Chile: Update on preferential tax regimes
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

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

Chile: Update on preferential tax regimes

Sponsored by

sponsored-firms-pwc.png
chile-focus-on-tp.jpg

Tax Reform Law 20.780 of 2014 introduced Article 41, letter H to the Chilean Income Tax Law, setting new criteria in order to determine whether a preferential tax regime was characterised for Chilean tax matters.

Since 2003, the characterisation of a preferential tax regime in Chile was entrusted to a fixed blacklist of 39 tax haven jurisdictions based on the OECD report of 1998, 'Harmful Tax Competition: an Emerging Global Issue', and its 2000 update. The aforementioned blacklist was issued by the Chilean Ministry of Finance (Decree 628 of 2003) and was relevant regarding certain international transactions, triggering the application of special rules when such transactions were performed involving a tax haven (i.e. long arm capital gain rules, thin capitalisation rules, royalty payments and remuneration for services).

Tax Reform Law 20.780 of 2014 introduced Article 41, letter H to the Chilean Income Tax Law, setting new criteria in order to determine whether a preferential tax regime was characterised for Chilean tax matters. According to such provision, a jurisdiction or territory would be deemed as having a null or preferential tax regime, when at least two of the following requirements were met: (a) its effective tax rate for foreign income is less than 17.5%; (b) the jurisdiction has not entered into an agreement with Chile for the exchange of information for tax purposes; (c) legislation of the jurisdiction does not provide for transfer pricing rules, which substantially comply with OECD recommendations; (d) the jurisdiction does not have the conditions to be considered as compliant or substantially compliant with OECD international standards in matters of transparency and exchange of information for tax purposes; (e) the jurisdiction maintains preferential tax regimes that do not follow OECD standards; and/or (f) the jurisdiction only impose taxes on domestic source income. Article 41, letter H allows taxpayers to apply before the Chilean Internal Revenue Service for a specific pronouncement, confirming whether a jurisdiction would be deemed as having a preferential tax regime as per the requirements set forth above.

Henceforth, since 2014, Chile has held two different rules in order to determine whether a jurisdiction would be deemed as having a preferential tax regime: one that provided a specific list of tax havens, and another that required an analysis of the requirements listed above.

Law 21.047 of November 23 2017 indirectly repealed the blacklist established by the Ministry of Finance and, as of December 1 2017, the characterisation of a preferential tax regime was entrusted solely to Article 41, letter H.

The Chilean Internal Revenue issued a preliminary list of possible preferential regimes in December 2017 (Resolution 124 of 2017) that included 150 preferential tax regimes. In July 2018, an updated list was issued by the tax authority (Resolution 55), reducing the list from 150 to 147 preferential regimes. Uruguay and Panama were excluded from the list, as both jurisdictions signed the Convention on Mutual Administrative Assistance in Tax Matters (MAAT) and introduced amendments to their internal tax legislation following BEPS recommendations.

The preferential tax regimes list is expected to be updated periodically, at least once a year, according to the Chilean Internal Revenue Service. This matter should be closely monitored as countries continue to adapt to new standards and trends on international taxation and transparency.

more across site & bottom lb ros

More from across our site

UK tax credit consultancy ForrestBrown also warned that advisors must get up to speed in order to support their clients
Large firms like EY risk losing staff for good if they track attendance, a prominent former management consultant for the firm has warned
Research has claimed that the net US federal income tax bills of 35 companies were negative $1.72 billion, while, in other news, Italy’s economy minister has predicted that pillar two will fail
Janet Truncale has handed two out of four global managing partner roles to defeated leadership rivals
A survey of more than 25,000 in-house lawyers reveals that embracing technology could help law firms win new business
The appeal related to deductions claimed by the Singaporean telecoms company, which was advised by PwC, on a A$5.2 billion acquisition from 2002
The latest wave of cuts follows chastening revelations regarding the ‘big four’ firm’s tax leaks scandal
UN proposals to reform the taxation of the aviation industry would lead to substantial economic cost for developing countries, argues Willie Walsh, director general of the International Air Transport Association
An anonymous litigation financier whose identity UK law firm Mishcon de Reya is said to know is allegedly covertly attacking tax transparency regulation
Silvana Van der Velde adds that thus far she has come across pillar two when it comes to joint venture agreements
Gift this article