How to pay international contractors in Chile [2024]


Sep 5, 2023

Foreign companies interested in sourcing a global network of talent may look to Chile to hire independent contractors. But if you want to tap into the South American country’s 20-million-person workforce, you need to know how to send self-employed workers their payments. 

If you have limited knowledge of Chilean tax laws, business structures, and employment classifications, how can you assure independent contractors get their payments quickly and compliantly? This step-by-step guide highlights what you need to know. 

Step #1: Classify your workers in Chile

The Chilean Labor Code sets the standards for employee-employer relationships, which have stark differences from contractor-client relationships. According to the Labor Code, mixing up these worker types, intentionally or not, can result in misclassification fines ranging from CLP 4,227,360 to CLP 26,421,000. Employers can be charged an additional CLP 1,585,260 per miscategorized employee, who is then eligible for benefits. 

So, how do Chilean authorities distinguish independent contractors from employees? Courts will look at the degree of worker subordination, level of integration, and more. The table below spells out the most important criteria to bear in mind.



High level of autonomy. Contractors are generally given more autonomy over when, where, and how they render services to a company.

More direction from the employer. Employees are under the control and direction of their employer, who can issue specific instructions and make decisions on the employee’s behalf (such as remuneration amount).

Equipment and work tools are owned by the worker.

Equipment and work tools are normally provided by the company.

Less integrated. Contractors can work outside of normal business hours and are not required to participate in regular company meetings.

Highly integrated. Employees are more likely to work on company property during set hours and participate in day-to-day company processes.

Limited entitlement to benefits. Contractors are entitled to Chile’s social security benefits, such as pensions, but are otherwise not guaranteed the same statutory entitlements as employees.

Entitled to benefits. Employees are entitled to benefits, including termination notice periods, paid annual leave, parental leave, overtime, and health insurance. Employers make contributions to these programs on the employee’s behalf.

Time-bound engagement. Contractors work until the end of a specific project or for a finite period of time.

Indefinite agreement. Employees are hired with responsibilities expected to continue indefinitely.

Risk of loss. Contractors likely assume more liability and risk for their work.

Protected from loss. Employees are typically shielded from any risk associated with work-related issues.

Refusal allowed. Contractors can refuse to take on work that wasn’t stipulated in the contractor agreement.

Limited refusal leeway. Employees usually can’t turn down work assigned by a supervisor (though exceptions can be stipulated in an employment contract).

Step #2: Determine the best way to pay your contractors in Chile

Before rendering a Chilean contractor’s services, companies first need to figure out how to pay them. You don’t want to scramble for a solution, since companies typically only have between two and four weeks to pay a contractor once they file an invoice. The most common payment methods for Chilean independent contractors include:

  • Bank wires. If you open a Chilean bank account, you can submit funds to Chilean freelancers via direct deposit. Or you can use your native bank account to send an international wire transfer through the SWIFT network, which comes with banking fees and service charges. 
  • International money orders. This method involves mailing a physical payment. But the process gets bogged down by the sending party having to commute to a Western Union, bank, or post office to purchase the money order. Then, the receiving party has to commute to their bank to make a deposit once the payment is ready. In addition to this being slow, money orders also come with wire fees and fluctuating exchange rates.
  • Digital wallets or payment platforms. Businesses can also use online payment platforms to transfer funds. But, keep in mind that some payment platforms are unavailable in Chile (like Venmo), and some popular digital platforms in Chile—like WebPay and ServiPag—are not as widely used elsewhere. You should also consider vendor fees and unstable exchange rates.
  • Global payroll services. Since independent contractors are responsible for their own taxes, they aren’t typically included in payroll. If you use a global payroll service like Rippling, you can pay independent contractors seamlessly along with the rest of your global workforce.

Step #3: Use global payroll software to process payments for Chilean contractors 

If you want to avoid volatile exchange rates, slow processing times, and global compliance issues, you can pay Chilean contractors through global payroll software. 

With Rippling, you can pay contractors around the world without worrying about manual currency conversions. 

Here’s a glimpse of Rippling in action:

Step #4: Ensure your Chilean contractors have the right tax information 

In Chile, independent contractors are responsible for filing their own taxes and making their own mandatory contributions to the country’s social security programs. Personal income tax rates range from 4% to 35.5%, and there may be additional corporate taxes depending on the contractor’s business structure. 

Social security payments are made through a Pension Fund Administrator (AFP), though men over 55 and women over 50 are exempt. Tax returns are filed online with Chile’s revenue service (the SII) in monthly installments and annually. 

Contractors who have an incorporated business pay a 19% value-added tax (VAT) monthly, but other self-employed Chilean workers are exempt.

While the exact tax obligations for a Chilean contractor depend on their business structure, they should expect to provide:

Effortlessly manage contractors around the world

Expand your international workforce swiftly with Rippling. Pay international contractors in Chile and around the world in one system.

Frequently asked questions about running payroll for contractors in Chile

Do you need to withhold taxes when paying contractors in Chile?

No, foreign companies don’t have to withhold taxes on a Chilean contractor’s behalf. Self-employed workers in Chile are responsible for paying their own income taxes and making their own social security contributions. If companies are hiring employees, they will need to withhold taxes and remit social security contributions.

What is the minimum wage in Chile?

As of September 2023, the Chilean minimum wage is CLP 460,000 pesos a month. The wage will increase to CLP 500,000 in July 2024. However, independent contractors are not subject to minimum wage and other employment laws.

Do Chilean contractors get benefits?

Chilean contractors are entitled to social security benefits—including a pension scheme—covered under the country’s privatized system. However, self-employed workers in Chile are not entitled to other statutory employee benefits, including paid time off, sick leave, maternity leave, paternity leave, severance pay, and public holidays like Christmas. 

Which business structures support independent contractors in Chile?

Self-employed workers can operate under the following business structures (terms are in Spanish):

  • Empresario individual: For an individual entrepreneur with unlimited liability
  • Empresa individual de responsabilidad (EIRL): For a limited liability sole proprietorship

Can you manually pay contractors in Chile?

Yes. Some small business owners choose to manually pay contractors in an effort to save on costs. But this proves to be time-consuming when working with multiple Chilean contractors and contractors in different countries. If you don’t pay an independent contractor quickly, they may seek to render their services elsewhere. 

Additionally, manually processing payments has some serious risks:

  • Compliance. Running payroll manually leaves companies vulnerable to errors and omissions, resulting in unintentional violations of Chilean law. Rippling, however, enforces compliance automatically—no matter where your contractors reside.
  • Security. Manual payroll processing—whether through spreadsheets or paper records—can lead to sensitive contractor information being stolen, lost, or misused.
  • Contractor experience. Manual payments can be slow, lacking the transparency that contractors need. Not knowing what they're being paid for and when they'll be paid creates a frustrating experience for contractors.

How do you turn a contractor into an employee in Chile?

After working with a Chilean contractor for a while, you may want to hire them as a full-time employee. You'll need to legally comply with Chile's labor and employment laws. And you'll need to decide between setting up your own legal entity or using an employer of record (EOR). The latter can be more efficient and cost-effective.

Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.

last edited: May 6, 2024

The Author

Jackson Knapp

Jackson is a writer and editor from DC, based in LA. He covers HR trends for Rippling.