CHILE Law and Practice Contributed by: Javier Cortés, Juan Pablo Márquez and Gonzalo Pérez, Cortés Del Río Tax & Legal
8.3 Mandatory Binding Arbitration Where a MAP is not successful in solving a matter, there is no compulsory arbitration in treaties entered into by Chile. As a general rule, Chile has no obligation to reach an agreement, except in the case of Article 4 which refers to the double residency of individuals. Nevertheless, the contracting states must act in good faith in order to reach a solution, as stated in the Vienna Convention on the Law of Treaties. Chile has also entered into several conventions to reciprocally promote and protect foreign investment, mainly with its commercial partners, following a free trade agreement. According to such foreign invest - ment conventions, in the case of a dispute between the State of Chile and a foreign investor, the matter may be subject to international arbitration. In this regard, most of the treaties state that the dispute will be filed before the International Centre for Settlement of Investment Disputes (ICSID) based in Washington, DC in the USA, which functions under the World Bank. Chile has a specific provision regulating APAs, con - tained in Article 41 E No 7 of the Income Tax Law, which expressly authorises the Chilean IRS to enter into APAs with taxpayers. The Chilean APA programme allows taxpayers to agree with the Chilean IRS on the transfer pricing methodology and conditions applicable to future related-party transactions for a period of up to three years, with the possibility of renewal. The APA covers specific intercompany transactions and is binding on both the Chilean IRS and the taxpayer for the agreed period, subject to material changes in facts and cir - cumstances. This provision was amended in 2025, establishing a procedure to request an APA and introducing the possibility of submitting a consultation for entering into an APA. The taxpayer interested in proposing an APA may submit a preliminary enquiry to the Chilean 9. Dispute Prevention 9.1 Advance Pricing Agreements
• Joint and simultaneous audits – Chile has the legal framework under the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters to participate in joint and simultaneous audits with foreign tax authorities, though formal joint-audit programmes have not been widely implemented. The Chilean IRS has conducted co-ordination calls and information-sharing exercises with major treaty partners in specific high-risk cases. • ICAP – Chile has expressed interest in the OECD’s International Compliance Assurance Programme (ICAP) but had not formally participated in ICAP rounds at the time of publication. 8. Mutual Agreement Procedures and Arbitration 8.1 Availability and Legal Basis All tax treaties entered into by Chile and third parties include a MAP provision. This procedure is contem - plated to prevent and solve any controversy regarding the interpretation and application of tax treaties. Chile has committed to the implementation of the minimum standard established in Action 14 of BEPS, which should bilaterally modify its tax treaties to include Article 25 (2): “Any agreement reached should be implemented notwithstanding any time limits in the domestic law of the Contracting State”. Multilateral MAPs have not yet been implemented in Chile. The Chilean IRS issued guidelines for implementing MAPs in Chile in 2022. 8.2 Application Deadlines As a general rule, a MAP must be triggered within the term indicated in the treaty, unless the latter does not specify a term for such purpose, in which case, the MAP may be initiated at any time. In all cases, the Chilean IRS guidance indicates that it is necessary to take into consideration the statute of limitations estab - lished in Chilean laws. The latter is relevant as the Chilean Tax Code allows a refund request for overpaid taxes for a three-year term, counted as from the time of payment or the final judgment in the matter.
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