EIN for Chilean LLC Owners: Why Active Business Income Generally Escapes Chile's CFC Rules

Three things before you apply. First, your LLC needs state approval -- applying before formation is complete is a common, avoidable delay. Second, keep your Chilean RUT or passport accessible in case the IRS requests identity verification during a fax or phone follow-up. Third, settle on a mailing address for the CP 575 confirmation letter -- a Chilean home address works, though many founders use a US virtual mailbox for faster, trackable delivery. Worth tracking from the start: any passive income your LLC generates alongside its core active business -- interest on a business bank balance, for instance -- since that slice, unlike your operating revenue, may fall under Chile's CFC accrual rules covered below.

The application process itself does not vary by country. Chilean founders use the same three non-resident routes as everyone else, since the IRS's online EIN system requires an SSN, ITIN, or US legal residence most applicants do not have. Fax is the most reliable method: complete Form SS-4 and send it to 855-215-1627 if faxing from within the US, or 304-707-9471 from outside -- i.e., from Chile -- with real-world turnaround commonly running one to two weeks despite the IRS's official four-business-day target. Phone, at 267-941-1099, is open to international applicants Monday through Friday, 6:00 AM to 11:00 PM US Eastern Time; Chile runs one to two hours ahead of Eastern depending on the season, one of the more convenient time-zone alignments in this series. Mail, at four to five weeks, is the slowest option and rarely worth choosing over fax.

A few fields on Form SS-4 consistently cause delays for non-resident applicants generally, Chilean founders included. Line 7b asks for the responsible party's SSN, ITIN, or EIN -- if you have none of these, the IRS's own instructions say to write Foreign or N/A, not leave the field blank, since a blank Line 7b is one of the most common reasons non-resident applications bounce back for correction. Lines 4a-4b need your full Chilean mailing address spelled out with Chile written in full, since that is where your EIN confirmation letter, Form CP 575, will be mailed if you apply by post. Line 9a asks about entity classification -- accepting the default disregarded-entity status is standard for most single-member LLCs and does not affect whether Chile treats your LLC's income as active or passive, since that classification depends on the nature of the income itself, not the US tax election.

Once issued, your EIN arrives with a confirmation letter, Form CP 575, sent by fax, mail, or both depending on your application method -- keep it permanently, since banks and payment processors will ask for it during account opening. A lost CP 575 cannot be reissued, but the IRS will provide an EIN Verification Letter, Form 147C, as a substitute for any future banking or tax need. From here, most Chilean founders move on to opening a US bank account -- Mercury and Relay both work for Chile-based founders, since Chile is not on either provider's restricted list -- and, since almost every non-resident-owned single-member LLC counts as a foreign-owned disregarded entity, filing Form 5472 alongside a pro forma Form 1120 annually, regardless of whether the LLC had US activity that year. The $25,000 minimum penalty for missing that filing applies independently of anything Chile's Servicio de Impuestos Internos (SII) separately requires.

If a formation service is handling your EIN application, confirm that the responsible party listed on Line 7a is you, the actual owner -- not a staff member at the formation company. The IRS defines the responsible party as whoever ultimately owns or controls the entity's funds and decisions, identified by their real name and passport-based nationality. An EIN record that lists someone other than the actual owner creates a mismatch that can complicate matters later if a bank or payment processor needs to verify beneficial ownership, which is the same information reported separately under BOI/FinCEN rules. If a provider suggests listing anyone but you, treat it as a red flag rather than a convenience, regardless of how routine it sounds.

Chilean founders benefit from a piece of good news that took an unusually long time to arrive: a comprehensive US-Chile income tax treaty entered into force on December 19, 2023, effective for withholding taxes from February 1, 2024 and for other taxes from January 1, 2024. The treaty was originally signed in February 2010 but took nearly 14 years to clear the US Senate, finally passing by a 95-2 vote in June 2023 -- making it the first new comprehensive US tax treaty to take effect in over a decade, and only the second such treaty the US has with a South American country. In practical terms, this gives Chilean founders a genuine advantage over founders in several other countries covered in this series: full treaty-based double-tax relief is available on qualifying income, rather than relying solely on unilateral foreign tax credit rules the way Argentine, Malaysian, or Taiwanese founders currently must. The treaty's limitation-on-benefits provisions still need to be satisfied to claim its protections, so it is worth confirming eligibility with a Chilean tax advisor rather than assuming automatic coverage.

Precision matters here, since the line between active and passive income is what decides whether Chile's CFC accrual rules apply at all. Passive income under Article 41 G specifically covers dividends from entities the CFC does not itself control, interest, certain categories of royalties, rental income unless the CFC's business is genuinely renting out real estate, and capital gains from the disposal of assets that themselves generate passive income. Ordinary trading revenue -- a SaaS subscription fee, an e-commerce sale, a consulting invoice -- does not fall into any of these categories. A founder whose LLC is a straightforward operating business should generally expect its core revenue to sit outside CFC accrual, but a founder whose LLC holds meaningful investment assets, earns licensing royalties, or rents out property alongside its main business should look more closely at whether that secondary income stream crosses into passive territory.

Chile's tax landscape may shift meaningfully in the near future, but it has not yet. On April 22, 2026, President Jose Antonio Kast filed a National Reconstruction and Economic and Social Development bill proposing significant pro-investment changes, including a lower corporate tax rate and repatriation incentives. As of the most recent available information, the bill had not been enacted, faced real political resistance in Congress, and its ultimate fate remained uncertain. Current law -- the cash-basis general rule and the passive-income-only CFC regime described above -- continues to apply in full. A founder should plan around today's rules and revisit the plan if and when this legislation actually passes, rather than structuring decisions around rates or incentives that do not yet exist.

A few mistakes show up repeatedly. Assuming all foreign LLC income is accrued annually the way it is in several other countries in this series, when Chile's general rule taxes most foreign income on a cash basis and reserves accrual specifically for passive income under the CFC rules. Assuming any passive income at all triggers CFC treatment for the whole LLC, when the accrual rule applies to the passive income itself, not automatically to the entity's active business revenue alongside it. Planning around a lower corporate tax rate or repatriation incentive from the pending 2026 reform bill before it has actually been enacted. Assuming no US-Chile tax treaty exists because older material predates its 2023 entry into force, when full treaty relief has in fact been available since 2024. And, as with every non-resident applicant regardless of country, leaving Line 7b of Form SS-4 blank instead of writing Foreign, which remains one of the most frequent reasons the IRS returns a non-resident application for correction.

Chile's general rule for foreign-sourced income works differently from the accrual-based attribution rules covered elsewhere in this series: foreign income is generally taxed in Chile on a cash, or received, basis -- meaning it is recognized when the taxpayer actually receives it, not automatically each year as the LLC earns it. The exception is Chile's Controlled Foreign Company rules under Article 41 G of the Ley sobre Impuesto a la Renta, which do require annual accrual -- but only for passive income. The CFC rules are scoped specifically to categories like dividends from non-controlled entities, interest, certain royalties, rental income from real estate the CFC does not actively operate as a business, and capital gains from assets that themselves produce passive income. Active business income -- revenue from selling software, services, or products to customers -- generally falls outside this passive-income definition entirely, which means it is not swept into the CFC accrual regime and is instead taxed under the general cash-basis rule when it reaches you. For most single-member LLCs formed by founders in this series -- SaaS products, e-commerce, consulting, agency work -- this is a meaningfully different starting position from the accrual-based regimes covered for other countries: the core business income is not accrued to your Chilean return before you receive it, only the passive slice, if any, is. None of this changes what Form SS-4 asks for -- the IRS has no field for Chile's active-versus-passive distinction -- but it shapes when Chilean tax actually comes due on your LLC's earnings.