Chile: New concept of permanent establishment

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Chile: New concept of permanent establishment

Sponsored by

sponsored-firms-pwc.png
AdobeStock_117262470_carbon

The Chilean IRS issued Circular Letter No 57 on December 7 2017 regarding the concept of permanent establishment (PE) for purposes of obtaining a Chilean identification number when non-resident, non-domiciled individuals or legal entities initiate business activities in Chile.

Even though this administrative pronouncement aims to improve the Chilean IRS's resources to audit foreign taxpayers carrying out activities in the country (by means of requiring a tax identification number when a PE is configured), it cannot be disregarded that the Chilean IRS is also introducing new criteria for the configuration of a PE.

The Chilean Income Tax Law does not establish an express concept of PE, providing instead for a list of examples: branches, offices, and agents or representatives. Based on this broad reference, the Chilean IRS construed the PE concept for domestic purposes through its administrative pronouncements, dictating that a PE would only be configured in cases where an agent had the authority to conclude business in Chile on behalf of the foreigner.

Circular Letter No 57 of 2017 broadens the above concept to state that a PE will arise when an individual or legal entity neither domiciled nor resident in Chile 'performs all or part of its activities or business in Chile through an agency, a branch, an office, premises or a site'. It also maintains the concept that a PE is configured when an agent or representative is empowered with the authority to represent the foreign company to conclude business on its behalf.

The Chilean IRS goes beyond this previous concept, by stating that a full or partial representation "does not refer exclusively to the existence of a mandate agreement to conclude business". It also identifies the "premises or site" as an example that would trigger a PE.

It is important to realise that this broad concept of PE was partially foreseen in Ruling No 3217 of 2016. Indeed, in that ruling when referring to the configuration by a Chilean taxpayer of a PE abroad, it stated that the PE concept would not be limited to cases where it existed as an agent or representative with the authority to close business, but it was possible also to consider other de facto circumstances, meaning that a case-by-case analysis was required.

Even if this new criteria established by the Chilean IRS could be considered as in line with the existing position regarding the artificial avoidance of PE status, the lack of a legal framework providing clear guidelines – or at least temporary requirements – generates legal uncertainty for foreigners carrying out activities in the country. This matter should be closely monitored, as further developments are likely to occur.

lopez.jpg
nunez.jpg

Santiago López

Ignacio Núñez

Santiago López (santiago.lopez@cl.pwc.com) and Ignacio Núñez (ignacio.nunez@cl.pwc.com)

PwC Chile

Tel: +56 229400556

Website: www.pwc.cl

more across site & shared bottom lb ros

More from across our site

ITR’s data has highlighted the US firm’s ambition to become America’s ‘premier’ tax player via a concerted partner recruitment strategy
Jaap Zwaan’s arrival continues a recent streak of A&M Tax investing in the region; in other news, the US and Japan struck a deal that significantly lowered tariff rates
In a world where international tax concepts rely on human activity, Leonard Wagenaar poses existential questions about the future of such ideas when AI is ever-present
France v Axa provides a practical illustration of how the burden of proof is applied in TP matters under French law, ITR also heard
In an exclusive interview with ITR, Ian Gary calls for a central public CbCR database and bemoans the US’s lack of involvement in international tax transparency
Reckitt Benckiser is to divest its Essential Home business, which includes more than 70 brands, to private equity firm Advent International
In the first of a new series of weekly opinion pieces, ITR Editor Tom Baker reflects on the OECD’s attempts to sanitise the US’s brazen pillar two negotiations
The threat of 50% tariffs on Brazilian goods coincides with new Brazilian legal powers to adopt retaliatory economic measures, local experts tell ITR
The country’s chancellor appears to have backtracked from previous pillar two scepticism; in other news, Donald Trump threatened Russia with 100% tariffs
In its latest G20 update, the OECD also revealed tense discussions with the US where the ‘significant threat’ of Section 899 was highlighted
Gift this article