The initiative seeks to avoid duplication in the payment of taxes and also prevent tax evasion of income and wealth taxes.

On November 16, 2023, the National Congress approved the agreement between Chile and the United States by which the “Agreement between the Government of the Republic of Chile and the Government of the United States of America to Avoid Double Taxation and to Prevent Tax Evasion in Relation to Income and Property Taxes and its Protocol.”

The entry into force of the agreement will occur when it is ratified by the President of the Republic of Chile and the exchange of notes between Chile and the United States takes place.

Thus, the provisions of the agreement will come into force in accordance with the following detail:

Withholding taxes at source, with respect to amounts paid or accrued, will take effect on or after the first day of the month following the entry into force of the Agreement.

Other taxes will take effect starting January 1 of the year following the entry into force of the Agreement.

Regarding the rules for exchanging information, they will govern from the entry into force of the Agreement, without making distinction to the tax period to which the information refers.

This is a fact that will undoubtedly favor commercial exchange between both countries. Among its main tax implications we can find the following:

Capital gains: The rate is reduced from the current 35% to 16%, provided that the transferor has not owned, within the 12 months preceding the transfer, more than 50% of the capital of the company with residence in Chile.

Interests: The maximum rates currently in force are limited (Chile 35%, United States 30%). The maximum rate will be 10% as a general rule and may be as high as 4%. However, during the first two years of validity of the Agreement it will be a rate of 15%.

Dividends: A maximum rate of 5% is established if the beneficiary of the dividends is a company that owns at least 10% of the voting shares of the company that pays the dividends and 15% in other cases. In the case of Chile, given our semi-integrated system, the maximum rate will not apply to the extent that the First Category Tax can be used entirely as a credit and the Additional Tax rate does not exceed 35%.

Use of credits: The corporate tax paid or withheld in the United States may be used in Chile as a credit.
Information exchange: A mechanism is contemplated for information requirements and exchanges.

For more information you can contact :

Francisca Franzani  | Compliance Group Director |  ffranzani@az.cl