In 1997, Chile started to negotiate bilateral agreements for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital.
Chile has negotiated agreements of this type with different countries, based on a number of previously establish criteria, among others, the existence of a free trade agreement, a substantial flow of capital and technological exchange to or from Chile, the attractiveness of an economy for both Chileans and foreigners for business development, and strategic interest in the region.
International tax conventions
Countries with conventions for the avoidance of double taxation
Argentina, Australia, Austria, Belgium, Brazil, Canada, Colombia, China, Croatia, Czech Republic, Denmark, Ecuador, France, Korea, Ireland, Italy, Japan, Malaysia, Mexico, New Zealand, Norway, Paraguay, Peru, Poland, Portugal, Russia, South Africa, Spain, Sweden, Switzerland, Thailand, United Kingdom. (act. sept. 2019)
Countries with conventions signed but not in force
Uruguay, United States (act. sept. 2019)
The purpose of these Conventions is to open the Chilean economy to new markets, by reducing the tax rates and moreover, the Conventions stimulate the cooperation between the tax authorities of the different Contracting States. On the one hand, the application of the Conventions will make Chile more attractive for foreign investors and on the other hand, it also stimulates Chileans to invest abroad.
In general, in its Conventions, Chile follows the Model Tax Convention of the OECD, with some important modifications, for example with respect to services that may constitute a permanent establishment without having a fixed place of business or regarding international transport.
Regarding the elimination of double taxation, Chile applies in its domestic law and in its tax treaties an ordinary credit system.
When no tax Convention is applicable, Chile provides an ordinary credit of 30% for the foreign tax paid on dividends and remittance of profits or, when this is less, for the amount of tax paid abroad. This credit may be deducted from the First Category Tax, any unrelieved credits may be applied against the Complementary Global Tax or the Additional Tax. With respect to income from permanent establishments or agencies and income from the use of brands, patents, formulas, technical advises and similar performances received by resident taxpayers from abroad, applies a credit equal to the rate of the First Category Tax (currently 20%) or, when this is less, for the amount of tax paid abroad. The credit for this income may only be applied against the First Category Tax.
When a tax treaty is applicable, Chile also applies an ordinary credit system. However, this credit is more extensive than the credit applicable without a treaty, as it applies to all kind of income referred to in the treaty. The credit granted will be 30% or, when this is less, for the amount of tax paid abroad. The credit may be applied against the First or Second Category Tax, any unrelieved credit may be applied against the Complementary Global Tax or Additional
To check the countries with which Chile has concluded agreements for the avoidance of double taxation, please click here.
Source: SII