Chile invests little in research and development. To change that, the government created an incentive that few companies take advantage of: the R&D Law (Ley I+D, Law No. 20,241), which lets a company recover a significant share of its R&D spending through its taxes.
This article explains what the law is, which activities qualify, how much the benefit is worth and how to activate it.
What is the R&D Law?
Law 20,241 establishes a tax incentive for private investment in research and development. It was enacted in 2008 and reformed in 2012 by Law 20,570, which made it far more flexible: it added projects carried out with the company’s own capabilities (“intramural”), removed the cap of 15% of gross income and raised the annual credit limit to 15,000 UTM.
It is administered by Corfo, the Chilean economic development agency, which certifies that projects or contracts meet the law’s requirements. The benefit is then claimed with the SII (Chile’s tax authority) in the company’s tax return. Contracts and projects certified up to December 31, 2035 are eligible.
What counts as R&D (and what doesn’t)?
This is the most important point, because it is where most applications are rejected. The law distinguishes three concepts:
- Basic research: experimental or theoretical work to obtain new knowledge about the underlying foundations of phenomena, without any particular application in view.
- Applied research: original work to acquire new knowledge, directed towards a specific practical objective.
- Experimental development: systematic work that draws on existing knowledge to produce new materials, products or devices, launch new processes, systems and services, or substantially improve existing ones.
Software development is expressly included, as long as it systematically resolves a scientific or technological uncertainty or produces a substantial, innovative improvement in a process, product or service.
The law also expressly excludes several activities:
- Testing and evaluation of a prototype that has already become a marketable product.
- Routine, repetitive or minor improvements, adaptations and analyses, even if they use technology.
- Cosmetic or minor modifications to existing applications.
- Periodic or seasonal changes.
- Promotion of results, market and commercialization studies.
- Purchasing intellectual property when that is the main purpose of the work.
Note: the law does not cover “innovation” in general, only R&D as defined above. According to a University of Chile study, 64% of rejections (2015 data) happened because Corfo considered the project a routine improvement.
The benefit in numbers
| Item | Value |
|---|---|
| Credit against First Category (corporate) Tax | 35% of certified expenditure |
| Deduction as an expense | Remaining 65% |
| Annual credit cap per taxpayer | 15,000 UTM |
| Minimum project or contract amount | Over 100 UTM per company |
| Validity | Projects certified until Dec 31, 2035 |
If the company has losses and cannot use the full credit, the remainder is not refunded, but it is inflation-adjusted and can be used in later tax years. We walk through the calculation in What is a tax credit?.
Who can apply?
The requirement is about taxes, not company type. Any individual or legal entity subject to First Category Tax, taxed on actual income with full accounting, can apply.
- Legal entities (SpA, Ltda., S.A., EIRL): the typical case.
- Individuals running a business who meet those tax requirements. Employees and freelancers taxed on fees do not qualify.
Companies do not need to register anywhere before applying.
Project or contract: two modes
| Project (“intramural”) | Contract (“extramural”) | |
|---|---|---|
| Who carries it out | The company, with its own capabilities and/or hiring third parties | A Research Centre registered with Corfo |
| Key requirement | At least 50% of expenditure in Chile | The company outsources 100% of the R&D to the centre |
| Type | Individual or joint | Individual or joint |
The project mode, added in 2012, lets the company use its own team instead of relying on a registered centre.
How to activate it: two routes
1. Standard certification. The company designs the project and submits the application online before spending. From the submission date it can deduct the 65% as an expense, and once Corfo certifies the project, it can apply the 35% credit.
2. Notice of intent. If the company has already started spending, it can notify Corfo within 30 calendar days of the first expenditure. It then has up to 18 months to submit the formal application. Once the project is certified, the credit applies retroactively from that first expense.
Since September 2024, applications are submitted online through the platform linked from the official program page.
Common mistakes
- Confusing innovation with R&D. Implementing a known technology, even if it is new to the company, usually does not qualify.
- Not documenting the technical uncertainty. Corfo needs to see what was unknown and how the team set out to resolve it.
- Missing the notice-of-intent deadline. The 30-day window from the first expenditure is strict.
- Not keeping separate project accounts. Traceable spending is the basis for Corfo’s later audits.
FAQ
Does Corfo assess whether my project is profitable? No. Corfo checks that the activities are R&D under the law and that costs are reasonable, but it does not assess commercial value.
How long can a project last? There is no minimum or maximum; it depends on the nature of the R&D.
Can I combine it with public grants? Yes, but the benefit only applies to the portion the company funds itself.
This article is for information only and is not tax advice for your specific case. Sources: Law 20,241, Certification Regulation (Supreme Decree 102/2012) and Corfo’s FAQ.
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