There are some commercial and tax advantages when using the Iquique Tax Free Zone, that is, the 'Zona Franca De Iquique'. Any company providing a product in Chile, especially to the mining industry, should take some time to understand if the free trade zone could be beneficial to their specific circumstances.
From a commercial perspective, having product stored in the free trade zone can decrease delivery time to customers for not only Chile but also to Bolivia, Southern Peru and Argentina. As many of the mine sites are remote, having the ability to dispatch product quickly can be the difference between winning a contract or not.
Companies with light corporate structures in Chile can also benefit from the different companies that offer warehousing and inventory control within the Zone Franca. This can save companies from having to hire employees to manage the merchandise and keep costs to a minimum.
From a tax perspective, companies must pay 19% IVA ( Also know as VAT or GST) when importing into Chile. When bringing imports into the Iquique Tax Free Zone, companies can defer payment of this tax until the products actually leave the free trade zone.
Due to the extensive Free Trade Agreement that Chile ("FTA") has, most tariffs and customs duties have been abolished for participating countries. In each individual case you will need to determine whether your imported products are FTA exempted.
One advantage of having a Chilean company already set up is that you will be able to seek an imputed tax credit for the 19% when you sell the product to a third party. To take advantage of this credit, any sale must be invoiced from a Chilean entity. Additional information on Chile VAT can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
