USA / CHILE – The US Department of the Treasury today announced the entry into force of a comprehensive income tax treaty between the United States and Chile. The Chile tax treaty is the first new comprehensive bilateral tax treaty signed by the United States to enter into force in over ten years.
The Chile tax treaty will reduce tax-related barriers to cross-border investments between the United States and Chile and is only the second US comprehensive bilateral tax treaty in force with a South American country.
The Chile tax treaty was approved by an overwhelming majority in the US Senate on June 22, 2023, and president Joe Biden signed the instrument of ratification in December.
The treaty entered into force today when the United States notified Chile that it had satisfied its applicable procedures for bringing the treaty into force.
Provisions in the Chile tax treaty include:
- Reduced source-country withholding tax on certain payments of dividends as well as payments of interest and royalties.
- A prohibition against source-country taxation of business profits of an enterprise in the absence of a so-called “permanent establishment.”
- Beneficial rules for individuals, including provisions that govern the taxation of income from employment, payments to students and trainees, and pensions and social security payments.
- A comprehensive limitation on benefits provision.
- A comprehensive provision allowing for full exchange of information between the US and Chilean tax authorities.
With respect to taxes withheld at source, the Chile tax treaty will have effect for amounts paid or credited on or after February 1, 2024. For all other taxes, the Chile tax treaty will have effect for taxable periods beginning on or after January 1, 2024.
To access the documents related to the treaty, click here.