The Central Bank informed this Monday the monthly indicator of economic activity for the month of March 2020. According to information provided by the aforementioned entity, Imacec contracted 3.5% compared to March 2019, which means one of the largest monthly falls in the last 10 years whose direct cause is the spread of the coronavirus pandemic.

In the previous three months (December 2019, January and February 2020) this item showed positive data of 1.1%, 1.5% and 2.7% respectively. These three months were a relief for the Chilean economy, which had already been registering negative data of 3.3% and 3.4% in October and November 2019 after the social outburst

The activities that have been most affected during this pandemic in Chile are Commerce and services, in which falls in education, transportation, restaurants and hotels stand out.

We can remember the measures that the Government in Chile has been taking in economic, fiscal and labor matters during the last two months of pandemic in the country.

In economic matters, the Chilean government has been taking a series of measures with the intention of safeguarding the country’s economy, small, medium and large companies and also of all its citizens.

A first package of measures was created that aimed mainly at strengthening the health system budget, protecting family income and protecting jobs and the companies that generate them, these measures as a whole will mobilize, in the coming months, fiscal resources of up to US $ 11,750 millions of dollars.

Then a second package of measures is announced to support independent workers and also small and medium-sized enterprises, among which the following stand out:

  • Creation of a US $ 2 billion fund to provide new benefits to informal workers, who, due to not having an employment contract, have not had access to the unemployment benefits of the State. This benefit will reach 2.6 million informal workers
  • Bank credits are created for entrepreneurs, micro, small and medium entrepreneurs, which will be transferred by the banks to the entrepreneurs. These lines will have a guarantee from the State, which allows reducing the credit risk with the current pandemic and facilitating the conditions for banks to lend this working capital to companies.
  • For companies with sales of less than 25 thousand UF per year, the State guarantee may reach up to 85% of the new loan for working capital. This guarantee will be up to 70% for companies with sales between 1,250 UF and 100,000 UF per year, and up to 60% for companies with sales of more than 100,000 and less than 1 million UF per year.
  • The banks that lend these resources must reprogram all the pre-existing credits with their debtors and postpone any amortization until this new line of credit is fully paid.
  • Companies must use these resources for their operational needs, including, among others, salary payments, leasing, supplier’s payment and other needs to remain operational during that emergency.

Also the government has adopted several fiscal measures, among which the ones mentioned in the following table:

Tax measures Validity
Release of PPMs for 3 months PPMs to be paid in April, May and June 2020
VAT deferral for 3 months (annual sales <350 thousand UF) VAT to be paid in April, May and June 2020
VAT payment deferred in 6 or 12 installments
(without interest or fines)
Since July 2020
Early refund of income tax for SMEs Income Operation 2020
Payment of income tax deferred for SMEs until July 2020 Income Operation 2020
Postponement of contributions (subject to eligibility) April 2020 Contribution fees
Transitory Release of Stamp Tax for 6 months Since April 2020
Flexibility in Payment Agreements with TGR Since April 2020

Regarding the labor sphere and given the “constitutional state of emergency of the catastrophe”, the companies have opted for different labor measures that are detailed below:

  • Remote work: Employers and workers can agree that the worker provide their services totally or partially from somewhere other than the company’s office. On March 24, a new remote work law was promulgated, which among other things indicated that the employer is obliged to provide the employee with the equipment and materials necessary for the execution of remote work.
  • Collective Holidays: The employer can determine once a year that the whole company or part of it will close its doors for a minimum of 15 business days so that the employees can enjoy their legal vacations collectively, in this case the holiday must be granted to all employees of the company or to an entire division of the company.
  • Legal holidays taken in advance: Employers can agree with their employees to advance pending legal holidays and spend them during a health crisis, this measure only requires the consent of employees to use their holidays and must be negotiated individually with each one from them.
  • Suspension of the employment contract: By mutual agreement, employer and employee may agree to suspend the employment relationship for a specified period. This implies that the conditions of an employee to provide services and employer to provide work and pay a salary are suspended. However, the employment relationship is maintained for the purpose of maintaining the employee’s seniority.
  • Suspension of salary payment due to force majeure: If the authority decrees closure of a workplace it could be considered an event of force majeure. This would free both the employee and the employer from fulfilling their obligations as long as the situation continues. That is, the employer would not be obliged to provide work or pay salaries and the employee to provide their services.
  • Other modifications: If any worker cannot opt ​​for remote work, the parties may agree on modifications to the way the service is provided, this could include temporary reduction of salary, the agreement on deferred entry and exit times to avoid taking transportation. public at the same time as most people, distribution of work or lunch schedules by shifts, among others.
  • Use of unemployment insurance funds: A recent law allows the suspension of the contract or a reduction in the working day, with compensation for the decrease in salaries with resources from the Solidarity Unemployment Fund. The employment relationship and all the employee’s labor rights will be maintained, so the employer must continue paying social security contributions.

The Coronavirus crisis is causing businesses to face huge challenges and, in this context, reliable and up-to-date information is essential. At AUXADI, we are experts in providing accounts, tax compliance and international payroll management to our clients. If you would like us to expand on the above information, please do not hesitate in getting in touch with us.

Do you need more information?

Manuel Oportus Vilches
Manager Chile

All information contained in this publication is up to date on 2020. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.