Regulatory Update in Chile: Q4 2025

Chile';s regulatory landscape shifted considerably during the final quarter of the year, with new rules touching corporate governance, environmental permitting, labour relations and financial market supervision. For international businesses operating in or entering Chile, understanding these changes is not optional - it is a prerequisite for compliant operations. This guide covers the key legislative and regulatory developments from Q4, explains their practical implications and identifies the compliance steps that businesses should prioritise now.

The Comisión para el Mercado Financiero (CMF), Chile';s integrated financial regulator, issued updated circulars tightening disclosure requirements for publicly listed companies and certain large private entities. The changes build on the framework established by Ley N° 20.382 on corporate governance and extend its reach to companies with significant public interest, including those operating in regulated sectors such as energy, telecommunications and financial services.

Under the revised rules, boards of directors must now formally document their conflict-of-interest procedures and make those procedures available to shareholders on request. The requirement applies to both open and closed corporations that meet defined thresholds of revenue or number of shareholders. In practice, many mid-sized companies with foreign shareholders had not previously formalised these procedures in writing, and the new rules close that gap.

A non-obvious requirement is that the documentation obligation extends to subsidiary boards, not just the parent entity. Foreign groups operating through Chilean subsidiaries should audit their subsidiary governance documents and ensure that local boards have adopted compliant conflict-of-interest protocols. Failure to comply can trigger CMF sanctions, which range from formal warnings to financial penalties calculated as a multiple of the infraction';s economic benefit.

The CMF also clarified its expectations around related-party transactions under Ley N° 20.382, specifying that transactions between a Chilean subsidiary and its foreign parent must follow the same approval and disclosure process as transactions with unrelated third parties when they exceed defined materiality thresholds. Many foreign groups had treated intra-group transactions as exempt from these rules, which is a common mistake that the regulator has now explicitly addressed.

The Servicio de Impuestos Internos (SII), Chile';s tax authority, intensified its transfer pricing audit programme during Q4, focusing on cross-border service fees, royalty payments and intercompany financing arrangements. The legal basis for transfer pricing rules in Chile is found in Artículo 41 E of the Ley sobre Impuesto a la Renta (Income Tax Law), which requires that transactions between related parties reflect arm';s-length conditions.

The SII issued new administrative guidance clarifying the documentation standards it expects taxpayers to maintain. The guidance aligns Chile more closely with the OECD Transfer Pricing Guidelines, which Chile adopted as a reference framework following its OECD accession process. Businesses should note that the SII now expects a three-tiered documentation structure - master file, local file and country-by-country report - for groups that meet the relevant size thresholds.

A practical scenario worth considering: a European technology company with a Chilean subsidiary paying royalties to the parent for use of intellectual property. Under the updated guidance, the Chilean entity must maintain contemporaneous documentation demonstrating that the royalty rate reflects what unrelated parties would agree to. If the SII challenges the rate and the documentation is insufficient, the authority can recharacterise the payment and impose additional tax plus interest and penalties.

A second scenario involves intercompany loans. The SII has signalled particular interest in loans where the interest rate is set below market levels or where the loan has no fixed repayment schedule. In such cases, the authority may treat part of the loan as a deemed dividend, triggering withholding tax obligations that the parties had not anticipated.

Businesses should review their intercompany agreements and ensure that pricing is supported by contemporaneous benchmarking studies. The cost of preparing adequate transfer pricing documentation is modest compared to the potential exposure from an SII audit.

Chile';s Dirección del Trabajo (DT), the labour inspectorate, issued new administrative instructions during Q4 relating to remote work arrangements and the obligations of employers under Ley N° 21.220, which regulates telework. The instructions clarify several points that had been disputed in practice since the law';s enactment.

First, the DT confirmed that employers must provide written telework agreements to all employees working remotely, even if the arrangement is informal or partial. A common mistake among foreign companies operating in Chile is to treat remote work as a purely operational matter without updating employment contracts. The DT';s position is that any regular remote work arrangement - even one day per week - triggers the written agreement requirement.

Second, the instructions address the obligation to cover employees'; connectivity and equipment costs. Employers must reimburse reasonable costs associated with internet access and equipment use when the employee uses personal equipment for work. The DT has indicated that a flat monthly allowance is an acceptable method of compliance, provided the amount is reasonable relative to actual costs.

Third, the DT clarified rules around the right to disconnect. Employees working remotely retain the same rest period protections as office-based employees, and employers may not require employees to be available outside agreed working hours. The DT has begun inspecting compliance with this requirement and has issued fines to employers who sent systematic communications to remote employees outside working hours.

For international businesses, a non-obvious compliance point is that Chilean labour law applies to employees based in Chile regardless of where the employer is incorporated. A foreign company with employees working remotely from Chile is subject to Chilean labour law and must comply with the DT';s requirements, including the written telework agreement, cost reimbursement and right-to-disconnect rules.

If your business employs staff in Chile or is considering doing so, contact us at info@vlolawfirm.com. We can assist with employment contract reviews and compliance assessments tailored to your structure.

The Servicio de Evaluación Ambiental (SEA), the body responsible for administering Chile';s environmental impact assessment system under Ley N° 19.300 (the Environmental Bases Law), issued updated procedural guidelines during Q4 that affect projects requiring environmental review.

The most significant change relates to the classification of projects that must submit a full Environmental Impact Study (Estudio de Impacto Ambiental, or EIA) rather than the lighter Environmental Impact Declaration (Declaración de Impacto Ambiental, or DIA). The SEA clarified that projects in or near indigenous communities'; territories are more likely to require an EIA and must include a formal consultation process under ILO Convention 169, which Chile has ratified. This requirement had been applied inconsistently in practice, and the new guidance standardises the approach.

A practical scenario: a mining or energy company seeking to develop a project in northern Chile, where indigenous communities hold territorial rights. Under the updated guidelines, the company must conduct a prior consultation process with affected communities before the SEA can approve the project. The consultation process has defined stages and minimum timeframes, and failure to follow them correctly can result in the SEA rejecting the application or courts annulling an approval after the fact.

The SEA also updated its guidance on cumulative environmental impact assessment, requiring applicants to consider the combined effects of their project with other existing or approved projects in the same area. This is particularly relevant for energy and infrastructure projects in regions where multiple developments are under way simultaneously.

Timelines for environmental review remain a significant practical concern. A full EIA can take between 12 and 24 months to complete, depending on the complexity of the project and the number of public comments received. A DIA typically takes between three and six months. Businesses should factor these timelines into their project planning and not assume that environmental approval will be granted quickly.

Many foreign investors underestimate the importance of community engagement during the environmental review process. Projects that invest in early and genuine dialogue with affected communities tend to move through the SEA process more smoothly than those that treat consultation as a procedural formality.

The CMF and the Unidad de Análisis Financiero (UAF), Chile';s financial intelligence unit, issued coordinated updates to anti-money laundering (AML) and counter-financing of terrorism (CFT) requirements during Q4. The updates implement recommendations from Chile';s recent mutual evaluation under the Financial Action Task Force (FATF) framework and reflect obligations under Ley N° 19.913, which established the UAF and the AML reporting regime.

The most significant change for businesses is the expansion of the list of "obligated entities" required to report suspicious transactions to the UAF. The expanded list now includes certain real estate intermediaries, high-value goods dealers and professional service providers, including lawyers and accountants acting in specific capacities. Businesses in these categories that were not previously subject to AML reporting obligations should review their status and implement the required compliance programmes.

For financial institutions and other entities already subject to AML obligations, the updated guidance raises the bar on customer due diligence. The CMF expects institutions to apply enhanced due diligence to customers identified as politically exposed persons (PEPs) and to maintain records of beneficial ownership for corporate customers. The beneficial ownership requirement aligns with the Registro de Beneficiarios Finales established under recent corporate transparency legislation.

A common mistake among foreign companies operating in Chile is to assume that AML compliance programmes designed for their home jurisdiction will satisfy Chilean requirements. In practice, Chilean rules have specific local requirements - including the obligation to report to the UAF using defined formats and within defined timeframes - that may not be covered by a generic global compliance programme. Local adaptation is essential.

The UAF has also signalled that it will increase its supervisory activity in the coming period, focusing on sectors identified as higher risk in Chile';s national risk assessment. Businesses in those sectors should expect more frequent information requests and should ensure that their AML records are complete and up to date.

For assistance with AML compliance programme reviews or UAF reporting obligations, contact info@vlolawfirm.com. We can help ensure your compliance framework meets current Chilean requirements.

What are the main risks for foreign companies that do not update their Chilean subsidiary governance documents?

Foreign companies that fail to update their Chilean subsidiary governance documents following the CMF';s recent circulars face regulatory sanctions from the CMF, which can include formal warnings, financial penalties and, in serious cases, restrictions on the company';s ability to operate in regulated sectors. Beyond regulatory sanctions, inadequate governance documentation can create practical difficulties in shareholder disputes, where the absence of documented conflict-of-interest procedures may be used to challenge board decisions. Courts in Chile have shown willingness to scrutinise governance processes in shareholder litigation, making proper documentation a legal risk management tool as well as a compliance requirement. Foreign groups should treat the governance update as a priority rather than a formality.

How long does it typically take to complete an environmental impact assessment in Chile, and what drives the timeline?

A full Environmental Impact Study (EIA) typically takes between 12 and 24 months from submission to approval, while a lighter Environmental Impact Declaration (DIA) usually takes between three and six months. The main drivers of timeline variation are the complexity of the project, the number of public comments received during the participation period, the need for a prior consultation process with indigenous communities and the quality of the initial application. Applications that are incomplete or that underestimate the project';s potential impacts tend to generate more requests for additional information from the SEA, which extends the timeline significantly. Investing in a thorough application and early community engagement is the most reliable way to keep the process on track.

Does Chilean labour law apply to a foreign company whose employees work remotely from Chile?

Yes. Chilean labour law applies to all employment relationships where the work is performed in Chile, regardless of where the employer is incorporated or where the employment contract was signed. A foreign company with employees working remotely from Chile must comply with all applicable Chilean labour law requirements, including the written telework agreement obligation under Ley N° 21.220, the cost reimbursement rules, the right-to-disconnect protections and the social security contribution requirements. Failure to comply exposes the foreign company to inspections and fines from the Dirección del Trabajo, as well as potential claims from employees. Companies in this situation should review their employment arrangements and formalise them under Chilean law.

Chile';s Q4 regulatory developments span corporate governance, tax enforcement, labour compliance, environmental permitting and financial market supervision. Each area carries concrete compliance obligations and real consequences for non-compliance. International businesses operating in Chile should treat these updates as action items rather than background reading, reviewing their current practices against the new requirements and making necessary adjustments promptly.

VLO Law Firms advises international clients on regulatory compliance and corporate matters in Chile. We can assist with governance document reviews, transfer pricing documentation, employment contract updates, environmental permitting strategy and AML compliance programme assessments. To request a consultation, contact: info@vlolawfirm.com