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Chile: New concept of permanent establishment

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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.


Santiago López

Ignacio Núñez

Santiago López ( and Ignacio Núñez (

PwC Chile

Tel: +56 229400556


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