Taxing Wages 2026

Chile

Abstract

This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.

Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

 

 

Chile’s national currency is the peso (CLP). For 2025, the average exchange rate was CLP 951.33 to USD 1. That same year, the average worker in Chile earned CLP 14 201 852 (country estimate1).

Taxes allowances and tax thresholds for the personal income tax system and upper earnings limits for social security contributions are determined using and expressed in CPI-indexed units. As of June 16, 2025, the following are the provisional2 yearly currency values applied to these units:

 

Major revenue items	Unit	CLP	USD
Social security contributions	Unidad de Fomento1, 2 (UF)	39 523,95	41.30
Monthly tax thresholds	Unidad Tributaria Mensual1, 3 (UTM)	68 785	71.87
Annual tax thresholds	Unidad Tributaria Anual1, 3 (UTA)	825 420	862.47

1. These amounts are subject to adjustments in line with the CPI and is compared with monthly earnings in the assessment of social security contributions

2. Average end of month value for the year, country estimate.

3. Value for June

Personal income tax system

Central/federal government income taxes

Tax unit

Each family member declares and pays taxes separately.

Tax allowances and credits

Standard tax reliefs

• Education tax credit: Parents with children attending preschool, primary, special or secondary education, with a total annual taxable income (both parents) of up to CLP 32 186 444 (UF 792), are entitled to a tax credit of CLP 178 814 (UF 4.4) per child, for expenses related to education. Children shall have a minimal school attendance of 85% and the school must be recognized by the State. This tax credit can be claimed by both parents, or only by one of them.

• Relief for social security contributions: Employee’s compulsory social insurance contributions are deductible for income tax purposes regardless of whether they are paid to government or private health insurers. (See section on employees’ contributions below).

Main non-standard tax reliefs

• Voluntary contributions and APV (Voluntary Pension Fund Savings): Voluntary contributions to pension funds and voluntary pension savings (APV) may be deducted from taxable income, with an annual upper limit of CLP 24 383 670 (UF 600).

• Mortgage Interest: Taxpayers whose annual income falls below CLP 74 287 800 (UTA 90) may deduct from their taxable income 100% of interest paid within a year for mortgage loans. This percentage is reduced in the case of taxpayers with higher incomes up to CLP 123 813 000 (UTA 150). This relief cannot be granted along-side the DFL2 Housing Mortgage Loan Payments benefit and cannot exceed CLP 6 603 360 (UTA 8) per annum.

• From tax year 2024 to 2029 individuals may access a tax credit for mortgage-backed loan payments (capital and interest) made on new residential housing, with a maximum annual credit of 1 100 128 (16 UTM). The credit can reduce the income tax owed and grant a refund, if applicable. It may be applied to only one property by taxpayer, registered in the Real State Registry up to September 2024 and eligibility must be stated in the property's purchase agreement.

Tax schedule

Tax rates are applied on monthly income and these taxes are retained and paid by employers. In order to estimate taxes, tax rates are applied on an annual basis, on the annual average income:

Taxable income (UTA)	Taxable income (CLP thousands)	Tax rates
0 -13.5	0 – 11 143	EXEMPT
13.5 - 30	11 143 – 24 763	4.0%
30 - 50	24 763 – 41 271	8.0%
50 - 70	41 271 – 57 779	13.5%
70 - 90	57 779 – 74 288	23.0%
90 - 120	74 288 – 99 050	30.4%
120 - 310	99 050 – 255 880	35.0%
310 and over	255 880 -	40.0%

The President of the Republic, Ministers, Undersecretaries, Senators and Deputies have tax thresholds and rates applicable specifically to their income, if it is higher than 150 UTA:

Taxable income (UTA)	Taxable income (CLP thousands)	Tax rates
0–13.5	0 – 11 143	exempt
13.5–30	11 143 – 24 763	4%
30–50	24 763 – 41 271	8%
50–70	41 271 – 57 779	13.5%
70–90	57 779 – 74 288	23%
90–120	74 288 – 99 050	30.4%
120 – 150	99 050 – 123 813	35%
150 and over	123 813 -	40%

State and local income taxes

No taxes apply to income at state or local government level.

Compulsory social security contributions

Employees’ contributions

Employees have mandatorily to contribute 7% of their income to a health insurance plan subject to an upper earnings limit of CLP 41 642 434 (UF 1053.6). They are free to choose whether to pay into a government-managed plan or alternatively to a private insurer3 (Isapres). The public insurance is based on a joint system that, in general, operates on an equal basis for all its beneficiaries, irrespective of the risk and the amount of the individual contribution. Its financing is partly covered by the contributions and partly by way of a government subsidy. Contributions paid to the plans offered by Isapres are based on the contributors’ individual risk and these plans are exclusively financed with the employees’ contributions. Public insurance contributions are included in the modelling as most of the employees are enrolled in the government-managed system.

Employee social security contributions in respect of pensions and unemployment are not classified as taxes in this report; though they are included in modelling as deductions for income tax.

• The mandatory contributions to pension funds and unemployment insurance plans are not classified as taxes, since the payments are made to private institutions. In 1980, the public social security system was replaced with a privately managed individual capitalisation system. This system is obligatory to all employees who have joined the labour force since 1983 and free-lance workers since 2012, and of a voluntary nature to all contributing to the former system. The contributions to the old government operated pension fund system are not included in the modelling because they relate to a minority of employees and the system will eventually disappear once the contributions and related benefit payments to those individuals remaining in it have ceased.

• In the case of their pension funds, these payments amount to 10% of their gross income, with an upper earnings limit of 41 642 434 (UF 1053.6). Added to that there is an amount that varies depending on the managing company that covers the management of each pension fund account.4 The monthly unemployment insurance premium is 0.6% of the employee’s gross income, with an upper earnings limit of CLP 62 554 668 (UF 1582.7). Employees do not pay the monthly unemployment insurance premium when they have a fixed-term contract or after 11 years of labour relationship.

• There are also mandatory contributions to managed funds by members of the police force and the army which are classified as taxes but are not included in the modelling as they relate to a minority of the overall workforce.

• If the employee has a high-risk job, that person has to make an additional contribution of 2% (heavy work) or 1% (less heavy work) of the gross income with an upper earnings limit of CLP 41 642 434 (UF 1053.6) to the pension fund account.

The pension and unemployment contributions are not included in the Taxing Wages calculations, as they are not considered as taxes in the report. However, information on “non-tax compulsory payments” as well as “compulsory payment indicators” is included in the OECD Tax Database, which is accessible at www.oecd.org/ctp/tax-database.htm.

Employers’ contributions

There are six categories of employer social security contribution, none of which are classified as tax revenues in this report, except for the last component which may be partially considered as one.

• Employers make mandatory payments of 0.90% of their employees’ gross income for an occupational accident and disease insurance policy subject to an upper earnings limit. For the majority of employees, the payments are made to employers’ associations of labour security which are private non-profit institutions. Those remaining are made to the Social Security Regularisation Unit (ISL). Although this latter organisation is controlled by the government, the funds are invested on the private institutions market. The employers also pay an additional contribution which depends on the activity and risk associated to the enterprise (it cannot exceed 3.4% of the employees’ gross earnings). This additional contribution could be reduced, down to 0%, depending on the safety measures the employer implements in the enterprise. If health and safety conditions at work are not satisfactory, this additional contribution could be applied with a surcharge of up to 100%.

• Employers shall make a mandatory contribution of 0.03% of the employee’ gross income to a fund which finances insurance coverage for working parents of children aged 1 to 15, or ages 1-18, whichever applies, that have a serious health condition, so that the parents can take a leave of absence from their work in order to accompany and take care of them; therefore, during this period the parents shall have the right to assistance financed by said fund (in Spanish, “Fondo SANNA”) that will replace, in total or partially, their monthly earnings. The collection of this contribution is initially delegated to the ISL and to the employers’ association of labour security.

• Employers make payments of 2.4% of each employee’s income (0.8% after 11 years of labour relationship and 3% for fixed-term contracts) with an upper yearly income limit of CLP 62 554 668 (UF 1582.7) to finance unemployment insurance. These funds are managed privately.

• Employers are required to pay a disability insurance of 1.58% (estimated average for 2025) of the employees’ gross income, with an upper earnings limit of CLP 41 642 434 (UF 1053.6), collected by the pension fund manager, and managed by an insurance company.

• If the employee has a high-risk job, the employer has to pay 2% (heavy work) or 1% (less heavy work) of the employee’s gross income, with an upper earnings limit of CLP 41 642 434 (UF 1053.6) to the pension fund account.

• Starting in 2025, the Pension Reform in Chile introduces an additional employer-paid contribution. This contribution will gradually increase until 2033 to 7% of a worker's gross income, with 4.5% allocated to individual pension funds and 2.5% to a public social security fund managed by an autonomous public entity. These funds will support benefits to enhance current and future pensions and reduce the gender pension gap. In 2025, the additional employer contribution to the employee individual account is set at 0.1% for and 0.9% for the autonomous public social security fund. Since it fulfils the requirements and definitions set by the OECD, this last component is modelled as a new and solely employer SSC in the model.

Universal cash transfers

Since 2020, a minimum wage bonus has been stablished to ensure an income floor for every employee working under a Labour Code regulated contract, with a standard weekly schedule between 30 and 45 hours of work and a gross wage under a specific threshold. In addition, the beneficiary must rank within the 90^th percentile of the Social Household Registry5 (in Spanish, Registro Social de Hogares). Since the gradual increase in the minimum legal gross wage has reached the level this benefit was intended to ensure, the benefit is no longer active in 2025.

On the same note, another important change in government benefits for employees is the elimination of the Family Wallet, which consisted of a fixed monthly payment per dependent household member. Along with the Minimum Guaranteed Income, both benefits are removed from the Taxing Wages 2025 model.

Another important social benefit corresponds to the “Family Allowance” which consists in a monthly payment available to any retirement pensioner or employees paying social security contributions. The specific amount will be directly determined by the income of the beneficiary and the number of dependent family members within the household.

The following table contains an annual estimation of the different payments by dependant house member and the corresponding income bracket of the beneficiary, applicable in 2025.

2025 Transfer by Dependant
Annual Income Range (CLP)	Annual Payment (CLP)
0 – 7 184 376	254 916
7 184 376 – 10 493 520	156 432
10 493 520 – 16 366 596	49 428
16 366 596 -	0

As a definition, for every cash transfer that can only be paid to one of the spouses per household and, where both individuals are working, the modelling assumes that the benefit is assigned to the member with the lower earnings.

Formerly known as “March Bonus”, the Permanent Family Contribution is an additional payment received by low-income families already participating in other social programs, among them, the Family Allowance. For this segment of beneficiaries, the Permanent Family Contribution consist of a yearly payment for each dependent household member equivalent to CLP 64 574.

Marital status-related transfers

As described in the previous section, the “Family Allowance” is a social benefit paid in accordance with the income and the dependant family members of the beneficiary of each household. This definition for dependant family member can include spouses when their income is below 50% of the minimum legal wage (for 2025, this threshold is estimated to be around CLP 3 137 272 yearly).

Transfers related to dependent children

For children, the criteria that defines a dependent household member is somewhat broader than for spouses. The following cases can be identified as the most common:

• Adopted children as well as those born to the parents

• Children up to the age of 18 or 24 years provided they are single and regular students in an elementary, secondary, technical, specialised or higher education establishment

• Minors under the care of an individual as a result of an official court order

Recent changes in the tax/benefit system

Changes to labour taxation associated to the 2024 Pension Reform Act

The year 2025 marks the starting point for Chile´s Pension Reform which aims to enhance current and future retirement pensions, expand the coverage of the contribution gap insurance, promote a more competitive pension fund management market, and address the gender gap in social security to ensure greater equity.

The primary source of funding for this reform is an increase in employer contributions. These additional funds will be allocated between the individual retirement accounts of each worker and a public social security fund designed to strengthen the pension system.

The implementation of these additional employer contributions will be phased in gradually over a period of 9 years. Starting in 2025 through 2033, with wages corresponding to August, the reform establishes an additional contribution of 0.1% directed to the individual retirement fund and 0.9% allocated to the Autonomous Social Security Protection Fund (FAPP), ensuring a balanced approach to improving pension benefits.

As for modifications related to cash transfers and other benefits additional changes in the labour system include the repeal of the Minimum Guaranteed Income and the Electronic Family Wallet. Both benefits are no longer included in the model.

Memorandum items

Identification of an average worker

• The source of information is a survey conducted by the National Statistics Institute (INE) to determine the Salary and Labour Cost Index. This nationwide survey is carried out on a monthly sample and gathers information on salaries and labour costs. It applies to companies with at least 5-worker payrolls grouped in accordance with ISIC4.CL 20126, covering workers in industry sectors B to R7.

• The average gross earning was obtained by multiplying the average hourly wage by the average number of hours worked. It covers both full and part-time workers.

Employers’ contribution to private health and pension schemes

• Employers in Chile have a mechanism called Collective Voluntary Pension Savings (Ahorro Previsional Voluntario Colectivo, APVC), through which they may complement the mandatory retirement savings paid by the employees.

2025 Parameter values

	Year	2025
Average earnings/yr	Ave_earn	14 201 852	Country estimate, based on information of wages up to March 2025
Allowances	Basic_al	0
Income tax	Tax_sch	0,0%	11.143.170
		4,0%	24.762.600
		8,0%	41.271.000
		13,5%	57.779.400
		23,0%	74.287.800
		30,4%	99.050.400
		35,0%	255.880.200
		40,0%
Education tax credit	edu_tax_cre	178.814
	edu_tax_cre_lim	32.186.444
Employees SSC
Upper threshold	SSC_sch	7,00%	41.642.434
		0
Employer SSC	SSC_pens_er	0,4%	41.642.434
		0
Permanent Family Contribution	CTR_permanent	64.574
Family Allowance
Child element	CTR_child	-	254.916
		7.184.376	156.432
		10.493.520	49.428
		16.366.296	-
Non-tax compulsory payments
	DummyNTC	0
pensions	NTC_pens	11,15%	41.642.434
		0,00%
	NTC_pens_er	1,62%	41.642.434
		0,00%
unemployment	NTC_un	0,60%	62.554.668
		0,00%
	NTC_un_er	2,40%	62.554.668
		0,00%
Work Accidents & SANNA	NTC_mutual_er	0,93%	41.642.434
		0,00%
Minimum Gross Wage	min_gwage	6.274.544

2025 Tax equations

The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note about tax equations. Variable names are defined in the table of parameters above, within the equations table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are as shown for the principal, with “_spouse” values taken as 0.

 

	Line in country table and intermediate steps	Variable name	Range	Equation
1.	Earnings	earn
2.	Allowances:	Tax_al	B	Min(Basic_al,earn)
3.	Credits in taxable income	taxbl_cr	B	0
4.	CG taxable income	tax_inc	B	Positive(earn-tax_al)
5.	CG tax before credits	CG_tax_excl	B	Tax(tax_inc, tax_sch)
6.	Tax credits	tax_cr	J	IF(taxinc_princ+taxinc_spouse<='edu_tax_cre_lim,IF(taxinc_spouse' =0,edu_tax_cre*Children,edu_tax_cre*Children*0.5),0)
			S	IF(AND(taxinc_princ+taxinc_spouse<=edu_tax_cre_lim,taxinc_spouse>0),edu_tax_cre*Children*0.5,0)
7.	CG tax	CG_tax	B	Positive(CG_tax_excl-tax_cr)
8.	State and local taxes	local_tax	B	0
9.	Employees' soc security	SSC	B	Tax(earn, SSC_sch)
11.	Family allowance	cash_trans	P/S	VLOOKUP(earn_spouse,CTR_child)*(children+married*IF(earn_principal<=(min_gwage/2);1;0)
12.	Permanent Family Contribution	cash_trans	P/S	CTR_permanent*(children+married*IF(earn_principal<=(min_gwage/2);1;0)
13.	Employer's SSC	SSC_empr	B	Tax(earn;SSC_pens_er)
134.	Employer's NTCP	NTCP_empr	B	DummyNTCP*(Tax(earn;NTC_un_er)+Tax(earn;NTC_pens_er)+Tax(earn;NTC_mutual_er))

Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse calculation) J calculated once only on a joint basis.

Notes

← 1.  Estimated using information of monthly earnings and working hours available up to March 2025.

← 2.  As for the UTM and the UTA, the values correspond directly to the actual figure for both units as of July. For the UF, an estimate of the average annual value is used. This figure is obtained by assuming a monthly growth from July to December equivalent to its effective average monthly growth between February and June 2025.

← 3.  By the end of 2023, the government-managed system reported to serve roughly 81% of the national population.

← 4.  Average cost in 2025 was 1.15% of gross income.

← 5.  The Social Household Registry is a national information system designed to support the selection process of beneficiaries for a wide base of social programs and cash transfers. This ranking is constructed from data available within government and additional input provided by individuals.

← 6.  ISIC4.CL 2012 is a Chilean classifier of economic activities, based on ISIC Rev.4.

← 7.  O (8422) “Defense Activities” and O (8423) “Public order and safety activities” are not included.