Chile: U.S. income tax treaty approved by U.S. Senate

The U.S. Senate voted to approve the U.S. income tax treaty with Chile.

The U.S. Senate voted to approve the U.S. income tax treaty with Chile.

The U.S. Senate on 22 June 2023 voted to approve the U.S. income tax treaty with Chile. Read TaxNewsFlash

The Senate’s approval of the treaty was subject to two reservations made necessary by changes to U.S. tax law since the treaty was signed in 2010.

Chile completed its process of approval of the treaty in 2015, but without the reservations. So Chile must now approve the reservations. Thus, the treaty will not be ratified and enter into force until Chile completes that additional approval process and mutual notification of approvals by both countries is made.

If the treaty is ratified, the withholding provisions would become effective for amounts paid or credited on or after the first day of the second month following the date on which the treaty enters into force. For all other taxes, the provisions would take effect for tax periods beginning on or after the first day of January following the date the treaty enters into force.

If ratified, the treaty would:

  • Limit the withholding tax rates on dividends paid from the United States to Chile to 15%, and to 5% in certain cases
  • Limit the withholding tax rates on interest and royalties paid by both countries to the other country
  • Exempt certain capital gains on sale of shares or other rights in a company resident in the source country from taxation in the source country
  • Eliminate the withholding tax on the payment of services if it qualifies as business profit and the income is not attributable to a permanent establishment

Read a June 2023 report (Spanish and English) [PDF 1.1 MB] prepared by the KPMG member firm in Chile

 

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