The initiative seeks to avoid duplicity in the payment of taxes and also to prevent tax evasion of income tax and wealth tax.
On November 16, 2023, the National Congress approved the agreement between Chile and the United States amending the “Agreement between the Government of the Republic of Chile and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Income and Wealth Taxes and its Protocol”.
The agreement will enter into force upon ratification by the President of the Republic of Chile and the exchange of notes between Chile and the United States.
Thus, the provisions of the agreement will become effective as follows:
- Withholding taxes, with respect to amounts paid or accrued, will apply on or after the first day of the month following the entry into force of the Agreement.
- Other taxes will be effective as of January 1 of the year following the entry into force of the Agreement.
- Regarding the rules for the exchange of information, they will be in force as from the entry into force of the Agreement, without distinguishing the tax period to which the information refers.
This is a fact that will undoubtedly favor the commercial exchange between both countries. Among its main tax implications we can find the following:
- Capital gains: The rate is reduced from the current 35% to 16%, provided that the transferor has not owned within the 12 months preceding the transfer, more than 50% of the capital of the company with residence in Chile.
- Interest: The maximum rates currently in force are limited (Chile 35%, United States 30%). The maximum rate will be 10% as a general rule and may be as low as 4%. However, during the first two years of the Agreement it will be a rate of 15%.
- Dividends: A maximum rate of 5% is established if the beneficiary of the dividends is a company owning at least 10% of the voting shares of the company paying the dividends and 15% in other cases. In the case of Chile, given our semi-integrated system, the maximum rate will not apply to the extent that the First Category Tax can be fully used as a credit and the Additional Tax rate does not exceed 35%.
- Use of credits: Corporate tax paid or withheld in the United States may be used in Chile as a credit.
- Exchange of information: A mechanism for information requests and exchanges is contemplated.
From az we will be reporting the news of this initiative that will have a direct impact on high net worth individuals.
For more information on these topics please contact our azTax team:
David Ancelovici | Director Tax Group | dancelovici@az.cl
Pablo Trucco | Senior Associate | ptrucco@az.cl
Elisabet Pinto | Associate | epinto@az.cl
Valentina Herrera | Associate | vherrera@az.cl
