There are an estimated 12,000 Americans living in Chile.
There are plenty of reasons for Americans to love living in Chile, the latin lifestyle combined with the first world infrastructure, the wines, and the incredible variety of natural landscapes to name but a few. As an American expatriate living in Chile though, what exactly do you need to know regarding filing US expat (and Chilean) taxes?
The good news is if you are paying income tax in Chile, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
US taxes – what you need to know
If you earn over US$10,000 (or just $400 of self-employment income), wherever the income originates in the world you have to file IRS form 1040. While any US taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.
If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.
If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
“In the case of non-Chilean nationals, they are taxable solely on Chilean source income for this first three years in Chile and would become taxable on worldwide income from the fourth year on.”
The US and Chilean governments share taxpayer info, and Chilean banks pass on US account holders' account info to the IRS, so it's not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.
If you're a US citizen, green card holder, or US/Chilean dual citizen, and you have been living in Chile but you didn't know you had to file a US tax return, don't worry: there's a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don't delay though, in case the IRS comes to you first.
Chilean taxes – what you need to know
Residents in Chile pay income tax just on income sourced in Chile for the first three years, and then from their fourth year of residence on, on their worldwide income.
A person is considered a resident if they spend at least 6 months of a tax year in the country, or less if they intend to live in Chile permanently.
The Chilean tax year is the same as in the US. Chilean tax returns are due by April 30th. The Chilean tax authority is called SII (Servicio de Impuestos Internos).
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Chile that you contact a US expat tax specialist.
At Bright!Tax, we have clients in over 150 countries worldwide. US expat tax is all we do and we are very good at it. If you have any questions regarding your personal situation, don't hesitate to contact us and we'll be happy to help.