Notes from Simon + Important Update on Chilean Citizenship

Transcription

1 Notes from Simon + Important Update on Chilean Citizenship It seems clear that more and more people are waking up each day realizing the same uncomfortable truth: this is NOT the country that I grew up in. Folks are feeling like strangers in their own land. So much has changed. And not necessarily for the better. We have far less freedom now than we used to. Today there is an extraordinarily obtrusive presence of the state in nearly every aspect of our lives, whether we recognize it or not. They tell us what we can/cannot put in our bodies. They tell us how we can do business. How to educate our

2 children. How to construct our homes and whether we can collect the rainwater that falls on our own properties. They tell us who to hate and who to support. They send our young people to their deaths for the sake of oil profits. They conjure stories of evil men in caves in order to make us afraid and willingly renounce our own liberties. They send the police out onto the highways to confiscate assets at gunpoint. They arm local law enforcement with assault rifles and armored personnel carriers. They spy, brazenly and unapologetically, on law-abiding citizens. And allies. They indebt future generations who will not even be born for decades. They erode the value of the savings that so many of us work hard to produce for the benefit of a wealthy banking elite. Then they tax what little is left over and blow it all on bombs, drones, and excessively expensive welfare programs that keep them in power. It s enough to make a person go crazy. And it s no wonder why so many people are looking at their options abroad. This makes a ton of sense. Even from a moral perspective, if you really want to do your part to stop the violence, one of the best things you can do is to stop supporting it with your tax dollars. Whether you re American, Canadian, French, or just about anything else, when you leave your home country, there can be tremendous tax benefits. In some cases, you stop paying tax to your home country altogether. Even in the case of US taxpayers there s a significant tax benefit for foreign earned income, housing costs, etc. (We ll talk more about this in a future Alert). More and more people are looking at their options abroad as the best way to enhance their freedom as well as take advantage of numerous lifestyle opportunities. When you re overseas, suddenly you may find the medical care to be higher quality and lower cost. You may find yourself surrounded by a network of like-minded friends. You may even find substantial business and investment opportunities in your new home. The last one is an advantage that I cannot overstate. Developing countries are notoriously lacking in many products and services that you might take for granted things they simply haven t been exposed to. One of the most profitable business models I know of is when expats bring successful Western business models to rapidly developing countries. Something that seems so simple to you the corner coffee shop is a revolutionary concept in Myanmar. Or an electronics store where the staff is actually knowledgeable about the inventory, doesn t really exist in much of Latin America. You ll find that simply by virtue of having lived in the developed West, you are a subject matter expert and have a competitive edge. There are cost advantages of living abroad as well. For so many places, the cost of living can be much lower, 2

3 especially for certain things that might be considered luxuries back home (like personal staff or landed estates). The benefits are really extraordinary. And we re living in a time when the cost of taking action is quite low. Airfare is very cheap these days (and even as airfares rise, there s no shortage of ways to hack cheap airfare). Technology makes it possible to keep in touch with people across the globe. You no longer have to earn your income in the same place that your bosses (or your customers) live. Plus, nothing is permanent. If it doesn t work out, you can always head back (or elsewhere) and you won t be worse off for having some overseas experience under your belt, and perhaps some extra language skills. I ve been amazed at how many people are so happy that they made the move abroad. They find their lives much more fulfilled with more people in their circle doing things that are more meaningful. The world is a big place, and there is no right answer for everyone. This is one of the reasons that I do travel so much I love to see first hand for myself what s actually happening on the ground. Depending on what you like, you may be more comfortable in Asia. There s the ultra-accommodating, welldeveloped, relaxing resort feel of Phuket. Or the super chill startup vibe that s taking over Chiang Mai (both in Thailand). Or the soothing, artistic, organic counter-culture in Bali. Singapore s business scene is incredible. Hong Kong s old world bridge between East and West is still tremendously exciting. Cambodia is a massively undiscovered gem that is shockingly cheap (and with delightful cuisine). Down here in Latin America is another multitude of opportunity. Panama is a small but vibrant nation with a strong economy and easy residency standards. Colombia is an up and coming expat hub with emerging business and investment opportunities that will soon be commonplace on the front page of the Wall Street Journal. It doesn t hurt that it s also home to some of the most beautiful women in the world. 3

4 Chile, of course, is at the top of my own list. I have dozens of favorite places out there, from Croatia to Thailand to South Africa. But nowhere else have I seen such a great combination of lifestyle, opportunity, and level of development. The weather here is as close to perfect as I can imagine. In the central part of the country, it s sunny and warm so often that I frequently forget what the rain feels like. That said, Chile is so long and skinny that it spans numerous climate zones from the Atacama Desert in the north to Antarctica in the south. You get literally all types of climates and geographic zones save tropical jungles. Plus the natural beauty is astounding. It s like New Zealand without the tourists. There are thousands of miles of beautiful coastline, and one of the most imposing snow-capped mountain ranges in the world. Culturally, Chile is very advanced. It s civilized. Violent crime is practically unheard of, and Santiago in particular has very modern infrastructure and architecture. It feels much more like Europe than Latin America. Yet at the same time, cost of living is very reasonable. There are certain things I have found incredibly expensive, though many things I have found shockingly cheap. In terms of lifestyle, I ve never been able to live as well anywhere else in the world as I do in Chile. And yet it costs me a tiny fraction of what it would in North America or Europe, if I could even achieve the same lifestyle there at all. I ll give you an example I have a live-in Thai chef who cooks every meal for me. She s not Chilean; she s actually from Thailand. I brought her over here and easily obtained a valid work permit for her under Chile s incredibly flexible immigration code. So I m essentially paying Thai wages for ultra high quality, authentic Thai food, yet doing so here in Chile. 4

5 First of all, I would never even be able to do this if I were in the US. I d have to move mountains in order to get her a visa, if at all. But more importantly, this lifestyle benefit has spawned its own business opportunity. Chile is not known for its great restaurants, and I can say objectively that, literally, the BEST Thai food in all of Chile is at casa de Simon Black. Locals know it. Our Chilean friends practically beg us for samples. We could easily start a new restaurant or take-out service. I doubt we will, but we have successfully experimented a bit with selling food. So the opportunity is clearly there. That s the thing I like most about Chile there s so much opportunity. If you re an entrepreneur, you ll be astounded at all the possibilities for new businesses; there are a lot of cottage industries dominated by one or two mediocre players who have no idea how to deal with savvy competitors. If you re an investor, you won t believe your eyes at what you can buy here. For VC types, the startup scene has almost no investor outlets available. We re buying as much agricultural land as we can get our hands on the quality of the land is extremely high, yet the prices are a fraction of what they are in the US and Europe. And even if you re looking for a job, you can easily obtain a work permit here. And there s plenty of job opportunities in Chile. That s one of the reasons why droves of young Spaniards have moved here the work available to them is significant, and as one Spanish friend told me, Being foreign gives me an edge over the locals. Bear in mind, Chile is a huge mining jurisdiction, so there s always a lot of work available for qualified people. I should acknowledge that Chile may not be everyone s cup of tea. No place is perfect, and there s plenty about the country that drives me crazy. 5

6 In fact, I was recently interviewed by the Economist about Chile s potential as a center of innovation. And while there s plenty of potential and an obvious growth trend, I was very clear with the reporter that there s too much pointless bureaucracy that holds the economy back. It s getting better, but there s a long way to go. Taken as a whole, though, I do feel that Chile checks a lot of boxes for potential expats. It s good for families, good for children, good for retirees. There s opportunity for professionals, workers, entrepreneurs, and investors. It s safe, friendly, and modern. And as I ve mentioned, at least for now, obtaining residency here is very straightforward. The first step is to obtain temporary residency, which can be done in a number of ways. We typically recommend the rentista route, where you demonstrate that you have the economic means to support yourself. This can be either through pension income or even just a lump sum of cash in the bank. There are also options for investors, students, workers, etc. For most of the visas we recommend, after just one year of temporary residency you can apply for permanent residency. We ve written about this before the primary requirement to qualify to apply for permanent residency in Chile is that you must spend 185 days in the country in a one-year period starting from the date that your temporary residency permit is issued. So let s assume they stamp your passport with the residency visa on December 10, In order to be able to apply for permanent residency, you have until December 9, 2015 to spend 185-days in the country. Once you obtain permanent residency, you only need to spend one day in the country within a 365-day period in order to maintain it. (Specifically, you cannot be absent from the country for more than 365 days straight unless you get a waiver from a Chilean consulate.) 6

7 And after five years of TOTAL residency, i.e. one year of temporary and four years of permanent, you can qualify to apply to become a naturalized citizen of Chile. This is where I need to make some clarifications because there s a lot of misinformation and confusion out there about how to qualify for Chilean nationality after obtaining residency. The primary question people have is: Do I have to spend 185-days in the country each year for five years? Or only in the first year? Here s the answer, and I want to be very clear about this: it takes five years of total residency in order to qualify to apply for naturalization. And once you achieve permanent residency, you do NOT need to be in Chile for 185-days each year. There are a lot of folks out there putting out bad information people who base their expert opinions on something they read in a forum, or something they heard from a friend who heard from a friend who knew a guy who had a buddy It s no wonder there s so much misinformation out there too many folks are quick to jump to conclusions based solely on hearsay and third-hand stories without conducting independent research. And yes, that even applies to lawyers. There s no shortage of attorneys who don t do their homework, or who don t actually read the legal code themselves. This goes especially for immigration; there are few lawyers in Chile who actually specialize in immigration. For most, it s an ancillary practice area, and even in large firms the immigration procedures are often handled by a low-level paralegal. This is the reason why many lawyers don t actually know the immigration law or the process; they simply don t deal with it enough to be subject matter experts in immigration as they are in something like labor law or mining rights. Likewise for the handful of foreigners in Chile who sell immigration services; few have conducted extensive legal research, and most operate based on claims of having a hookup in some government office. That s why I wanted to send this out to you today; our staff has received a multitude of s lately about residency in Chile saying, So and so told me something different than what I read in Sovereign Man. I have no doubt there are differing opinions. But I m here to present facts. So to clear up all the misinformation you may have heard, below is the objective data direct from the Chilean legal code, along with our analysis and conclusions, verified in concert with lawyers, paralegals, and the government itself: 7

8 1. What does the Constitution say? Any country s Constitution is the starting point for understanding its nationality law; most modern constitutions define who is/isn t a national, plus grounds for naturalization. Constitution of the Republic of Chile: Article 10: Los extranjeros que obtuvieren carta de nacionalización en conformidad a la ley. [Foreigners that have obtained a nationalization card according to the law are Chilean nationals.] Bottom line, Chile s Constitution doesn t tell us much. 2. What does the legal code say? In the absence of any concrete answers in the Constitution, we look at the legal code. There is substantial immigration law in Chile to examine, all of which points to the same conclusions: Decreto Ley 1094, 8 April 2011: Artículo 42.- Los plazos de residencia en el país para obtener la permanencia definitiva deberán ser ininterrumpidos. Se entenderá que no ha habido interrupción cuando los períodos de ausencia no superen los ciento ochenta días dentro del año, contados hacia atrás desde la fecha de vencimiento de la visación de residencia. 8

9 [The amount of time spent in the country necessary for a temporary resident to qualify for permanent residency is defined as having not been absent for more than 180 days in the year starting from when the residency visa was issued.] Ley núm. 5,374, 24 Jan 1934: Artículo único. Fíjase en cinco años, el tiempo de residencia continuada en el territorio de la República que deben acreditar los extranjeros para solicitar carta de nacionalización. [This is the original modern immigration law that requires five years of continuous residency in order to qualify to apply for naturalization.] Decreto Ley 1094, 8 April 2011: Artículo 43.- Se considerará revocada tácitamente la permanencia definitiva de todo extranjero que se ausente del país por un plazo ininterrumpido superior a 1 año. Esta revocación no operará respecto de los casos calificados que determine el reglamento. [Permanent residency will be revoked if a person is absent from the country for an uninterrupted period of more than one year, though exceptions apply. In other words, maintaining continuous permanent residency requires entering Chile at least once in every 365 day period.] Decreto 5142, 26 June 1981: Corresponderá al Ministro del Interior calificar, atendidas las circunstancias, si viajes accidentales al extranjero han interrumpido o no la residencia continuada, a que se refiere el inciso precedente. [The Ministry of Interior can determine circumstances under which extended time abroad doesn t count against an applicant s continuous residency cited above in Ley This gives the Ministry latitude to waive the requirement for permanent residents to be in Chile for one day in a 365-day period.] Artículo 1.o La nacionalización se otorgará por el Presidente de la República, en decreto refrendado por el Ministro del Interior. [The power to grant nationality rests with the President of Chile, though the execution of the law lies with the Ministry of Interior.] Artículo 2.o Podrá otorgarse carta de nacionalización a los extranjeros que hayan cumplido 21 años de edad, que tengan más de cinco años de residencia continuada en el territorio de la República y que sean titulares del permiso de permanencia definitiva. [Foreigners can qualify to apply for naturalization who are at least 21 years of age, have had 5 years of continuous residency, and are permanent residents.] Podrá otorgarse también carta de nacionalización a los hijos de padre o madre chilenos nacionalizados, que hayan cumplido 18 años de edad y que reúnan los demás requisitos indicados en el inciso primero. Estas personas quedarán comprendidas en los casos de excepción que contempla el artículo 4, letra i). [Children of naturalized citizens who have reached 18 years of age can also apply for naturalization, so long as they also meet the requirements listed previously.] 9

10 3. What do the official procedures say? Law is important. But departmental procedures give us further clarification into how the bureaucrats actually do business. Prorroga de permanencia definitiva [This is the website of the consulate in Washington DC, which has an entire section on the extension of permanent residency. It states that for individual permanent residents who will be out of Chile for more than one year, they can apply to the consulate to have their permanent residency extended. This is the clear execution of the Ministry s latitude to waive the time in country requirement per the legal authority indicated above.] Chile Extranjeria website official statement on obtaining nationality: Podrá otorgarse carta de nacionalización a los extranjeros que hayan cumplidos 21 años de edad; o 18 años si es hijo de padre o madre chileno por nacionalización, que tengan más de 5 años de residencia continuada en el territorio nacional y que sean titulares del Permiso de Permanencia Definitiva. [Foreigners can apply for naturalization if they are over 21, or 18 if father/mother is naturalized; have spent more than 5 years of continuous residency in Chile; and have permanent residency] 10

11 Application procedures to apply This is perhaps the most interesting part. The actual application for Chilean naturalization can be found at the following website. The requirements to apply for naturalization are as follows: 1. Be a foreigner [duh] 2. Be at least 21, or 18 if you are the son/daughter of naturalized Chilean 3. Have more than 5 years of continuous residency (beginning on the first day of residency) 4. Be holder of valid permanent residency permit 5. Not be convicted of nor on trial for a crime 6. Be able to make a living 7. Sign request form The documentation required to apply for naturalization is as follows: 1. Application form 2. Notarized photocopy of current passport 3. In case of children of naturalized foreigners, a legalized birth certificate 4. Copy of Chilean ID card 5. Copy of permanent residency certificate 6. Validity certificate of permanent residency* 7. Certificate of Legal Record from the Civil Registry 8. Photographs 9. Property, bank statements, tax declarations, employment records, etc. 10. Biography and statement of why you want to obtain nationality * This is the Certificado de vigencia de la Permanencia Definitiva, provided by the police. According to the police, this is the document that conclusively establishes that the applicant s Permanent Residence is still valid. ( Documento que establece fehacientemente que el permiso de Permanencia Definitiva no ha caducado. ) See: The naturalization application form itself is a very short 1-pager called the SOLICITUD CARTA DE NACIONALIZACIÓN. The fields include basic personal data like name, RUT, civil status, sex, date of birth, address, profession. There is NOTHING on the application form about travel dates in/out of Chile, or how many days the applicant was present in the country. In other words, there is nothing in the naturalization application that requires you to demonstrate that you have spent any particular amount of days in the country. 11

12 4. Conclusion Chile s immigration law and procedures state clearly that: 1. Five years of continuous residency is required in order to qualify to apply for naturalization, meaning you must have valid residency in year 1, 2, 3, 4, and This five-year window starts from the date of the first residency issuance. 3. The first year of the five years is temporary residency (for most visa types). 4. Applicants must spend 185 days in-country in that first year in order to qualify to apply for permanent residency. 5. Once permanent residency is approved, it can be maintained indefinitely as long as the individual is not out of Chile for more than 365 days in a row. 6. The Ministry of Interior has the ability to waive this requirement, and there is an official procedure to do so. In other words, if you spend 185 days in Chile in year one, and then one day per year for the next four years, you will have technically accumulated five years of continuous residency, and thus meet the qualification to apply for naturalization. This is what the law says based on the citations above. Nowhere in the Chilean Constitution, body of law, or procedures is there any mention that applicants must be in the country for 185-days every single year in order to qualify to apply for naturalization. Taxation in Chile for New Residents People look at the maximum headline marginal tax rate and the VAT here and erroneously conclude that Chile is a high-tax place to be. Not the case. Certainly it s not a ZERO tax place to be. But it can be quite tax efficient. To give you an example, the effective rate on taxable income of $75,000 USD in Chile (as of the time of this writing) is just a hair over 10%. In the Land of the Free, it s nearly double that, just at the federal level, without including all the Social Security, Medicare, or state tax. Moreover, while Chile does tax its residents on their worldwide income, it s important to note that worldwide income applies to money that s actually paid to you individually and brought into Chile. So the use of multiple flags, offshore companies, and foreign accounts is a perfectly legitimate strategy in Chile. And because Chile is party to so many comprehensive tax treaties (Australia, Canada, New Zealand, UK, etc.), there are a number of ways to continue making legal deductions. (Chile s tax treaty with the US is signed but not yet in effect). Last, there are substantial tax benefits for new residents. Primarily, according to article 3 of Chile s Income Tax Law (which is only 100 pages), new residents are not required to pay tax on their worldwide income for three full years after residency has been granted. This is a huge benefit and one that new residents should plan to take advantage of. 12

13 Even more interesting, there is no requirement to provide travel dates in/out of the country on the naturalization application form, nor is there a requirement to provide travel data in the supporting documentation. Note, in order to apply for PERMANENT RESIDENCY after the first year of temporary residency, you must demonstrate that you have not been away from Chile for more than 180 days. To do so, you must present a Certificado de Viajes, or travel certificate, which is obtained from the local authorities. This is a document that shows the amount of time you have been in/out of Chile in the last year. This Certificado de Viajes is required to apply for permanent residency. But it is conspicuously absent from the documentation requirements to apply for naturalization. Instead, when you apply for naturalization, you must simply provide a certificate showing that your permanent residency is still valid, i.e. you have not been out of the country for more than 365 days in a row. Final answer-- as we have stated before, the law does NOT require that you spend 185 days per year in the country for five years straight in order to qualify to apply for naturalization. All the above stated, it s important to remember that Chilean immigration authorities do have latitude in approving / rejecting applications for both naturalization and residency. For example, while the immigration law and procedures are very clear on the matters we re discussing, there is absolutely nothing in the code that stipulates just how much savings someone must be able to demonstrate in order to qualify for the rentista visa. So the immigration authorities do have discretion. And just like nearly every other country on the planet, if an applicant meets the naturalization requirements, it merely qualifies the individual to apply. It does not guarantee success. 13

14 Thousands of people are naturalized each year here. So it does happen. It s very above-board, and the procedures are formalized. During the application process, for example, Chilean authorities will want to see that you have taken steps to integrate into society. Just look at the supporting documentation requirements the Chilean government is far more concerned to see whether you have paid taxes, made bank deposits, speak a bit of Spanish, etc. than whether you have been out of the country. My view is that if you plan on spending exactly one day in the country each year after obtaining permanent residency, it will be very difficult to have accomplished any of these, i.e. you will not be able to demonstrate that you have really integrated. Bottom line, I think anyone who makes a bona fide effort to live here should have solid expectations of success in the naturalization process, even if business and family commitments keep them out of Chile for well over six months each year. 5. The Future I also have to give you my take on the future: there s no doubt in my mind that Chile s immigration procedures are going to change eventually. I ve seen it for myself huge lines at the Extranjeria and PDI offices where an entire building PACKED with foreigners is going through the process, every single day. This is not sustainable, especially with Chile s slowing economy. It s all about supply and demand. Right now the demand for residency in Chile is high. Supply is tight. This means that the price absolutely has to go up. With immigration matters this means that they ll raise the bar they might make it more difficult to obtain residency, or perhaps they ll increase the investment necessary to obtain residency, or maybe they ll even introduce quotas. I can t really say for certain right now. But I can see the writing on the wall. This is going to change. So if you have been thinking about obtaining residency in Chile, now s the time to do it. Remember, you need to be able to spend at least six months during the first year here. But after that, you only need to spend one day per year (i.e. you cannot be absent for more than 365 straight days unless you get this officially waived at a consulate). So I definitely want to encourage you to look into this. Several dozen SMC members took us up on the advice to establish residency here in Chile, and our primary recommendation has traditionally been one of the law firms that we work with. What we recommend are the rentista visa, where you demonstrate some proof of economic solvency; and the investor visa, in which you make a small investment in the country. There are other options as well, but those are the main two that will apply to most people. 14

15 Both of these options lead to permanent residency in just one year. For now. But I do expect this to change. So again, if you feel like you want to establish a potential base for yourself overseas and are thinking about Chile, I would encourage you to start this process sooner rather than later. To get started on this, contact both Francisco della Maggiora <fdellamaggiora@dmey.cl> and Ángeles Santos <asantos@dmey.cl> at Della Maggiora Eyzaguirre Abogados in Santiago. 15