2025: a year of innovations in transfer pricing in Chile

2025 has witnessed numerous innovations in the field of transfer pricing in Chile, continuing a trend of constant evolution. As new topics emerge in this area, several important aspects stand out:

• The tax reform of November 2024;

• The focus on audits announced by the Internal Revenue Service (SII) within the framework of the Tax Compliance Management Plan (Plan de Gestión de Cumplimiento Tributario, or PGCT);

• The general rule published by the Financial Market Commission (CMF) on related-party transactions; and

• More recently, President Donald Trump’s announcements on tariff increases.

These developments are leading multinational groups to re-evaluate the valuation of their intragroup operations, especially concerning imports to the US. With regard to Chilean regulations, it is essential to highlight the following developments.

After several failed attempts to implement tax reforms, Law 21,713 was amended last November to ensure compliance with tax obligations within the pact for economic growth, social progress, and fiscal responsibility. The main goal of this reform is to increase revenue by 1.5% of GDP. Beyond debating the feasibility of achieving this target, what is interesting is that, upon detailed analysis, the most relevant topics introduced are related to transfer pricing, tax sustainability, and the general anti-avoidance rule. Among the highlights are the following.

Although the instructions for Sworn Statement 1951 already hinted at the use of the interquartile range, the law now explicitly mentions it. If the price, value, or margin of the analysed transaction falls outside the interquartile range, it will be considered that the value, price, or margin is not at arm’s length. If the SII issues a tax assessment under Article 24 of the Tax Code or a resolution, the transfer pricing adjustment will be made to the median of the interquartile range.

In line with the recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes and BEPS Action 5, the criteria to qualify a jurisdiction as a preferential tax regime were modified. The changes in the requirements for countries considered “preferential regimes” will require reviewing related foreign entities with which transactions are conducted. According to Article 41H of the Income Tax Law, a territory or jurisdiction will be considered to have a preferential tax regime when it simultaneously meets the following conditions:

• It has not entered into an agreement with Chile that allows for the exchange of information for tax purposes, or the agreement is not in force or contains limitations that prevent effective information exchange; and

• It does not meet the conditions to be considered compliant or substantially compliant in terms of transparency and information exchange for tax purposes.

This will require Chilean companies to review related-party transactions that must be reported in transfer pricing declarations.

Corresponding adjustments allow the taxpayer, with prior authorisation from the SII, to rectify the prices, values, or returns of operations carried out with related foreign parties on transfer pricing adjustments made by other states (with a valid agreement). In this case, the deadline has been modified, indicating that the corresponding adjustment must be made “within 1 year from when the transfer pricing adjustment is considered final in the other jurisdiction”.

A self-adjustment is allowed when the taxpayer determines that its operations with related parties do not comply with the arm’s-length principle, and therefore it may adjust its prices, values, or returns before any SII requirement. The determined adjustment must be added to the taxable base of the first category tax and will only proceed when it implies an increase in the indicated taxable base. Adjustments cannot be made to decrease the taxable income of the first category and determine a lower tax or a greater tax loss, unless the transaction with a related party is under an advance pricing agreement (APA).

Although APA regulations have existed in Chile since 2012, they have begun to be signed, and the Chilean tax authority has been very active in signing these agreements since 2019. It could be said that it is the most committed authority in the region on this issue, as demonstrated by events promoting this instrument, the number of agreements signed and under negotiation, and even the modification of the law to facilitate the instrument and make it more attractive.

The new rule includes the following:

• Formal inclusion of the ‘pre-filing meeting’ – although this was a good practice that the SII carried out, this instance is now formalised, and the tax authority must communicate the viability of an APA within two months following the date of submission of the request.

• Validity of APAs – increased from three to five years.

• SII response time – the SII must pronounce on an APA request within 12 months from when it received all the necessary background information. This period has been extended with the reform, as it previously only had six months to pronounce.

• Inclusion of a rollback APA – there is now a provision for the effects of an APA to cover operations up to three commercial years prior to the agreement’s signing. It is clarified that if an adjustment is made for commercial years prior to an agreement’s validity on the occasion of signing an APA, such adjustment will only have effects at the income tax level.

• Incorporation of the National Customs Service (Servicio Nacional de Aduanas, or SNA) – in an APA, when the related transaction involves the importation of goods, the agreement must include the SII, the taxpayer, and the SNA.

• Monitoring procedure – a monitoring procedure for APA compliance is provided for, which involves the submission of an annual report by the taxpayer demonstrating the conformity of its transfer prices with the agreed conditions. Failure to submit the report may result in early termination of the agreement.

One might wonder what tax sustainability has to do with transfer pricing issues; the answer is a lot. Although the reform introduces a very general concept, specifically as a “set of measures that a taxpayer implements to promote mutual cooperation and transparency in fulfilling their tax obligations”, what this implies in practice for Chilean taxpayers is the disclosure of certain information in Sworn Statement 1913, mostly related to transfer pricing issues. This statement must answer whether the multinational group and the entity in Chile comply with best practice standards such as the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, the BEPS actions, the Global Reporting Initiative standards, or any other good global sustainability practice.

With this reform, Chile seeks to integrate tax sustainability into its Fiscal Pact, rewarding taxpayers’ cooperation and fiscal transparency. The reform positions Chile as a leader in tax sustainability in Latin America.

The CMF has issued General Rule No. 501 (NCG 501), aimed at public companies and special companies. This rule mandates the disclosure of their standard operating policies and procedures, as well as related-party transactions.

• Semiannual disclosure – starting January 2025, all related-party transactions from the previous six months must be disclosed. This rule requires the preparation and dissemination of a semi-annual report on related-party transactions. The report is mandatory for publicly traded companies and special companies with securities registered with the CMF.

• Content of the report – NCG 501 specifies the required content for these reports, which must be presented grouped by type of operation and by counterparty. The report must include the transactions carried out by the company during the respective six-month period, regardless of whether they were carried out under the usual policy. These semi-annual reports must be published on the company’s website within the month following the six-month period reported.

Implementing NCG 501 strategically and correctly offers companies a significant opportunity to establish adequate controls to prevent engaging in related-party transaction offences.

It is crucial to note that NCG 501 does not differentiate between local and cross-border intercompany transactions. This requires economic groups to ensure that all relevant areas within them are coordinated and use the same source of information. Areas such as finance and taxes, legal, investor relations, and financial statements must be coordinated and use consistent information for publication.

Each year, the SII sets its priorities in the PGCT to combat tax evasion, avoidance, and crime. With regard to multinational groups, the main transfer pricing audit focuses added to those existing from previous years are:

• Transfer pricing in distributors – the focus will be on distributors of health products, electronic products, automotive goods, and machinery; and

• The auditing of negative adjustments – with the entry into force of the aforementioned reform, negative self-adjustments of transfer pricing are not allowed, so the authorities will monitor that no adjustments are made to decrease the first-category taxable liquid income, with a special focus on taxpayers that made these adjustments before the law came into force.

It is worth remembering that one of the focuses on multinationals from previous years that remains a priority in transfer pricing audits is intangibles.

2025 has proven to be a pivotal period for the evolution of transfer pricing regulations in Chile. The implementation of the tax reform of November 2024 has introduced significant changes, aimed at ensuring compliance with tax obligations and increasing GDP revenue. These changes, along with the new SII audit strategies and the implementation of NCG 501, reflect a renewed commitment to transparency and fiscal responsibility. Additionally, recent announcements of tariff increases by President Trump have led multinationals to re-evaluate their transfer pricing strategies, especially in the area of imports to the US.

In this dynamic context, it is crucial for multinational companies to adapt quickly to ensure regulatory compliance and maintain their competitiveness in the global market.