Chile: U.S. income tax treaty enters into force

U.S. Treasury Department announced entry into force of the income tax treaty with Chile

U.S. Treasury Department announced entry into force of the income tax treaty with Chile

Article Posted date 21 December 2023

The U.S. Treasury Department on 19 December 2023 announced the entry into force of the income tax treaty with Chile. Read TaxNewsFlash

With respect to taxes withheld at source, the U.S.-Chile income tax treaty will have effect for amounts paid or credited on or after 1 February 2024. For all other taxes, the U.S.-Chile income tax treaty will have effect for taxable periods beginning on or after 1 January 2024.

The main benefits of the treaty include:

Dividends

  • From the U.S. to Chile: 15% - 5%
  • From Chile to the U.S.: As long as Chile provides a full corporate income tax credit (27% rate) deductible against the withholding tax, Chile may impose its full withholding tax (35% rate)
  • Exempt from taxation at source when the beneficiary is a pension fund

Interest

  • 10% (15% for the first 5 years)
  • 4% with respect to certain creditors (banks, financial institutions, among others)

Royalties

  • 10% (copyrights, industrial property and other similar intangible assets)
  • 2% (industrial, commercial or scientific equipment)

Services

  • Withholding tax on the payment of services eliminated if it qualifies as business profit and the income is not attributable to a permanent establishment (PE)

Capital gains

  • Shares or other rights: 0% (capital markets and pension funds) up to 16%
  • Immovable property: no limit (including the sale of shares or rights whose value derives in more than 50% from real estate)
  • Other assets: only taxable in the State of residence

Income from fiscally transparent entities

  • Specific rule for income obtained through fiscally transparent entities which allows access to treaty benefits

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

 

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