Navigating Pension Options for Foreign Professionals Employed in Chile: To Withdraw or to Continue AFP Contributions?
As a professional foreigner with a current employment contract in Chile, you have several options regarding your pension (AFP) funds and its contributions. Let's explore these options in light of law 18.156 and recent developments in multiple AFP payout requests:
Law 18.156 grants an exemption for both companies hiring foreign technical personnel and the personnel themselves from making pension contributions to Chilean pension organizations (AFPs). However, this exemption is specific to foreign employees with "technical professional" status as outlined in the law. It does not apply to independent individuals or foreigners contributing voluntarily into local system.
For professional foreign employees hired by Chilean companies, the options are as follows:
- Opting out of social contributions in Chile from the beginning of the work contract: This means losing coverage for medical sick leave (which requires a minimum affiliation of 6 months and contribution for 3 months). You would continue contributing to social security in your home country or through international coverage for health, pension, invalidity, and death. However, this exemption does not cover work accident risks and occupational diseases (based in law 16.744), or contributions for unemployment insurance (defined in law 19.728). That exemption lasts until the end of the professional work period with the selected employer.
- Retrieving your AFP funds during your Chilean work period: This allows for potentially better investment opportunities. However, if you choose this option but your employer continues contributing to AFP, it will be interpreted as reaffiliation with the Chilean Pension System (applying pension law 3.500). Contributions made after the initial AFP retrieval date cannot be accessed until retirement age.
- Continuing contributions to the local pension system (AFP) and requesting a payout when you leave Chile: This allows you to invest the funds internationally for your pension and health coverage.
- Starting contributions in Chile but realizing there are better international options: You can retrieve your AFP funds under law 18.156 and exclude yourself from local contributions in Chile (“Ley de Exención”), while continuing your employment with your Chilean employer. However, keep in mind that you will loose medical sick leave coverage.
If you sign a new contract with another Chilean employer after receiving a refund of AFP contributions, you must exclude yourself again under law 18.156 for the new contract to be exempt from local contributions.
The HR department should maintain documentation according to law 18.156 (translated professional title, translated social security coverage certificate) to verify the status of technical professional foreigners at any moment of revision.
For specific guidance or further assistance, feel free to reach out to us.