuant to the Securities Market Law, the securities may be privately offered in Chile to certain qualified investors identified as such therein (which in turn are further described in CMF General Regulation No. 216 dated 12 June 2008).

Furthermore, in accordance with General Regulation No. 345, the CMF exempts, under the registration requirements, the offering of securities that meet certain requirements (a General Regulation No. 345 exemption), such as the offering of:

  1. instruments representing equity interests (capital) that represent at least 10 per cent of the capital of the issuer; and the conditions of the offer contemplate a minimum investment by each investor of an acquisition of 2 per cent or more of the share capital of the issuer;
  2. local and foreign instruments representative of the capital of an entity, its subsidiaries or affiliated companies, or of its subsidiaries, where the offer is addressed to the employees of that entity, of its subsidiaries or of affiliated companies; and
  3. instruments representing the capital of an entity, of its subsidiaries, or of affiliated companies of that company or of its subsidiaries, whose ownership is a requirement for the use or enjoyment of the facilities or infrastructure of that entity whose business or purpose is exclusively related to charitable, educational or sporting activities, and such offer is intended to enable those who will participate in the same access to those benefits. In this case, the issuer is only required to file certain information with the CMF five business days prior to the commencement of the offer.

The restriction for public offers is imposed on the person or entity conducting the offering and not on the issuer itself (where different). However, whether third-party issuers may be held liable is something that would depend on whether the relationship between the offeror and the relevant third-party issuer can be construed as a joint effort to offer products or securities.

Special consideration shall be made regarding the fact that unless an offering of foreign securities qualifies as a private placement, such offering should comply with the provisions of the Securities Market Law regarding public offering of offshore securities. The Securities Market Law governs only the public offering of securities in Chile, their markets established and in operation in the country, and the Chilean stock exchanges and brokers.

Brokerage of securities

The Securities Market Law reserves the intermediation or brokerage in Chile of publicly traded securities exclusively to stockbrokers and broker dealers registered with the CMF and, in certain events, to banks and financial institutions established in Chile.

Money intermediation

Pursuant to the General Banking Law, unless specifically authorised by law, no individual or legal entity may:

  1. engage in business reserved by law to banks and, particularly, the business of receiving or soliciting money or other repayable funds from the public, whether as a deposit or loan, or in any other manner; or
  2. engage, for its own account or for the account of other persons, in the business of money brokering or in the intermediation or brokerage of credits evidenced by securities, commercial paper or any other type of debt instrument.

The public was expressly warned about the foregoing by the CMF (formerly the Superintendency of Banks and Financial Institutions) by means of a joint regulation (Circular No. 960) on 14 August 1990.

Note that the General Banking Law governs only General Banking Law activities in Chile and those banks authorised to operate in the country.

ii Eligible counterparts

On a different note, it should be borne in mind that there are certain restrictions that would prevent or limit individuals, corporations in general, banks, insurance companies, pension funds and mutual or investment funds from acquiring structured products and foreign securities in general from persons or entities not domiciled or resident in Chile. However, be advised that the Chilean regulations allow the following entities to invest in structured products as mentioned below.


Chilean banks and local branches of foreign banks shall comply with the rules set forth by Chapter XIII of the Compendium of Foreign Exchange Regulations (Compendium) and Chapter III.B.5 of the Compendium of Financial Regulations, both of the Central Bank of Chile (Central Bank), and the rules and regulations issued by the CMF.

Under current Chilean banking regulations, banks may invest in certain foreign currency securities. Banks in Chile may only invest in equity securities of foreign banks and certain other foreign companies in which Chilean banks would be able to invest if those companies were incorporated in Chile. Banks in Chile may only invest in foreign debt securities traded in formal secondary markets (as defined in the Central Bank regulations). Such debt securities shall qualify as securities issued or guaranteed by foreign sovereign states or their central banks or other foreign or international financial entities, and bonds issued by foreign companies. Such debt securities must have a minimum rating as follows:

Table 2
Rating agencyShort-termLong-term
Standard & Poor'sA2BBB-
Fitch rating serviceF2BBB-
Dominion bond rating serviceR2BBB (low)
In the case that a short term security has no rating, the requirement will be deemed fulfilled if the same issuer has current long term securities complying with the conditions set out above and provided that the referred-to short and long term securities have similar guarantees, preferences or privileges or other legal condition having a favourable effect on the potential payment of the obligation
Table 2
Rating agencyShort-termLong-term
Standard & Poor'sA2BB-
Fitch rating serviceF2BB-
Dominion bond rating serviceR2BB (low)
In the case that a short term security has no rating, or is rated as P3, A3, F3 or R3, the requirement will be deemed fulfilled if the same issuer has current long term securities complying with the conditions set out above and provided that the referred-to short and long term securities have similar guarantees, preferences or privileges or other legal condition having a favourable effect on the potential payment of the obligation
Table 3
Rating agencyShort-termLong-term
Standard & Poor'sA1+AA-
Fitch rating serviceF1+AA-
Dominion bond rating serviceR1 (high)AA (low)
In the case that a short term security has no rating, the requirement will be deemed fulfilled if the same issuer has current long term securities complying with the conditions set out above and provided that the referred-to short and long term securities have similar guarantees, preferences or privileges or other legal condition having a favourable effect on the potential payment of the obligation

Further, in the event that the sum of the investments of a bank in the type of foreign securities referred in Tables 1 and 2 and of all loans granted to foreign individuals and entities (other than loans granted to finance Chilean exports or imports) exceeds 70 per cent of such bank's effective net equity, the excess is subject to a 100 per cent mandatory reserve requirement. However, banks may invest abroad in securities with a rating equal to or higher than the ones indicated in Table 3 for an additional amount equivalent to 70 per cent of such bank's effective net equity without being subject to the aforementioned reserve requirement.

Similarly, and without prejudice to the foregoing, banks established in Chile may also make financial investments in the following instruments:

  1. securities that do not have a risk classification issued or guaranteed by states or foreign central banks. For these purposes, such instruments shall be assigned the international risk classification of the country in which the issuer is located; and
  2. structured notes issued by investment banks that have an international risk classification not lower than that indicated in Table 3, the return of which is linked to a sovereign or corporate fixed-income instrument, with a classification not lower than that described in Table 2. Such instruments shall be listed on formal secondary markets located in countries with an international risk rating of not less than BB- or its equivalent.

Notwithstanding the foregoing, instruments may not have a formal secondary market to the extent that appropriate accounting provisions for the corresponding country risk are established.

Banking companies that make the financial investments referred to above shall, in any case, inform the International Financial Operations Management of the Central Bank about them within the terms and in accordance with the procedures established for such purpose in Chapter XIII of the Compendium and its corresponding manuals.

Insurance companies

Pursuant to the Insurance Company Act,4 insurance companies may invest the funds of their technical reserves and risk equity in negotiable instruments issued by foreign banks and bonds issued by foreign companies, provided such instruments are rated by at least two international rating agencies. General Rule No. 152 issued by the CMF provides that Chilean insurance companies may invest the funds of their technical reserves and risk equity in deposits, bonds, promissory notes and other negotiable instruments representing debt or credit, issued by foreign financial institutions, companies and corporations. Such instruments must have a risk rating given by at least two international risk rating agencies, which must be among those selected by the CCR (the rating entity approving the securities in which pension funds may invest) when evaluating the risk of the investments to be made by Chilean pension funds. In any event, the risk rating of those instruments may never be lower than BB or its equivalent, as the case may be. In addition, these instruments shall have daily and public price statistics publicised through recognised information systems.

The CMF is currently discussing with relevant parties and insurance companies an amendment to General Rule No.152, through the introduction of General Rule No. 425, with the objective of contributing to the development of the insurance industry by seeking to relax the investment regime governing insurance companies.

Pension funds

The Pension Funds Act,5 the Investment Regime for Pension Funds issued by the Pensions Superintendency and Chapters III.F.3 and III.F.4 of the Compendium authorise pension funds to invest in securities and negotiable instruments authorised by the Pension Superintendency, SAFP, following a prior report from the Central Bank, including structured notes issued by foreign entities (banks and companies). Structured notes issued by foreign entities are defined as hybrid negotiable instruments that combine a fixed and variable income component, the latter being indexed to the return of a certain underlying asset. Structured notes shall be classified by the CCR in a risk rating category of AAA, AA, A or BBB in the case of long-term instruments, or Level 1 (N-1), Level 2 (N-2) or Level 3 (N-3) in the case of short-term instruments, as per the risk rating equivalence determined by the CCR. According to the regulations, an issuer of structured notes must guarantee at least the repayment of 100 per cent of the capital invested. Hence, from this perspective, only structured notes that comply with such requirements may qualify as eligible structured notes for pension funds.

As to the limit on investment in structured notes, this shall in no case exceed 1 per cent of the corresponding fund. The above limit should also include investments in foreign currencies of countries whose sovereign debt is classified in categories below BBB and Level N-3, as appropriate, and that have only one risk classification carried out by a private rating agency, and those of countries that do not have a risk classification.

Finally, among other requirements, the regulations provide that the maximum maturity of notes must not exceed six years, and that the underlying assets may be shares, indexes, currencies, debt instruments, commodities, derivatives, mutual funds, investments funds and funds of hedge funds. There are additional requirements for each underlying asset.

Structured OTC options (ones traded in Chile) shall, at least once a week, provide buying, selling and spread prices in electronic systems of publicly available financial information. In addition to the above, the corresponding pension fund administrator shall provide, at least semi-annually, a report with an opinion on the correct valuation of the instrument drawn up by an independent consulting firm.

Mutual funds and investment funds

The Funds Act6 and General Regulation No. 071 authorise mutual funds managers to enter into option agreements, and future and forward agreements in connection with the assets under management, with clearing houses as counterparts and, in the case of future and option agreements, trades shall be effected in an exchange market (not over the counter). There are certain mutual funds denominated as structured mutual funds that may enter into option agreements over the counter and with counterparts that are not clearing houses, provided that they satisfy certain requirements set forth in the above-mentioned regulations. In connection with forward agreements entered into with a non-Chilean counterpart, General Regulation No. 071 provides that the counterpart shall be a bank, which short-term and long-term debt shall meet certain rating requirements.

There is no reference in the laws and regulations regarding mutual funds and investment funds as to structured notes, as opposed to what has been mentioned above regarding banks and pension funds, although we believe that the current regulations authorise a mutual fund to invest in structured notes subject to the requirements applicable to investments in debt securities abroad. In addition, we believe that investment funds may invest in structured notes, certificates and leveraged certificates provided that their by-laws specifically contemplate such investments as authorised investments, and further provided that they fulfil all other requirements applicable to their investments in debt securities abroad. However, note that these matters are far from being settled in the applicable laws and regulations.

iii Exchange controls

The Central Bank regulates foreign currency transactions by means of the Compendium. Notwithstanding the applicable regulations applicable to banks, as mentioned above, Chilean investors shall comply with the foreign exchange requirements imposed by Chapter XII of the Compendium in the remittance of funds in and out of the country:

  1. Local residents may freely invest outside Chile in any kind of securities. Payments may be made in foreign currency, which may be purchased in the formal exchange market.
  2. Whether or not foreign exchange has been purchased in the formal exchange market, pursuant to Chapter XII of the Compendium, the remittance of foreign currency outside of Chile in excess of US$10,000 must be made through the formal exchange market. In connection therewith, a statement generally describing the purpose of an investment must be filed with the Central Bank. Such statement shall also be filed in the case of the use of foreign exchange outside of Chile by a local resident (e.g., funds kept abroad, proceeds from investments). The obligation, however, is vested solely on the investors and not on the local entity.
  3. Proceeds from the disposition of investments or dividends may be remitted (or not) back to Chile. If remitted, however, the transfer must be made through the formal exchange market, except for amounts lower than US$10,000. Amounts repatriated may be kept in foreign currency or converted into Chilean pesos. If converted into Chilean pesos, conversion must be made in the Formal Exchange Market.7

Offering process and post-sale requirements


Regarding the marketing of structured products, there is no definition of marketing in Chilean law. Indeed, the laws and regulations refer merely to an offer without giving any definition or giving guidelines. In general, marketing or offer should be understood as any kind of activity to promote securities, to gauge interest in acquiring them or to solicit one or more transactions. Note that investment advice or reports with recommendations to buy specific products (for instance, with the buy/hold/sell categorisation) can be considered to be an offer.

Here, the analysis will depend on the nature of the marketing activities made by either the issuer or local distributor and the range of clients that are intended to be covered in Chile.

Phone calls and mailings

Special care should be taken to avoid the activities of the issuer or local distributor falling within the subject matter scope of the Securities Market Law.

As such, if phone contacts refer to, or the materials sent include, an express or implied offering of securities (e.g., a suggestion to purchase), there exists the risk that, if offered widely or to a certain sector or group of the public, such actions be considered a public offering of securities or brokerage of the same and, thus, would be subject to the Securities Market Law. As previously mentioned, offers of securities addressed to a certain sector or specific group of the public are considered by the Securities Market Law to be public offerings. Therefore, if an issuer or local distributor were to approach all or substantially all investors within a specific group, it is likely that the CMF would consider such action as a public offering in Chile of unregistered securities. Conversely, if the issuer or local distributor were to approach a small number of prospective clients on an individual basis, the risk of being considered a public offering or brokerage is low and hopefully manageable. Once again, widespread solicitation, even by phone, is prohibited.


If meetings with customers in Chile include the offering of offshore securities, whether express or implied, they may only be occasional and infrequent. Multiple meetings with different local investors (e.g., a roadshow) are likely to be considered a public offering of offshore securities or brokerage of the same and, thus, should be avoided.


As to the delivery of written materials about offshore securities in Chile, refer to the paragraph about phone calls and mailings.


We believe that the application of the Securities Market Law may not be extended to a website based outside of the Chilean territory, provided that it only refers to offshore securities that are not registered in Chile, and not to securities, domestic or foreign, or certificates that represent foreign securities that are registered with the CMF. The foregoing assumes, of course, that a website will not be addressed solely or principally to customers located in Chile, but rather is made available to anybody with internet access, and that it will be password protected.

Closing transactions

It would be advisable that local entities do not close transactions or issue any kind of receipts, and limit their activities in Chile to the minimum outlined above. For the avoidance of doubt, the closing of transactions and document execution, at least on the side of the issuer, should be done from abroad.

In the case of a private placement, the following rules apply:

  1. Any materials (physical or electronic) shall include a specific wording available in General Regulation No. 336 or General Regulation No. 345 in order to benefit from the General Regulation No. 345 exemption. There is no specific rule as to where the legend should be placed, but it should be easily seen by the investor.
  2. The use of mass media is forbidden: for these purposes, mass media include, among others of a similar nature or coverage, press, radio, television and internet, when those media are publicly accessible in or from Chile, regardless of the place where they are produced or from where they are broadcast. However, the following are excluded from this concept:
    • letters, emails and other communications, physical or electronic, which are addressed exclusively to a determined person who is duly individualised in the same communication; and
    • telephone calls, meetings, personal interviews and electronic systems of restricted access.

Regarding the distribution of structured products, note that the only synthetic instruments that are traded in the Chilean stock markets are futures, options and Chilean Repos (simultaneas), which are security purchasing operations with buyback clauses. This financing mechanism allows investment in securities without having the required resources through receiving third-party financing for the purchase of shares. The person who provides the financing obtains a fixed and known return in exchange. Nonetheless, it is possible to distribute other synthetic instruments, such as structured products, outside the stock market (over the counter) between customer and stockbroker. Those transactions are done and settled though the Stock Exchange terminals.

In cases where the materials contain misleading information or otherwise contravene the Securities Market Law, the issuer or the distributor, or both, may be subject to administrative sanctions by the CMF. These range from a mere warning (a reprimand by the CMF) to fines.

With respect to fines, the CMF can apply one of the following:

  1. a fine of up to 15,000 Unidades de Fomento (UF),8 which may be trebled up to five times in the case of repeated offences;
  2. a fine of up to 30 per cent of the value of the issuance, accounting record or irregular operation; or
  3. a fine of up to the double of the benefits obtained from the issuance, accounting record or irregular operation.

Moreover, note that if a representative of the issuer or the distributor holding a position as a director or senior executive commits an infraction to the Securities Market Law, the CMF is entitled to disqualify the representative from holding such a position in a Chilean company for a term of up to five years. Courts may also impose periods of imprisonment of up to 15 days, at the CMF's request, to obtain full compliance with CMF orders requesting disclosure of specific information.

Further note that if the CMF deems that there is a public offering of unregistered securities in Chile, it may file criminal charges against either the issuer or the distributor for violation of securities laws, which may entail up to five years of imprisonment.

Exchange listing and trading

There is no trading for structured notes in Chile and, subject to the restrictions outlined above, it is not necessary under Chilean law that any issuer of structured notes be licensed, qualified or entitled to do business in Chile.

As to registration requirements, only Chilean quotas of Chilean structured funds whose underlying investments are structured notes are required to be registered, by the corresponding administrator of such fund, in the Registry of Offshore Securities kept by the CMF and in the Santiago Stock Exchange for trading.

If the marketing and sale of products are subject to the Securities Market Law, it should be borne in mind that there are registration requirements for offshore securities or certificates that represent foreign securities (securities deposit receipts) in the Registry of Offshore Securities kept by the CMF.

Tax considerations

Structured notes are not expressly regulated in Chilean legislation. Therefore, the Chilean Income Tax Law (ITL) does not provide a special tax treatment for income resulting from these instruments, and the Chilean IRS has not issued rulings regarding their tax treatment. Given the above, income arising from structured notes obtained by Chilean residents (including interest and capital gains) would be taxed as per the general rules provided by the ITL.

In this regard, as a general rule foreign income received by Chilean-resident entities is subject to a 27 per cent first category tax. Once the income is distributed, it will be subject to final taxes of up to 35 per cent if the partner or shareholder is a Chilean-resident individual (overall income tax), or 35 per cent if the partner or shareholder is a foreign entity or individual (withholding tax), in which case the Chilean-resident entity is responsible for its withholding. Against the applicable final tax, 65 per cent of the first category tax paid can be credited (resulting in a maximum effective rate of 44.45 per cent) unless the partner or shareholder is an individual or entity resident in a foreign country with which Chile has a double taxation treaty currently in force (or, up to 31 December 2021, signed but not yet in force), in which case the first category tax can be fully credited against the aforementioned final tax.

Foreign income received by Chilean-resident individuals is subject to final taxes of up to 35 per cent. If the income arising from structured notes is considered to be securities income, as established in Article 20 No. 2 of the ITL, then it would be also subject to a 25 per cent first category tax, which can be fully credited against the aforementioned final taxes.

Foreign taxes levied and paid over the income arising from structured notes may also be credited against Chilean taxes, provided that certain requirements set forth in the ITL are met and within the limits established therein.

The aforementioned tax treatment may differ if a double taxation treaty applies. Should this be the case, income taxation may vary depending on how the income is classified (e.g., interest, business profits) as per the particular characteristics and associated risks of each structured note, and according to the rules set forth for each type of income in the corresponding treaty. Therefore, in this case the tax treatment applicable to the income arising from structured notes should be determined on a case-by-case basis.

Other issues

Although there is no case law on the subject matter, there might be a risk of recharacterisation each time a new instrument or product raises Chilean public policy issues (for instance, a Chilean court may consider that certain TRSs are collateralised loans that have been structured as a TRS to avoid Chilean prohibitions on self-help remedies) or tax issues (for instance, the IRS may consider that in connection with leveraged certificates, a portion of the payment made by the investor should be subject to withholding taxes as it would correspond to the payment of interest on an offshore loan). This risk should be assessed on a case-by-case basis.


1 José Luis Ambrosy is a partner at Claro & Cia. The information in this chapter was accurate as at October 2020.

2 The Chilean Securities Market Law, Law No. 18,045, as amended.

3 The General Banking Law, Decree with Force of Law No. 3 of 1997, as amended.

4 The Insurance Company Act, Law No. 251.

5 The Pension Funds Act (D.L 3.500).

6 The Funds Act (Law 20.712).

7 The Formal Exchange Market is composed of banks and other entities authorised by the Chilean Central Bank. The Informal Exchange Market is composed of entities that are not expressly authorised to operate in the Formal Exchange Market, such as certain foreign exchange houses and travel agencies, among others. Both the Formal and Informal Exchange Markets are driven by free market forces. The Chilean Central Bank is empowered to require that certain purchases and sales of foreign currencies be carried out on the Formal Exchange Market. Current regulations require that the Chilean Central Bank be informed of certain transactions and that they be effected through the Formal Exchange Market.

8 The UF is an inflation-indexed Chilean peso-denominated monetary unit calculated by the Central Bank of Chile with a value in Chilean pesos that is adjusted daily to reflect changes in the official consumer price index (Chilean IPC) calculated by the Chilean National Institute of Statistics. The UF is published monthly in the Official Chilean Gazette and is adjusted in monthly cycles. Each day in the period beginning on the 10th day of the current month through the ninth day of the succeeding month, the nominal peso value of the UF is indexed up (or down in the event of deflation) to reflect the variation in the Chilean IPC during the calendar month immediately preceding the period for which such unit is calculated.

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