International Tax 2026

CHILE Law and Practice Contributed by: Javier Cortés, Juan Pablo Márquez and Gonzalo Pérez, Cortés Del Río Tax & Legal

1.4 Multilateral Instrument Chile signed the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Multilateral Instrument or MLI) which entered into force in Chile on 1 November 2021, following ratification by the Chil - ean Congress. Chile opted to apply a broad range of MLI provisions to its tax treaties, including: the principal purpose test as the anti-abuse standard; the preamble language on treaty purposes; and anti-fragmentation rules for permanent establishment (PE) purposes. Note that Chile did not adopt binding arbitration.

Below the legal sources mentioned above are second - ary, non-binding sources such as Supreme Court rul - ings and Court of Appeal rulings, which are persuasive in terms of lower court decisions. Guidance issued by the Chilean IRS does not bind the courts or taxpayers, but nonetheless provides impor - tant information on the administration’s interpretative position. 1.3 OECD Model/United Nations Influence on Treaty Practice Chile has been a full member of the OECD since 7 May 2010 and generally follows the OECD Model Tax Con - vention (“OECD Model”) both in its treaty practice and in the interpretation of its domestic international tax rules. The Chilean IRS has expressly acknowledged the relevance of the OECD commentaries as an inter - pretative tool, even where specific treaty provisions pre-date Chile’s OECD membership. Chile’s more recent treaties are substantially aligned with the OECD Model, incorporating updated Base Erosion and Profit Shifting (BEPS)-related provisions such as principal purpose tests (PPTs), limitation of benefits (LOB) provision clauses and treaty shopping anti-abuse rules. Chile also reserves certain positions with respect to the taxation of capital gains on indirect transfers, con - sistent with its domestic rules under the domestic ITL and the taxation of technical services. Some tax treaties entered into by Chile follow the UN treaty model regarding technical services and perma - nent establishment considerations, granting broader taxation powers to the source country. None of the tax treaties entered into by Chile contain a binding arbitration clause. Considering that Chile has an integrated tax system according to which corporate tax paid by a legal entity may be used as a credit against foreign owner/share - holder tax, tax treaties entered into by Chile do not provide a reduced rate on dividends abroad (the so- called “Chile Clause”).

2. Territoriality, Residence and Permanent Establishment

2.1 General Principle of Territorial Taxation Chile applies a worldwide taxation system. Article 3 of the Chilean ITL establishes that persons domiciled or resident in Chile are subject to tax on their worldwide income, while persons without domicile or residence in Chile are subject to tax only on their Chilean-source income. Income is considered to be sourced in Chile if it arises from assets located in the country or from activities carried out in Chile. Chile introduced an indirect transfer rule, based on which gains derived from the disposal of shares or interests in foreign entities are considered Chilean source income, if certain thresholds are exceeded. This provision has significant implications for cross- border M&A transactions involving indirect transfers of Chilean assets. Foreign source income is taxable in Chile on a cash basis, that is, when income is received in Chile by taxpayers, unless controlled foreign company (CFC) rules apply. 2.2 Tax Residence of Individuals Tax residence is determined in Chile by two concepts: domicile and residence.

CHAMBERS.COM