The "General tax on payments abroad" applies to services, rather than dividends. Also, technical or professional services rendered abroad --- presumably, most o

The "General tax on payments abroad" applies to services, rather than dividends. Also, technical or professional services rendered abroad --- presumably, most of what a startup would be paying its suppliers for --- get withholding tax at 15% rather than 35%. (I am no accountant or tax lawyer, but to me it looks like the main point of the 35% tax is some sort of anti-transfer-pricing-abuse measure --- to penalise attempts at tax evasion by local companies who pay their affiliates in tax havens for fictitious and ill-defined "services" and then try to claim that these service payments are part of their cost of doing business and should be deducted from profits for their Chilean tax bill.) For the dividing line of what is a technical service or not, look up "Servicios prestados en el extranjero" on the website of the Chilean taxation authority: http://www.sii.cl http://www.sii.cl Even better, these tax rates on both services and on dividends may be further reduced by bilateral treaties. Chile has tax treaties with many OECD members and South American countries. See http://www.sii.cl/pagina/jurisprudencia/convenios.htm http://www.sii.cl/pagina/jurisprudencia/convenios.htm US citizens/permanent residents should note a few things. Like trevalyan says, don't let it discourage you --- but be aware of the issues that could come up. If you participate in the program, you will become an owner of a "Controlled Foreign Company". You have to file a Form 5471 every year with the IRS and an FBAR declaration (TD F 90-22.1) with the US Treasury Department for any bank accounts owned by you or your Chilean company. 5471 in particular is a pain in the ass. Also if you go back to the US afterwards and continue running your Chilean company, it can get very complicated --- look up "Subpart F" (Internal Revenue Code sections 951-965), in particular "foreign base company services income" --- start at http://www.law.cornell.edu/uscode/26/usc_sup_01_26_10_A_20_1_30_N_40_III_50_F.html http://www.law.cornell.edu/uscode/26/usc_sup_01_26_10_A_20_1... Another (less pressing) problem is that Chile has signed a tax treaty with the US, but it is not yet ratified by either side's legislature. Until the treaty has been ratified and the IRS determines that it meets their requirements, dividends that a US citizen receives from a Chilean company are NOT qualified dividends. They will be taxed at your ordinary US income tax rate and not the reduced rate of 15%. But I'd imagine by the time you are profitable enough to think of paying dividends, the treaty will be settled and this will no longer be a problem (though of course, the provisions for qualified dividends may have sunsetted by that time!)