Chile: Amendments to transfer pricing rules

Law 21.713 (published October 24, 2024) establishes rules to comply with tax obligations within the Pact for Economic Growth, Social Progress, and Fiscal Responsibility. As part of this law, amendments are introduced related to transfer pricing, particularly concerning advance pricing agreements (APAs), definitions and specifications of concepts, and the introduction of self-adjustments.

Significant amendments include:

• The concept of the arm's length principle is expressly introduced (in line with OECD guidelines), and the concepts of functions, assets, and risks assumed by the parties are reinforced.
• Regarding business reorganizations or restructurings, it is added that these can be directed from abroad, unlike the previous text, which only mentioned transfers abroad of goods or activities capable of generating taxable income in Chile.
• The reference to natural persons is removed in the definition of related parties.
• It is explicitly stated to taxpayers need to maintain supporting information when an analyzed party is foreign.
• In terms of APAs, a series of international best practices and OECD recommendations are introduced, including:
  • The possibility of holding preliminary consultations (commonly known in English as Prefiling meetings)
  • The duration of the agreements is increased from four to five years
  • The figure of “roll-back APA” is added, which means evaluating the effects of the agreement up to three fiscal years prior to its subscription, with the incentive that the tax of the first paragraph of article 21 of the LIR will not be applied during that period
  • The review period for the SII is increased from six to 12 months
  • With the intention that it be an applicable instrument in practice for multinational groups that see their transfer pricing results adjusted abroad for operations with Chile, regarding the corresponding adjustment requests, by virtue of the adjustments made by other States, the presentation period is modified to one year from the date the transfer pricing adjustment is considered final in the other jurisdiction
• The so-called “Transfer Pricing self-adjustments” are incorporated into the norm, provided that these aim to improve the taxpayer's economic results. These adjustments must be added to the taxable base of the first category tax.
• A rule is incorporated into the Customs Ordinance establishing that adjustments or self-adjustments in transfer pricing will not affect the values declared in an import or export destination, nor will it be necessary to modify these values.

For more information, contact a KPMG tax professional in Chile:

Marco Macias | marcomacias@kpmg.com