CHILE Law and Practice Contributed by: Patrick Humphreys, Daniela Gazmuri Larraín, Paula Lühr, Ian Hinzpeter, Camila Leviante, Beatriz Riveros and José Luis Bravo, Garnham Abogados
in full, leaving USD8 to pay and a combined burden of 35%; regarding countries without a double taxa - tion treaty, only 65% of the credit applies under the semi-integrated regime, raising the total to maximum of 44.45%. Interest is generally subject to 35% additional tax, though a 4% rate can apply to interest paid to quali - fying foreign banks or financial institutions. Royalties, technical services, software and other cross-border payments may attract different domestic rates, often modified by treaties. VAT, Services and Other Taxes Chile applies value added tax (VAT or IVA) at 19%. It generally applies to sales of goods, some sales of real estate, services provided or used in Chile, and imports. Foreign investors should watch services supplied from abroad. Payments to foreign consult - ing firms supporting a local project may be subject to additional tax. Where an exemption applies, such pay - ment will normally be subject to VAT instead. Treaty relief can reduce withholding tax, but does not reach VAT, if applicable. VAT cash flow matters in capital-intensive projects. Imports are generally subject to VAT, but qualifying foreign investment projects can apply to the Minis - try of Finance for an exemption on imported capital goods. Exporters are generally exempt from VAT on exports and may recover related input VAT, subject to formal procedures. Other business taxes can include municipal business licences, stamp tax on loans and credit documents, real estate tax, environmental taxes, a mining royalty or specific mining tax and customs duties. Chile has not enacted the OECD’s Pillar Two global minimum tax (the GloBE rules) or an equivalent domestic top-up tax. Even so, multinational groups operating in Chile should take specialist advice, as they may be affected indirectly where the ultimate parent’s jurisdiction has adopted Pillar Two. 5.3 Available Tax Credits/Incentives Chile’s tax incentives are narrowly targeted and form- heavy, usually requiring advance certification, sup - porting evidence, specific filings and strict deadlines.
An incentive does not apply automatically simply because the activity is economically worthwhile. For foreign corporate investors, the most useful incen - tives often relate to VAT and investment cash flow. Exporters may recover input VAT linked to their export operations, and capital-intensive projects may seek VAT relief on imported capital goods, subject to Min - istry of Finance approval and the applicable require - ments. Chile also offers an R&D tax incentive: eligible taxpay - ers can credit part of certified research and develop - ment spending against corporate income tax, pro - vided a competent public agency certifies the project and the statutory requirements are met. It can suit technology, mining, energy and life-sciences investors carrying out genuine R&D in Chile. Further benefits exist for specific industries, regions or activities, including export mechanisms and cus - toms or free-zone rules, each reviewed case by case as the SII scrutinises substance, documentation and compliance. 5.4 Tax Consolidation Chile has no general tax consolidation or fiscal unity regime. Each Chilean company is a separate taxpayer that files its own returns, and a Chilean parent gen - erally cannot offset one subsidiary’s profits against another’s tax losses. Tax losses can generally be carried forward by the company that generated them, subject to limits and anti-avoidance rules. Reorganisations designed main - ly to transfer or monetise losses may be challenged. For groups, this makes the initial choice of vehicles, financing and structure especially important. 5.5 Thin Capitalisation Rules and Other Limitations Chile’s thin capitalisation rules discourage excessive debt financing, especially where cross-border lending benefits from reduced withholding rates. They rest on an excess-indebtedness test usually described as a three-to-one debt-to-equity ratio.
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