Foreign investment issues

Investment restrictions

What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?

There are no particular restrictions, fees or taxes on foreign investment in or ownership of a project and related companies other than those generally applicable to local investment.

However, there are some specifically regulated sectors that are subject to restrictions. For example, the development of power plants interconnected to the power system, or the operation of its related services, must be directly carried out by Chilean companies or individuals. Also, nationals of countries bordering Chile are prohibited to acquire rights, including mortgages, over real estate properties located in the border area. The above-mentioned restrictions also apply in the case of foreclosure.

Insurance restrictions

What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies? May such policies be payable to foreign secured creditors?

Any person is free to take out an insurance policy over assets with a foreign insurance company and no specific restrictions, fees and taxes exist in this regard.

Payments of insurance premiums to a foreign insurance company domiciled abroad are subject to a 22 per cent withholding tax. Reinsurance premiums paid to a reinsurance company domiciled abroad are subject to a 2 per cent withholding tax. However, in both cases, the premium will be exempted from withholding taxes if it corresponds to an insurance policy related to port or aeronautical industries, or if the insured party is a public works concessionaire.

Even though local insurance is not mandatory, reinsurances and cut through clauses are effective and customarily required by foreign creditors.

The holder of an insurance policy can appoint a collateral agent (acting on behalf of the foreign creditors) as insured party or as an additional beneficiary of the policy, which is a common practice in project financing in Chile.

Worker restrictions

What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?

In a local company with more than 25 employees, at least 85 per cent of them must be Chilean nationals, with certain exceptions such as technical specialists.

Any foreigner who wishes to engage in a labour relationship in Chile must previously be authorised to do so by the immigration authority. The employer has the obligation to verify that a foreign employee has a valid working permit or visa.

Equipment restrictions

What restrictions exist on the importation of project equipment?

As a general rule, there are no restrictions on the importation of project equipment. However, the importation of some assets is forbidden (such as used vehicles, hazardous industrial waste and asbestos). In addition, the importation of some goods requires the authorisation of the corresponding government authority, such as guns, ammunition and cement that will be used in public works and buildings.

Nationalisation laws

What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected (from nationalisation or expropriation)?

Pursuant to the Chilean Constitution, no person may be deprived of its property, except by means of a general or particular law that authorises the expropriation based on public benefit or national interests. The expropriated person may claim before the ordinary courts against the legality of the expropriation and will always be entitled to be indemnified.

There are no forms of investment specially protected from nationalisation or expropriation.