I.         General Information

 

Chilean Constitution grants every person the right to carry out any business activity (including direct selling business), unless such activity goes against morality, public order or national security, and always in compliance with applicable laws and regulations.

 

Although there is not a specific legislation in Chile in connection with direct selling, there are many laws and legal provisions that regulate direct selling business aspects, such as the Civil Code, Commercial Code, Sanitary Code, Consumer Protection Law, Food’s Sanitary Regulation, etc.

 

II.         Cooling-off Period

 

The Consumer Protection Act (“CPA”), grants to any consumer the right to unilaterally terminate an agreement within a 10-days term from the reception of products or the hiring of service (and before the rendering of such service),in the following cases:

 

1. In face-to-face purchases in which the consumer did not have direct access to the good.

 

2. In purchases of goods or hiring of services through meetings called for such purpose by the provider.

 

3. In online purchases of goods or contracting of services, or if a consumer has accepted an offer made by a provider through catalogues, advertisement, or any other kind of long-distance communication.

 

Please note that this withdrawal right cannot be excluded by the provider, with the following exceptions: (1) in the case of the contracting of services, insofar as it is informed in advance (prior to the execution of the contract and payment of the price of the service), in an unequivocal, prominent, easily understandable, and accessible manner (e.g., terms and conditions of website); and, (2) in the case of products, which:

(i) due to their nature, they cannot be returned or may deteriorate or expire rapidly; (ii) have been made according to the consumer’s specifications, or (iii) are for personal use. Specific regulation will be issued by the Ministry of Economy regarding the form and conditions in which the provider shall communicate the exclusion of the right of withdrawal, as well as the products to which such exclusion shall be applicable.

 

In addition, the 10-days term can be extended to 90 days if the provider does not senda written confirmation of the purchase/hiring or the corresponding product or service agreement to the consumer. Also, the consumer cannot exercise this right to withdrawal if the purchased product has deteriorated because of its fault.

 

Non-compliance with the cooling-off period by the provider may be sanctioned by a court of law with a fine of up to approximately USD 20,500, plus damages (if applicable).

 

Also, the CPA provides consumers the non-waivable right of legal warranty, which allows them to choose at their discretion –within six months, following the date on which the product was received– between the free repair of the good or, after restitution, its replacement or refund of the amount paid, without prejudice to compensation for damages caused. This right must be communicated by the supplier of the product or service in each of its premises, stores, websites, among others. Additionally, it shall not be necessary to enforce the warranties granted by the supplier to exercise the legal warranty right.

 

In addition, Law No. 21,398 (“Pro-Consumer Law”) incorporated a new third paragraph in Article 1 N°3 of the CPA regarding basic commercial information, which states that in the case of sales of durable goods, the duration of the product in foreseeable conditions of use, including the term in which the supplier is obliged to have spare parts and technical services for its repair, will be considered basic commercial information.

 

III.         Pyramid Schemes

 

Pyramid schemes are those in which the potential earnings of a participant mainly come from the recruitment of other participants to certain plan or operation, instead of from the sale of products or services. Usually, in such schemes, the participants must pay a very high starting fee in order to become an Independent Representative of the relevant company, the products do not have considerable value and/or are of low quality, and the relevant company does to repurchase stocks from its Independent Representatives.

 

Although there is not a specific legislation prohibiting the abovementioned pyramid schemes, in certain cases, such practice might be construed as a fraud under Chilean Criminal Code.

 

IV.         Multi-Level Marketing

 

Multi-Level marketing companies have a special regulation regarding payment and withholding of VAT. As set forth in Exempt Resolution No. 52 issued by the Chilean Tax Authority on April 5th, 2012, the VAT of the final sale shall be charged in advance by the relevant Multi-Level marketing company. In such a case, sales forces can be exempted from the obligation of issuing sales receipts (“boletas”), provided that the corresponding withholdings have been made.

 

V.        Prohibition on Products

 

There is no specific legislation prohibiting the commercialization of products through direct selling.

However, certain products (alcohol beverages, pharmaceutics products, food, etc.) have restrictions for their free commercialization, as well as their advertising, and there are other products which commercialization is prohibited (illegal drugs, protected animals, etc.) and, therefore, such commercialization may even constitute a criminal offense under Chilean law.

 

VI.         Credit Restrictions Country

 

According to the CPA, if a provider of products or services grants a credit to theconsumer, said provider shall clearly inform to the consumer the following aspects in connection with the relevant credit:

 

1. The cash price of the relevant product or services;
2. The applicable interest rate;

• The amount of other included payments, such as applicable taxes, notary office expenses, insurances, etc.;

1. The alternatives that the relevant consumer has in connection with the number of installments, their respective amount and periodicity;
2. The total amount to be paid by the consumer in each alternative of credit, corresponding such amount to the addition of all installments to be paid;
3. The penalty interest rate to be paid in the event of default in the payment of one or more installments of the relevant credits, as well as the system of calculation of expenses arising from judicial collection of unpaid credits, including legal and other fees;

• The effects in the event of default due to the lack of payment of the credit, and the procedural effects of the collection actions, such as the seizure, removal, and auction of goods; and
• Extrajudicial collection

 

Likewise, the CPA establishes that the relevant interest rate shall only be applicable to unpaid balances and that the corresponding payments may not be required in advance, unless otherwise agreed by the parties.

 

Additionally, charging an interest above the maximum agreeable rate is an infringement to the CPA, regardless of other civil and criminal sanctions that may apply.

 

The CPA provides that standard form credit agreements elaborated by any person or financial entity shall contain the following:

 

1. A summary sheet of its main clauses, which must be the first page of the contract;
2. A detailed breakdown of all the costs associated with the credit;
3. Grounds for early termination by the provider;
4. Duration of the contract and the clauses that allow the consumer to early terminate the contract;
5. An Annex specifying all the additional products contained in the contract, informing which are mandatory or voluntary;
6. If the provider has a Customer Service, including its requirements and procedures in an Annex;
7. Power of attorneys contained in the contract; and
8. If the contract considers commissions, fees, maintenance charges or costs, they must be duly specified, including their adjustment Such adjustment mechanism must be based on objective conditions, which should not depend solely on the provider’s decision, and must be verifiable by the consumer.

According to Law No. 21,236 on Financial Portability, consumers have the inalienable right to the financial portability for all individuals or legal entities that are either considered consumers pursuant to the CPA or micro or small companies, pursuant Law No. 20,416, and that have any valid financial product or service with a provider. For this purpose, providers of financial products or services must deliver to the consumer a settlement certificate for early termination, within a period of five business days, counted from the time they request it, except when it refers to a single specific financial product or service, in which the certificate must be delivered within three business days from the respective request.

 

Consumers have the right to terminate their financial products or services early on their own volition and provided that they fully extinguish the obligations with the provider associated with the specific services that the consumer decides to terminate, including the cost per term or advance payment determined in the contract.

 

In addition, providers of financial products shall inform in every advertisement the total costs of the financial operation and cannot sell tied products.

 

Non-compliance with these rules may be sanctioned with a fine of up to approximately USD 102,800, plus damages (if applicable).

 

Also, in 2021, new duties for providers of financial products and services were included in the CPA:

 

1. Inform in simple terms on the standard form agreements, the physical and technological means through which consumers may exercise their rights and the form of termination of the contract. In the case of noncompliance to this obligation, the consumer shall only be bound by what she/he was informed in the
2. Inform the mechanisms and conditions to terminate the contract, at the time of the conclusion of the contract. Providers may not condition the termination of the contract to the payment of amounts owed (without prejudice of the fees applicable for early termination of the financial service) or restitution of goods or establish more burdensome conditions than those required for its conclusion.
3. Block, at the consumers request, the payment cards, and not charge administration, operation and/or maintenance costs upon permanent blocking.
4. Deliver, at the consumers’ request, the certificates and background information necessary to renegotiate the credits of any kind.
5. Do not restrict or condition the purchase of goods or contracting of services and the offer of discounts (when access to such discount is conditioned to the execution of a money credit operation in more than one installment) to be made exclusively with a means of payment managed or operated by the same supplier, by a related company or by a business support company.
6. Inform the price, in all advertising, in a size and visibility greater than the one informed in the offer or promotion.
7. Analyze, prior to the conclusion of a money credit operation, the economic solvency of the consumer, based on sufficient information obtained through official means intended for such purpose, and inform the consumer of the result of such analysis, and provide the consumer with such information. Specific regulation will be issued by the Ministry of Economy regarding the form and conditions applicable to comply with these obligations.

 

Finally, there is a bill of law in the Chilean Congress which seeks to amend the CPA to

include that acceleration clauses will be considered abusive when the default is not directly related to the credit operation, or when the delay in payments by the consumer is less than 20% of the overdue debt.

 

VII.         Money Collections

 

There is not a specific regulation applicable to money collection in connection with direct selling.

 

If a direct selling company is willing to judicially collect certain obligations, the applicable procedure shall depend on the origin of such obligations and the nature of the relevant titles held by the company.

 

VIII.         Licenses

 

No specific licenses are required for direct selling companies’ distributors and/or sellers.

 

IX.         Status of Direct Sellers

 

All the direct selling companies associated to the Chilean DSA (Cámara de Venta Directa de Chile, A.G.) sell their products through independent sellers or distributors, with whom the relevant company has executed a commercial mandate or a distribution agreement, as the case may be, in which it is established that there is no labor relationship between the direct selling company and the corresponding independent seller or distributor (“Independent Representatives”). Additionally, such Independent Representatives do not qualify as “employees” under Chilean Labor Law.

Notwithstanding the above, there is an inherent risk associated to this type of contracts, which is that the Independent Representatives claim the existence of a direct labor relationship with the direct selling company, depending on the manner in which the relationship has been handled in practice, and if from such relationship it is possible to determine the existence of a tie of subordination and dependency between the parties (key element of the employment relationship)1. Considering the latter, it is highly advisable to manage the relationship with the Independent Representatives as independently as possible.

 

In connection to this topic, please be aware that there is a bill of law in the Chilean Congress (No. 16,151-13) which aims to modify the criteria to identify an employment relationship including, among other criteria: place where the services are rendered; length of the services; entity determining the fees; and type of services. This Bill could affect the qualification of Independent Representatives.

 

X.        Earnings Claims

 

There is no specific legislation in connection with earnings claims applicable to direct selling.

1 For your reference, please note that the relationship of subordination and dependence is not defined in the law. Notwithstanding the foregoing, according to repeated pronouncements of the labor authorities, the bond of subordination and dependence would be a factual element that would be evidenced by the occurrence of various indications of employment, such as: the duty to attend work; the continuity in the rendering of services; the compliance with a work schedule; the obligation of the employee to remain under the employer’s orders and obey its instructions and, in general, the employer’s control in the development of the employee’s functions; and, above all, in the acquisition by the employer of the work product, among others. Consequently, a direct employment relationship is established when a person is subject to a subordinate and dependent relationship with respect to another.

XI.         Taxes and Fees

 

The following is a general overview of the current Chilean tax system.

 

Companies and individuals resident or domiciled in Chile are subject to income tax on their worldwide income, while non-resident entities and individuals are taxed only on their Chilean source income (as a general rule, income derived from assets located or activities performed in Chile).

 

The Chilean income tax system is considered an “imputation” system in which corporate and final income taxes are integrated. As corporate profits flow from the corporate sphere to the shareholder or partner sphere, the corporate tax previously paid works as a credit, which is fully or partially creditable against final income taxes, applicable at the shareholder or partner level.

 

Chilean companies may be subject to a general tax regime (“General Regime”) or a preferential tax regime applicable to small and medium companies (“SMEs”), this is, companies with annual gross income up to 75,000 UF2 (currently USD 3.3 million approximately) (“SMEs Regime”) that comply with certain requirements regarding the companies’ type of activity. In this regard, please note that income derived from exploitation of real estate, shares and securities and association or participationaccounts contracts (contratos de asociación o cuentas en participación) shall not exceed35% of its total income.

 

The General Regime levies with a 27% corporate tax rate income obtained by companies. Under this regime, shareholders are subject to final taxes (i.e., personal income taxes and withholding taxes) when such profits are effectively distributed. Still, it only allows using a 65% credit of the corporate tax paid by the company, unless the shareholder is resident in a tax treaty country, in which case the corporate tax paid is 100% creditable against final taxes. Nonetheless, a 100% credit is also applicable to partners or shareholders residents in countries that have signed tax treaties before January 2020 (even if the tax treaty is not yet in force). This rule is currently applicable until December 31, 2026.

 

The SMEs Regime levies with a 25% corporate tax rate income obtained by companies on a cash basis. Under this regime, shareholders are subject to final taxes (i.e., personal taxes and withholding taxes) until such profits are effectively distributed and use a 100% of the corporate tax paid by the company as a credit against the final taxes. Furthermore, the SMEs Regime allows applying for a fiscal transparency regime, according to which the company is not required to pay the corporate tax but only its shareholders’ final taxes. This fiscal transparency regime applies only when all of the company’s shareholders are subject to final taxes. Temporarily, the SMEs corporate tax rate is 12,5% for Commercial Year 2024, according to law No. 21.256, as modified in May 2023.

 

1. Corporate tax. A 27% (General Regime) or 25% (SMEs Regime) corporate tax is imposed annually on the net Under the General Regime it is determined under full accounting records and on an accrual basis, derived from investments andcommercial, industrial, mining, and other activities, irrespective of whether the enterprise is organized as a legal entity, branch, or permanent establishment. Under the SMEs Regime, the taxable basis is determined under

2 Unidad de Fomento or “UF” is a monetary unit set by the Chilean Central Bank, which value fluctuates according

to the Consumer’s Price Index. Currently, 1 UF is equal to CLP 37.167,00 / USD 39 approximately.

simplified accounting records on a cash basis.

 

2. Personal income taxes. Income derived from dependent employment and the total income obtained by resident individuals, is levied with personal taxes at progressive rates ranging from 0% to 40%.

 

3. Withholding tax. The withholding tax levies Chilean source income and other types of income earned by non-residents when the income is paid or made available to the foreign resident. It is typically collected through withholding by the payer.

 

As a general rule, the withholding tax applies at a 35% rate. However, certain items of income may be exempt or subject to lower rates, such as interest payments to foreign banks or financial institutions (4%); engineering or technical works and professional or technical services (15% or 20%); royalties and other payments on patents, models, and designs (15% or 30%); and payments for the use of standard computer programs and commissions to agents, which maybe exempt.

 

Double taxation treaties could grant relief or exemptions of the Withholding Tax. Chile has entered into tax treaties, with Argentina, Union of Arab Emirates, Australia, Austria, Belgium, Brazil, Canada, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, France, India, Ireland, Italy, Japan, Malaysia, Mexico, Norway, New Zealand, Paraguay, Peru, Poland, Portugal, Republic of Korea, Russia, Spain, South Africa, Sweden, Switzerland, Thailand, United Kingdom, United States of America, Uruguay and the Netherlands.

 

In the case of profit distributions or dividends paid by a Chilean entity, the withholding tax rate is 35%. However, the corporate tax paid on the same profits is totally or partially creditable against the withholding tax depending on the payer’stax regime and the residency of the shareholder.

 

4. Taxation of capital gains. As a general rule, capital gains arising from the sale of shares or an interest in a Chilean corporation is deemed as ordinary income subject to final taxes (i.e., personal income taxes and withholding taxes) when realizedby foreign companies or individuals that have not assigned said shares to an individual entrepreneur3or subject to the relevant tax regime when realized bya Chilean company.

 

Provided that certain specific requirements are met, gains derived from publicly traded shares may benefit from an exemption or a special tax treatment. In this sense, as of September 1st, 2022, capital gains arising from the sale of shares with stock market presence are subject to a sole tax rate of 10%.

 

5. Value Added Tax (“VAT”). VAT levies at a 19% rate the habitual sale of tangible goods, the sale of real estate (land excluded), imports and certain types of services. Exports are VAT exempt (zero-rated). A special refund mechanism is available regarding the acquisition of fixed assets.

 

VAT is declared and paid on a monthly basis and assessed under a credit-debit mechanism.

 

3 In general terms, an “individual entrepreneur” consists of a legal fiction that allows a single individual to create

a separate accountability like a legal entity, for tax purposes.

As of January 1st, 2023, all services are levied with VAT unless expressly exempted by law.

 

6. Municipal License Tax. An annual duty is payable to the Municipality in which professional, commercial, industrial activities are conducted. The tax is calculated over the tax-adjusted equity and the rate ranges from 25% to 0.5%, depending on the Municipality, capped at 8,000 UTM or Monthly Tax Units (approx. USD 532,000). In the case of professional activities, a fixed amount is levied.

 

7. Stamp Tax. Stamp Tax mainly levies documents evidencing indebtedness for borrowed money, including loans and other specific documents such as notes and bond Foreign loans made to a Chilean debtor are subject to Stamp Tax, even if no documents are issued. Stamp Tax basis is the principal amount of the loan, and its rate is 0.066% multiplied by the number of months to maturity of the loan, capped at 0.8%. In the case of loans payable on demand, the current rate is 0.332%.

 

The Stamp Tax in each case is applied over the principal amount of the debt.

 

8. General Anti-Avoidance Rules (GAAR). Under the GAAR, tax obligations arise and are determined based on the legal nature of facts, acts, legal agreements, transaction, or series of transactions, irrespective of the form or names given by interested parties.

 

GAAR recognizes the principle of the good faith of taxpayers, by which the Chilean Tax Authority must undertake the effects arising from the business or acts conducted by them. However, if a taxable event set forth by the law is “avoided” by means of business or acts executed by taxpayers, there will be no good faith. “Avoidance” takes place if there is abuse or simulation. In the case of abuse, taxpayers shall fulfill the tax obligations arising from the taxable events set forth in the law. In the case of simulation, taxpayers shall pay the taxes corresponding to business or acts effectively executed by the parties, regardless of the simulated business or acts.

 

The GAAR admits taxpayers’ right to choose between the different conducts and alternatives set forth by the tax legislation. The sole exercise of such option will not be considered as abuse.

 

The existence of abuse or simulation should be declared by a Tax Court, upon requirement of the Chilean Tax Authority, which will have the burden to prove that avoidance was the main purpose of a given structure. Individuals and companies involved with the design or execution of elusive tax planning may be subject to penalties of up to 100% of the taxes avoided. If the infraction were committed by a legal entity, the penalty will be applied to its directors or legal representatives, to the extent that there is a breach of their managerial and supervision duties.

 

9. Tax Reform Bill.

 

On January 29, 2024, the Government introduced the Tax Compliance Legislation to the Chilean Congress.

 

The framework of this bill of law is organized around several core pillars:

1. Modernization of the tax administration and the Tax and Customs Courts
2. Fighting informality
3. Tax offenses
4. Aggressive tax planning
5. Enhanced powers for the Taxpayer’s Advocate
6. Regularization of tax obligations
7. Institutional strengthening and

 

Key features of the bill include amendments to banking secrecy laws, the administrative enforcement of the General Anti-Avoidance Rule, and provisions for anonymous reporting of tax violations.

 

XII.         Social Security

 

1. Dependent employees:

 

1. Pension Contributions: All employees (except for specific foreigners ruled by Law about Foreign Technicians or under an international Social Security Treaty) shall contribute to the Pension Fund, by monthly paying a percentage over their monthly remuneration. The relevant amount is withheld and paid by the employer to the public or private Pension Fund Administrator (“Instituto de Previsión Social”/IPS or “Administradora de Fondos de Pensiones”/AFP) to which the employee is affiliated to. The remuneration over which the employees shall make the payments is capped by law.

 

For your reference, currently the monthly contribution to the pension fund is 11.45% approximately, of the employee’s remuneration (10% to the fund and 0.49%-1.45% for commission to the administrator), with a cap over the remuneration of 84.3 UF (currently USD 3,154 approximately).

 

Note that there is a bill of law being discussed in Congress which, among other amendments, seeks to implement the obligation of employers to contributeinto the pension fund. This contribution would apply gradually up to 6% of the employee’s monthly remuneration (capped for these purposes).

 

1. Health insurance: All employees (except for specific foreigners ruled by Law about Foreign Technicians or under an international Social Security Treaty) shall pay a 7% over their respective monthly remuneration (capped by law for these purposes) for health insurance. This insurance is administrated by a public institution (“Fonasa”) or a private institution (“Isapre”), at the employee’s choice.

 

For your reference, the current cap over the monthly remuneration is of 84.3 UF (currently USD 3,154 approximately).

 

1. Insurance for Work-Related Accidents and Illnesses: This insurance provides compensation for employees injured in work-related accidents and professional diseases.

 

For these purposes, employers must make contributions to an employee compensation insurance scheme and may choose between private insurance (mutual aid funds) and public insurance (“Instituto de Seguridad Laboral”) schemes. The contribution that must be paid varies according to the nature of the activity and the employer’s accident records, varying from 0.9% to 7.7% of its payroll (calculated over a maximum monthly remuneration of

84.3 UF / USD 3,154 approximately).

 

1. Other social security payments: Additionally, there is: (i) an Unemployment Insurance that is co-paid by the employee, the employer and the Chilean government; (ii) a Disability and Survival Insurance borne by the employer;

(iii) a Heavy Works Contribution co-paid by the employee and the employer (not applicable to direct selling companies); and (iv) an Insurance for Parents of Children Suffering from Certain Serious Diseases borne by the employer.

 

2. Independent Contractors (“trabajadores independientes”):

 

As of 2019, independent contractors have been obliged to contribute to the Chilean social security system. Based on current regulations, independent contractors are obliged to pay social security contributions for: (a) Disability and Survival Insurance; (b) Compensation for work-related accidents and professional diseases; (c) Insurance for the accompaniment of children with serious illnesses; (d) Health Insurance; and (e) Pension Fund. These contributions shall be paid in April of each year based on the income they received on the previous calendar year, provided that they have an income of at least 5 monthly minimum wages (currently CLP 2,300,000 / USD 2,316 approximately).

 

Payment of social security contributions is entirely obtained from the relevant independent contractor’s tax reimbursement. Considering that the previous mandatory 10% tax withholding of the fees was not enough to cover all expenses arising from social security contributions, it was set forth by law that the withholding will gradually increase until it reaches 17% of the fees in 2028. During 2024, the fees withholding is of a 13.75% of their fees. The payment of social contributions from the tax reimbursement has an impact on the independent contractors’ income, since their tax reimbursement may decrease, or they could even not receive a tax reimbursement in a specific year.

 

Please note that independent contractors are briefly defined as “any natural person who, without being subordinated to an employer, exercises an individual activity by which obtains an income taxed by the Personal Income Tax.” Therefore, only Independent Representatives which according to their activity obtain this kind of income shall be reached by these social security obligations.

 

XIII.         Others

 

1. Pharmaceutical Products need prior registration granted by the relevant health authorities and can only be sold in establishments specially authorized to commercialize such kind of products. In this context, while pharmacies are the main facilities authorized for selling pharmaceutical products, pharmaceutical laboratories and pharmaceutical wholesalers are also allowed to engage in selling, provided it is done in a separate building, especially conditioned for these means, and previously approved by the sanitary Additionally, Foodstuff products do not need registration in order to be commercialized in Chile. However, each importation of these products must go through a prior authorizationprocess before health authorities. Once such authorizations are granted, they can be freely sold to the public through direct selling -insofar as the products have been duly imported and come from duly authorized storage facilities- unless they are classified by the competent health authorities as pharmaceutical products, in which case the rules stated above shall apply. Notwithstanding the above, please note thatif these foodstuff products exceed

certain levels of calories, sugars, saturated fats, or sodium set forth by local sanitary legislation, certain restrictions to the sale, advertisement and marketing of such products may apply. Cosmetic Products need registration from the relevant health authorities prior to its commercialization but, in general, they can be freely sold to the public through direct selling, unless they are classified as pharmaceutical products, in which case the same rules stated above shall apply.

 

2. Data Protection. Processing of individual’s personal data in Chile (whether the processing is conducted by an individual, a private or a public entity) must be performed in compliance with Law No. 19,628 on the Protection of Private Life, Data Protection Law (“DPA”).

 

1. Requirements to process personal data under the DPA. As a general rule, data controllers must obtain a written and informed consent from the data subject; unless the controller is either authorized by law to perform the processing or exempt from obtaining consent under any of the legal exceptions. Legitimate interest or contractual relationship are not considered lawful basis for the processing under the DPA.

 

The data subjects must be duly informed of: (i) the purpose of the collection and storage of the data, and (ii) the possibility for such data to be communicated to third parties. The mere notification or communication of the existence of a data processing activity, or the publication of a privacy policy without an act of consent linked to those, is not sufficient under the DPA to authorize personal data processing activities.

 

Private entities are not subject to any licensing or registration requirements (such as database registration) for data processing purposes. There is no legal obligation to appoint a compliance officer, and there are no mandatory regulatory compliance programs that companies need to undertake.

 

1. Data controller obligations under the DPA. Obligation to: (i) block any data which accuracy cannot be established; (ii) rectify any incorrect, inaccurate, misleading, or incomplete data; and (iii) delete or cancel obsolete data or data for which there is no longer any legal basis for retention.

 

The data controller also has a general obligation to care for the data with due diligence and shall be liable for the damages associated with not complying with it.

 

1. Data processing by third parties on behalf of the data controller. An entity may process personal data on behalf of the data controller, acting as a data processor. In this scenario, the DPA sets forth that a written agency agreement must be executed between controller and processor, in which they must state the conditions in which the data can be used (e.g., a data processing agreement).

 

1. International data transfer. The DPA does not regulate cross-border transfer of personal data, nor does it establish restrictions for the transfer of personal data to certain countries or jurisdictions. Hence, to the extent the general data processing rules set forth in the DPA are met, cross-border transfer of personal data is valid and legal.

 

1. Enforcement and sanctions. There is no data protection authority in Chile,

and claims for breaches to the DPA must be filed before an ordinary civil court. As a general rule, the breach to the DPA may be sanctioned with the payment of material and moral damages to the data subject, following a civil trial. The DPA also provides for a fine of up to USD 3,500 approximately, whichmay be imposed by the court if the controller does not respond within two business days to a request of information, modification, cancelation, orblockage made by a data subject.

From a consumer protection standpoint, infringements to the DPA may also entail infringements to the Consumer Protection Act (“CPA”) (e.g., infringement to certain regulations regarding standard form agreements, such as privacy policies)4. In this regard, please note that the CPA provides different sanctions for the breach of its provisions. However, it contains a generic and subsidiary sanction of a fine of up to UTM 300 (USD 20,500 approx.) in case there is no specific sanction provided.

 

1. Bill of law amending the DPA. The Chilean Government filed a bill of law before Congress in 2017 (bulletin 11144-07), which aims to significantly amend the DPA. Some of the most relevant amendments to be introduced by this bill are:

 

1. It provides a new and more detailed regulation for the data subjects’ rights of access, rectification, erasure, blocking and objection, and introduces the new rights of portability and objection to automated decision-making, including profiling;
2. Right to object allows the data subject to oppose to the processing of her/his personal data for marketing purposes, including profiling;
3. It restricts automated processing of personal data, entitling data subjects to request that no decision affecting them significantly be adopted exclusively on the grounds of the automated processing of that data, with certain exceptions;
4. It creates a Personal Data Protection Authority with the ability to monitor and punish violations of the law with fines of up to 20,000 UTM (approximately USD 1,400,000);
5. It sets forth the obligation for data controllers that are legal entities not incorporated in Chile to designate a legal representative domiciled in the country;
6. It regulates international data transfers, and it sets forth the obligation for data controllers to inform on their web pages of such international transfers (including references to whether the level of data protection in the third country is adequate and the existence of potential safeguards for the data);
7. It provides new legal bases for processing of personal data, such as the execution of a contract or a legitimate interest;
8. It regulates the duty to adopt safety measures, and to report security breaches to the authority; and
9. It sets forth the possibility for the data controller to adopt and certify prevention models, associated with mitigating circumstances regarding liability.

1. Cybersecurity Framework Law (“CFL”). On April 8th, 2024, a framework law

⁴ Law No. 21,398 on reinforcement measures for the protection of consumers, incorporated Article 15 bis to the Consumer Protection Act No. 19,496 which extends the faculties of control conferred to SERNAC (Chilean consumer authority) to the processing of consumers’ personal data. In this regard, SERNAC has indicated that the clauses contained in consumer pre formulated standard contracts authorizing the processing of personal data should be reviewed in accordance with the provisions of both CPA and DPA.

on cybersecurity and critical information infrastructure was published in the Official Gazette, which establishes the institutional framework, principles, and general regulations on cybersecurity actions of State Administration bodies and between them and individuals. It creates, among other bodies, the National Cybersecurity Agency (“ANCI”), with capacity to supervise and sanction violations of the CFL. CFL will also create a governance model that improves the prevention, mitigation, management and response to incidents and cyber-attacks.

For its entry into force, the President of the Republic must issue, within one year of the publication of the CFL in the Official Gazette (i.e., until April 8th, 2025), one or more executive law decrees to determine a period for the entry into force of the rules of the CFL, which may not be less than six months from the publication of the CFL in the Official Gazette, the date of initiation of the activities of ANCI, among other matters.

This law will apply to: (i) institutions that provide services qualified as

“essential” and (ii) institutions qualified as “operators of vital importance”.

The CFL establishes as essential services: those provided by the State Administration Bodies, by the National Electric Coordinator, those provided under a public service concession, and those provided by private institutions performing some specific activities such as generation, transmission and distribution of electric energy, telecommunications, transportation, manufacture, and research of pharmaceutical products, among others.

The ANCI will determine, by means of well-founded resolution, the providers of essential services that qualify as operators of vital importance, which shall comply with the following requirements: (i) that the provision of such service depends on computer networks and systems, and (ii) that the affectation, interception, interruption or destruction of its services has a significant impact on security and public order, on the continuous and regular provision of essential services, on the effective fulfillment of the functions of the State or, in general, of the services that the State must provide or guarantee.

The CFL distinguishes between: (i) general duties and obligations, and (ii) specific obligations that must be complied with by operators of vital importance. The first ones relate to the duty to report cybersecurity incidents and cyber-attacks and the duty to implement permanent measures to prevent, report and resolve cybersecurity incidents. The second one relates to specific obligations such as to set continuous information security management systems, maintain business continuity and cybersecurity plans, conduct regular revision operations, among others.

 

3. Consumer Protection: The Chilean Government filed a bill of law before Congress in 2023 (bulletin No. 16271-03), to amend the Consumer Protection Act (CPA) and improve the protection of the rights of consumers in their individual interests. It intends to strengthen SERNAC by granting it sanctioning powers. Some of the most relevant amendments to be introduced by this bill are:

 

1. New attribution of SERNAC to initiate sanctioning
2. Legal recognition of the claims management procedure before
3. Strengthening of individual mediation that can be conducted by Consumer Associations.
4. Legal recognition of the general interest of
5. Setting forth post-sale obligations to
6. Reduction of the maximum ceilings that may be charged for extrajudicial

1. Acceleration clauses will be considered abusive when the default is not directly related to the credit operation, or when the delay in payments by the consumer is less than 20% of the overdue debt.
2. Setting forth the obligation of companies to maintain the same contracting channels to modify or terminate contracts.
3. Extend the liability of the e-commerce platforms in the commercialization of goods and services.
4. Extend the scope of application of the Consumer Law to contracts of promise of purchase and sale of housing.
5. Raising the standard of conduct of companies, obliging them to guarantee sufficient attention and dignified and equitable treatment to consumers.
6. Prohibition to promote or use stereotypes that justify or naturalize relations of subordination, inequality, or discrimination based on sex, gender, or sexual orientation in advertising.
7. Setting forth a period of 24 hours to make available the funds derived from a pre-approved credit or quota, so that the consumer has an appropriate time to evaluate its acceptance and, if so deemed, to retract
8. Prohibition of tied sales to funeral service companies, which currently exist for telecommunication and insurance contracts.
9. Extension of the pro-consumer principle to interpret the rules of the CPL in favor of consumers.
10. Elimination of the requirement of a contractual relationship between the affected consumers and the infringing company as a requirement to sue collectively. It also seeks to modify the current definition of consumer to eliminate the requirement of an “onerous legal act” to qualify as a
11. Reports prepared by SERNAC with the information gathered through the exercise of its legal powers and/or information provided by companies will enjoy legal presumption when they contain a list of the sources and documents taken into consideration during their preparation, assimilating it to the general rule of the acts of the administration.
12. SERNAC officials, subject to certain requirements, serve notices in proceedings in which SERNAC is a party.

 

4. Labor Regulation: the following cited laws correspond to relevant labor regulations that have been published in the Official Gazette during the last year:

1. Law No. 21,645, that modifies the Labor Code regarding the Conciliation of Maternity, Paternity and Family Life. This law sets forth that employees who have under their care: (a) children aged 14 or younger; and (b) children under the age of 18 who have disabilities or severe dependence must be given preference to use their vacation days on the vacation period determined by the Ministry of Education, over other employees that do not have children under those circumstances. Additionally, the company must offer remote working when the employee has a child who fits in the abovementioned cases.

 

1. Law 21,643 modifies the Labor Code regarding prevention, investigations and sanctioning of sexual harassment, workplace harassment and violence in the workplace. This law applies to all companies, no matter the number of employees that they have. In this regard, companies must incorporate the investigation procedures for sexual and labor harassment into the Hygiene and Safety Regulation. Additionally, the companies must elaborate a protocol for the prevention of sexual harassment, workplace harassment and

workplace violence. This protocol must be prepared with the assistance of the organism in charge of administrating the work-related accidents and occupational illness insurance.

 

1. Law 21,561 modifies the Labor Code to reduce the weekly working hours limit from 45 to 40 hours, entering into force gradually in a 5-year term and includes multiple and important amendments to the working hour and rest regimes (in force as of April 26th, 2024,). After the first year of enforcement of the law, the ordinary working hours limit will be reduced to 44 hours; by the third year it will go down to 42 and, finally, to 40 hours after the fifth year.

 

Additionally, this new law includes multiple and important amendments to the working hour and rest regimes, including but not limited to: (a) flexibility in the distribution of workday; (b) limitation of the category of employees excluded from workday limit; (c) implementation of electronic attendance record; (d) compensation of overtime for additional rest days, among others.