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5.4. Tax Base for Non-Resident Entities

A non-resident entity with a branch or permanent establishment in Chile is subject to tax in Chile on the worldwide income attributable to the branch or permanent establishment. Income so attributable is income derived from the permanent establishment’s activities or from assets assigned to or used by the permanent establishment.  

As with resident companies, the starting point for the determination of taxable income is the permanent establishment’s accounting records. In this respect, the permanent establishment is deemed to be an autonomous entity dealing independently with the head office and related entities/permanent establishment’s The permanent establishment income is subject to corporate tax (also referred to as first category tax - FCT), and remittances abroad are subject to the additional withholding tax.

A non-resident without a branch or permanent establishment in Chile is taxable only on specified Chilean sourced income. The additional withholding tax is generally levied as final withholding taxes. Where income paid to non-residents is subject to corporate tax, the taxable base for the additional withholding tax is the amount paid out as grossed up by the corporate tax. The corporate tax paid is then credited against the additional withholding tax payable.

Note that Chilean sourced income subject to tax in Chile includes, in certain circumstances, gains on the indirect transfer of Chilean assets between two non-residents (typically the transfer between two non-residents of the stock of a foreign company holding Chilean assets) – see Sec. 13.5.