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13.5. Other Anti-Avoidance Rules

Tax Information Exchange Agreements (TIEAs)

Tax Information Exchange Agreements (TIEAs) provide for the exchange of information on tax matters and Chile has concluded TIEAs with several countries, including Bermuda, Jersey, Uruguay, and Guernsey.

Exchange of Cross-Border Tax Rulings

Chile has agreed to exchange tax rulings with eligible jurisdictions from 1 April 2016 in implementation of BEPS Action 5.

Automatic exchange applies to the following cross-border tax rulings and APAs:

  • Issued, amended, or renewed after 1 April 2016;
  • Issued, amended, or renewed between 1 January 2014 and 31 March 2016; and
  • Issued, amended, or renewed between 1 January 2010 and 31 December 2013, provided they were still in effect as at 1 January 2014.

The exchange is possible if there is an agreement between Chile and the relevant jurisdiction providing for the spontaneous exchange of tax information. The agreement can be a tax information exchange agreement (TIEA), a tax treaty, or the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Financial Account Information Reporting and Exchange

Chile acceded to the OECD Mutual Assistance Convention as amended and the convention entered into force for Chile on 1 November 2016. Effective September 2018, Chile has signed the Common Reporting Standard (CRS) Multilateral Competent Authority Agreement and adopted measures to implement the automatic exchange of financial account information in accordance with the global standard for exchange of information developed by the OECD under the CRS.

Further, Chile signed an Intergovernmental Agreement (IGA) with the United States on 30 June 2014 to improve international tax compliance and to implement the U.S. Foreign Account Tax Compliance Act (FATCA).

Exit Tax Rules

Companies that close down their activities in Chile are subject to an exit tax at the rate of 35% on the portion of undistributed profits. The corporate tax paid by the company is fully or partially creditable against the exit tax.

Low or No Tax Jurisdictions and Tax Regimes

On 5 July 2018, Chile published the list of jurisdictions having preferential regimes. The list includes 147 jurisdictions.

A jurisdiction is considered as having a preferential regime, if it satisfies at least two of the following conditions:

  • The effective tax rate of the jurisdiction is less than 50% of the tax rate in Chile;
  • The jurisdiction has not entered into a tax information exchange agreement with Chile or such agreement is not in force;
  • The jurisdiction does not have transfer pricing rules in accordance with recommendations of the OECD or the UN;
  • The jurisdiction is not compliant with OECD standards for transparency and tax information exchange;
  • The jurisdiction is identified as a preferential tax regime by the OECD; or
  • The jurisdiction only taxes local source income.

The list of jurisdictions that are considered as having a preferential regime is as below:

Afghanistan Åland Islands Algeria
American Samoa Angola Anguilla
Antigua and Barbuda Armenia Bahamas
Bahrain Bangladesh Belarus
Belize Benin Bermuda
Bhutan Bonaire, Sint Eustatius and Saba Bosnia and Herzegovina
Botswana Bouvet Island British Indian Ocean Territory
Brunei Darussalam Burundi Cambodia
Cape Verde Cayman Islands Central African Republic
Chad Christmas island Cocos (Keeling) Islands
Comoros Congo (the Democratic Republic of the) Congo (Rep. of)
Costa Rica Côte d'Ivoire Cuba
Curaçao Djibouti Dominica
Egypt Equatorial Guinea Eritrea
Ethiopia Falkland Islands [Malvinas] Fiji
French Guiana French Polynesia French Southern Territories
Gambia Grenada Guadeloupe
Guam Guinea Guinea-Bissau
Guyana Haiti  Heard Island and McDonald Islands
Vatican City Honduras Hong Kong
Iran Iraq  Jordan
Kiribati  Korea (the Democratic People's Republic of) Kuwait
Kyrgyzstan  Laos Liberia
Libya  Macao  Madagascar
Malawi  Malaysia  Maldives
Mali  Marshall Islands  Martinique
Mauritius  Mayotte  Micronesia (Federated States of)
Moldova Mongolia  Montenegro
Mozambique  Myanmar  Namibia
Nepal  New Caledonia  Nicaragua
Niger  Norfolk Island  Northern Mariana Islands
Oman  Palau  Palestine, State of
Papua New Guinea  Pitcairn  Puerto Rico
Qatar  Rwanda  Reunion Islands
Saint Barthélemy  Saint Helena, Ascension and Tristan da Cunha  Saint Martin (French part)
Saint Pierre and Miquelon  Sao Tome and Principe  Serbia
Seychelles  Sierra Leone Sint Maarten (Dutch part)
Solomon Islands  Somalia  South Georgia and the South Sandwich Islands
South Sudan  Sri Lanka Sudan
Suriname  Svalbard and Jan Mayen  Swaziland
SyriaTaiwan (Province of China) Tajikistan
Tanzania Thailand  El Salvador
Timor-Leste  Togo  Tokelau
Tonga  Trinidad and Tobago  Turkmenistan
Turks and Caicos Islands  Tuvalu  United Arab Emirates
United States Minor Outlying Islands  Uzbekistan  Vanuatu
Venezuela British Virgin Island US Virgin Island
Vietnam  Wallis and Futuna  Western Sahara
Yemen  Zambia  Zimbabwe

Indirect Transfer of Assets

Indirect transfers of Chilean shares are subject to capital gains tax at a rate of 35%, if any of the following circumstances exist:

  • Chilean assets represent more than 20% of the fair market value of the foreign company that is transferred;
  • The fair market value of the Chilean assets is greater than approximately USD 180 million; and
  • The foreign entity being transferred is domiciled or incorporated in a jurisdiction considered as having a preferential regime under the Chilean domestic tax laws (see above).

The indirect transfer is exempt if the sale of shares takes place in the context of a reorganization of the business group, the shares always remain under the ownership of the same controller, and no income or higher value is generated for the transferor. If after the reorganization there is a disposal (indirect transfer of Chilean assets) generating income, then the respective taxation will be determined based on the circumstances existing at the date of disposal.

In 2015, Chile issued a resolution outlining the reporting requirements to be met by non-residents in respect of indirect transfers. The resolution provides that a declaration in the prescribed form has to be submitted to the Chilean tax authorities when such transfers are made. The declaration includes:

  • Identification of the buyer, the seller, their representatives in Chile if applicable, and the relevant Chilean entity if part of the underlying assets;
  • Description of the assets transferred;
  • Description of the underlying assets in Chile;
  • Price and payment for the transaction;
  • Determination of income for the transaction and applicable tax; and
  • Any other relevant information.

Generally, the declaration is to be submitted by both the transferor, the transferee, and the Chilean entity. However, if all the parties agree on the information included in the declaration, then only the transferor is required to make the submission.

The reporting requirements apply retroactively from 1 January 2013. Declarations must be submitted by the last working day of the month following the transfer.