Global Compliance and Reporting
Juan Antonio Rivera
+56 (2) 2676-1217
Email: juan.antonio.rivera@cl.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Maria Javiera Contreras
People Advisory Services
Juan Andrés Perry
Indirect Tax
Maria Javiera Contreras
Legal Services
Pedro Lluch
A. At a glance
+56 (2) 2676-1679
Email: maria.javiera.contreras@cl.ey.com
+56 (2) 2676-1191
Email: juan.andres.perry@cl.ey.com
+56 (2) 2676-1679
Email: maria.javiera.contreras@cl.ey.com
+56 (2) 2676-1945
Email: pedro.lluch@cl.ey.com
Corporate Income Tax Rate (%) 27 (a)
Capital Gains Tax Rate (%) 27/35 (b)
Branch Tax Rate (%) 27 (a)
Withholding Tax (%)
Dividends
Interest
Royalties from Patents, Trademarks, Formulas and Similar Items
35 (a)(c)(d)
35 (c)(e)
0/15/20/30 (c)(f)
Technical Services 0/15/20 (g)
Other Fees and Compensation for Services Rendered Abroad 35 (c)
Branch Remittance Tax 35 (a)(h)
Net Operating Losses (Years)
(a) For further details, see Section B.
(b) For domestic operations between two Chilean residents, capital gains are subject to income tax under general provisions (27% rate). Capital gains derived by nonresidents are subject to the general 35% withholding tax rate (treaty provisions may lower the rate).
(c) The tax applies to payments to nonresidents.
(d) The 35% tax applies to the amount of the grossed-up dividend. One hundred percent of the corporate tax paid by the company can be used as a credit against the withholding tax if the shareholder is a resident in a treaty jurisdiction. In the case of non-treaty jurisdictions, only 65% of the corporate tax credit may be used (resulting in a 44.45% effective tax burden).
(e) A reduced rate of 4% applies to certain interest payments including, but not limited to, interest paid on loans granted by foreign banks, insurance companies and financial institutions, and interest paid with respect to import operations. The 4% rate depends on whether the company meets a certain thin-capitalization standard.
(f) No withholding tax is imposed on payments related to standard software if certain requirements are met. A reduced withholding tax rate of 15% applies to payments with respect to the following:
• Invention patents
• Models
• Industrial drawings and designs
• Layout sketches or layouts of integrated circuits
• New vegetable patents
• Use or exploitation of computer programs (software) The reduced tax rate does not apply to payments made to companies resident in jurisdictions considered to be preferential regimes. As a result, the withholding tax rate for such payments is 30%. A reduced withholding tax rate of 20% applies to payments for television broadcasting and cinematographic materials.
equivalent to 80,000 MTFC and at 45.5% for exploiters with annual sales lower than the equivalent to 80,000 MTFC.
Capital gains. In general, capital gains recognized by foreign investors are subject to a 35% tax. As a general rule, direct or indirect transfers of Chilean shares must be done at fair market value.
Transfers of shares of companies listed on the stock exchange are subject to a sole tax of 10%. Institutional investors are exempt from income tax under certain conditions. Under certain double tax treaties, the tax rate on capital gains related to direct transfer of shares may be reduced to 20%, 17% or 16%.
Indirect transfers of Chilean shares are subject to capital gains tax at a rate of 35% if a nonresident entity transfers its indirect interest in Chile under either of the following conditions:
• The nonresident seller transfers at least 10% of its shares in the indirect holding entity and either of the following circumstances exists:
— At least 20% of the fair market value of the total shares held by the seller derives from the fair market value of the Chilean underlying assets.
— If, at the date of the transfer, the fair market value of Chilean underlying assets is equal to or greater than approximately USD180 million proportionally.
• The seller is incorporated in a jurisdiction considered preferential (with certain exceptions).
Tax-free reorganization rules (among the same economic group) are available for both direct and indirect transfers if certain requirements are met.
Administration. All accounting periods in Chile must end on 31 December. Income taxes must be paid during the month of April.
Provisional payments on account of final annual income tax are due on a monthly basis.
Foreign tax relief. A foreign tax credit may be claimed up to a limit of 35% of the foreign-source income, depending on the nature of the income and the existence of a tax treaty.
C. Determination of trading income
General. Taxable income, determined in accordance with generally accepted accounting principles, includes all profits, with the exception of specified items that are not considered income for tax purposes.
In general, all expenses that have the capability of producing income (in the corresponding calendar year or potentially in the future), duly sustained and justified, may be deducted to determine taxable income. Disbursements related to transaction contracts between unrelated parties (to prevent litigation or settle an existing one) are deductible. A bad debt over 365 days between unrelated parties is deductible.
Interest associated with investment in Chilean companies is deductible for corporate tax purposes.
Annual depreciation rates must be applied after the revaluation of fixed assets according to the rules of monetary correction (see Monetary correction). Accelerated depreciation may be applied to new or imported fixed assets and to imported fixed assets with normal useful lives of three years or more. The accelerated method allows the calculation of depreciation based on a useful life for an asset equivalent to one-third of the normal useful life established by the Chilean tax authorities. However, accelerated depreciation may be used only in determining trading income for corporate tax purposes.
One hundred percent of the value of fixed assets acquired during the period of 1 June 2020 to 31 December 2022 may be claimed as depreciation in the first year of the assets’ useful life. Other transitory depreciation regimes and depreciation benefits are available depending on the size of the company and nature of the assets.
Relief for losses. Losses may be carried forward without a time limit. If a qualified change of ownership occurs, accumulated tax losses may not be deducted from income generated after the ownership change.
The carryback of losses is not available.
D. Value-added tax
Value-added tax (VAT) applies to sales and other transactions regarding tangible personal property, as well as to payments for all types of services, except those expressly exempted in the law. It also applies to the habitual sale of real estate. The general tax rate is 19%. VAT is imposed under a credit-debit system.
E. Miscellaneous matters
Foreign-exchange controls. The Central Bank of Chile must be informed of all transactions exceeding USD10,000. Other annual information requirements are imposed.
Taxpayers must report annually (by a sworn statement that must be filed each year) their permanent investments in foreign companies, investments in foreign branches and details regarding their foreign-source income.
Individuals or entities domiciled or resident in Chile must inform the Chilean Internal Revenue Service (IRS) if they become trustees or administrators of trusts created in accordance with foreign law.
Transfer pricing. Chilean transfer-pricing regulations are in line with the Organisation for Economic Co-operation and Development (OECD) guidelines.
Acceptable transfer-pricing methods include the following:
• Comparable uncontrolled price
• Resale price
• Cost-plus
• Profit-split
• Transactional net margin
foreign entity is deemed controlled if it is domiciled in a tax haven or preferred jurisdiction, unless the Chilean taxpayer demonstrates that it does not control it).
F. Treaty withholding tax rates
The table below lists the withholding tax rates under the Chilean treaties in force. All of these treaties are based on the OECD model convention. Patent and know-how
Argentina 10/15 (a) 4/12 (b)(d) 3/10/15
Australia 15 (a) 5/10 (b)(d) 5/10 (c)
Austria 15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Belgium 15 (a) 4/5/15 (b) 5/10 (c)
Brazil 10/15 (a) 15 15
Canada 10/15 (a) 10 (b)(d) 10 (c)(d)
China Mainland 10 (a) 4/10 (b)(d) 2/10
Colombia 0/7 (a) 5/15 10 (c)
Croatia 5/15 (a) 5/15 5/10
Czech Republic 15 (a) 4/10 (b)(d) 5/10
Denmark 5/15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Ecuador 5/15 (a) 4/10 (b)(d) 10 (c)
France 15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
India 10 (a) 10 10
Ireland 5/15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Italy 5/10 (a) 4/10 (b)(d) 2/10 (c)(d)
Japan 5/15 (a) 4/10 (b) 2/10 (c)
Korea (South) 5/10 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Malaysia 5/15 (a) 15 (b) 10
Mexico 5/10 (a) 5/10 (b)(d) 10 (c)(d)
Netherlands 5/15 (a) 4/10 (b) 2/10 (d)
New Zealand 15 (a) 10 (b) 5/10 (c)
Norway 5/15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Paraguay 10 (a) 10/15 (b) 15 (c)
Peru 10/15 (a) 15 15 (c)
Poland 5/15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Portugal 10/15 (a) 5/15 (b) 5/10 (c)
Russian Federation 5/10 (a) 15 5/10
South Africa 5/15 (a) 5/15 5/10
Spain 5/10 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Sweden 5/10 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Switzerland 15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
Thailand 10 (a) 10/15 10/15
United Arab Emirates 5/10 (a) 4/10 2/10
United Kingdom 5/15 (a) 4/5/10 (b)(d) 2/10 (c)(d)
United States 5/15 (a) 4/10/15 2/10
Uruguay 5/15 (a) 4/15 (b) 10
Non-treaty jurisdictions 35 (f) 4/35 (g) 15/30 (e)
(a) With respect to Chile, the treaty withholding tax rates for dividends do not apply to the 35% withholding tax applicable under domestic law as long as the corporate tax is creditable against the withholding tax. The 35% tax applies to the amount of the grossed-up dividend. One hundred percent of the corporate tax paid by the Chilean company is creditable against the withholding tax borne by a nonresident shareholder.
(b) These treaties have a most-favored nation (MFN) clause with respect to interest.