CHILE Law and Practice Contributed by: Javier Cortés, Juan Pablo Márquez and Gonzalo Pérez, Cortés Del Río Tax & Legal
IRS, which will analyse the enquiry and may request clarifications, if appropriate. The Chilean IRS will com - municate the viability of the APA within two months following the date of submission of the request. In addition, the law established the possibility of rolling back an APA, giving it retroactive application. 9.2 Other Mechanisms Advance Rulings Taxpayers have the possibility to request an advance ruling from the Chilean IRS to confirm a tax position or interpretation. This can be exercised in three ways: General consultations on a no-name basis This option is available to all taxpayers, whether they are personally and directly involved or whether they have economic interest in the transaction or not, allowing any taxpayer to request a ruling to interpret a tax law. Under this scenario, the answer provided by the tax authority will not be binding for the taxpayer. However, the Tax Code sets forth a provision in Article 26 which states that no retroactive collection applies when the taxpayer has applied, in good faith, a cer - tain interpretation issued by the national or regional commissioners sustained in an official interpretation, which would include a specific ruling. GAAR/SAAR consultation on a no-name basis This option is also available for all taxpayers, whether they are personally and directly involved or have an economic interest in a transaction or not. This alter - native allows any taxpayer to ask if a transaction or series of transactions may fall under the GAAR. As in the case above, the tax authority will also provide an answer to the consultation under a theoretical and general approach. In this scenario, the answer pro - vided by the Chilean IRS will not be binding. GAAR/SAAR specific consultation disclosing the name of the taxpayer and providing details of the transaction Taxpayers may also request a ruling, providing all the relevant information of a transaction, if they are per - sonally and directly involved in such transaction. In this case, the Chilean IRS will rule in a specific case with all the relevant information of the taxpayer on hand – thus, the answer provided will be binding, provided that the facts of the actual transaction are
identical to those presented to be ruled on by the tax authority. Collaborative Relationships The Chilean IRS’s large taxpayer unit administers a new tax sustainability programme for large domestic and multinational taxpayers. Under this programme, large taxpayers have access to dedicated account managers, and can obtain infor - mal pre-clearance on significant transactions, as well as engage in periodic compliance review meetings with the Chilean IRS. While the programme does not provide the same level of formal certainty as an APA or advance ruling, it facil - itates a more transparent and predictable compliance environment. Foreign Financial Institutions It is possible to register foreign financial institutions (FFIs) before the tax authority, in order to secure a reduced tax rate applicable to interest payments made abroad. Under domestic law, the WHT applicable to interest paid from Chile to countries abroad is 35%, while this tax is reduced to 4%, regardless of the application of a tax treaty, to interest arising from loans granted by a bank or a foreign or international financial institution, whether or not the financial institution in question is related to the taxpayer. A voluntary registry of FFIs was created in 2008 in order to register these institutions, so that the Chilean debtor could have certainty that the tax to be withheld would be at the reduced 4% tax rate. Notwithstanding the above, those entities that meet the requirements to be deemed an FFI are entitled to the 4% reduced tax rate, even if they are not registered. However, once an FFI is registered before the tax authority, the latter is not able to challenge the 4% WHT, thus reducing the possibility of a dispute over the applicable tax rate. Tax Invariability Regime The bill of law recently sent to Congress proposes to create a new tax invariability regime applicable to foreign and domestic investors developing mining,
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