Chile and Argentina activate agreement to eliminate double taxation

This treaty constitutes a framework of clear rules, based on high international standards and focused on promoting the development of commercial, service and investment activities between both States.

The Chilean Minister of Finance, Rodrigo Valdés, and his Argentine counterpart, Alfonso Prat-Gay, announced today that, after obtaining ratification by the Congresses of both countries, on January 1, 2017, the Effects of the bilateral agreement to eliminate Double Taxation in relation to Income and Capital Taxes and to prevent Tax Evasion and Avoidance.

“Eliminating the barriers caused by the duplication of taxes between Chile and Argentina is very good news. This will drive a greater flow of investments, trade, services and technologies among our countries, ”said Rodrigo Valdés.

For his part, Minister Prat-Gay said. “This is an important step in the process of integration between our two sister nations. Taking advantage of our complementarities we will get more jobs and higher quality on both sides of the mountain range. ”

What does the agreement imply

The Agreement is based on the model developed by the Organization for Economic Cooperation and Development (Ocde), whose agreement seeks to eliminate the double international taxation to which taxpayers who carry out transnational activities between both countries are affected.

Also among its objectives is to boost exports of services and facilitate the transfer of technology and knowledge. Likewise, the Agreement establishes mechanisms that help prevent tax evasion and avoidance through cooperation between the tax administrations of both countries and proceed to exchange information between them.

This Agreement applies to persons residing in one or both of the Contracting States, with respect to income and wealth taxes that affect them, as detailed below:

Business Benefits: Regarding income from business activities, these will be taxed exclusively in the State of residence of the taxpayer who obtains them, unless a “permanent establishment” is configured in the other State in accordance with the terms of the same agreement, in which If both countries may tax income.

Dividends: Regarding dividends distributed from Argentina to Chile, Argentine taxation would be subject to the limit of 10% (shareholders or significant partners) or 15%, as the case may be. In the case of Chile, the power to apply the Additional Tax on dividends paid from Chile at a rate of 35% was maintained, as long as the First Category Tax remains deductible against the Additional Tax. This is due to the fact that Chile has an integrated income tax system, in which the corporate tax is a credit against the tax that the owner of the company must pay.

Maritime, Air and Land Transport: The profits of a company of a State from the operation of ships, aircraft or land transport vehicles in international traffic, can only be taxed in that State. This provision will take effect for tax years or fiscal years beginning on June 30, 2012, in order to ensure the uninterrupted tax treatment of the income obtained by the companies of the contracting parties from international transport. .

Interest and Royalties: Interest and royalties can be taxed in both States. However, the right to tax them by the State from which they come (country of source) is limited if the beneficiary is a resident of the other State. In the case of interest, the tax required in the source country cannot exceed 4%, 12% or 15% depending on the interest rate in question. Regarding royalties, the tax required in the source country may not exceed 3%, 10% or 15% depending on the type of royalty in question.

Independent Personal Services: Independent personal services will generally be taxed in the country of residence of the person obtaining them. Of course, they may also be taxed in the other State when there is a fixed base in the other State and the income can be attributed to that base.

Estate Taxation: It is established that the assets of a resident of a State that are located in the other State may be taxed in that other State. Equity constituted by ships, aircraft or land transport vehicles operated in intentional traffic and movable property related to said exploitation is exempted from this rule, which can only be taxed in the State of which the company is a resident.

Principle of Non-Discrimination: The Convention establishes the principle of non-discrimination by providing that nationals of one State shall not be subjected in the other to less favorable treatment than that which it applies to its nationals who are in the same conditions. This contributes to a climate of security for investors.


Source: Ministry of Finance