Two more DTA´s for Chile: China and Argentina

Chile concludes negotiations and sets final draft of the Convention to Avoid Double Taxation (DTA) with China and Argentina.

Recently, it was announced by the Chilean Minister of Finance, that the final draft of the DTA with China is set and ready to be confirmed by national authorities. With the executive’s endorsement, the DTA should be ready for Congresses approval. In this regard, Chilean authorities have emphasized their intention to speed up the legal in-house procedures.

This is very good news for Chilean investments in China and Argentina and vice-versa. It will lower the tax burden for both people and companies in all countries involved.

In addition, at the end of last year, the House of Representative approved the DTA with the United States of America, which is now one step closer to becoming effective.

Chile is a leader in the Latin American region with 25 DTA´s already in force. The purpose of these Conventions, just as the name implies, is to avoid double taxation on capital gains or income.

Double taxation usually occurs when an individual is taxed both the country of his/hers residence and in the country the income was generated. Typically, each country uses a different principle to attain tax jurisdiction (residence and source).

As a general rule, with DTA´s, residency is the main factor when considering tax jurisdiction and overrules other factors such as the source (country) of income.  This eliminates the possibility of two countries taxing the same income. In other cases, the DTA divides tax burden between both countries.

However, double taxation is not the only benefit of a DTA. As a second purpose, the DTA stimulates the cooperation between the tax authorities of the different Contracting States who are seeking to avoid fiscal evasion so it is also an important tool of tax control.

This new DTAs will open the Chilean economy to new markets, by reducing the tax rates therefore stimulating foreign investment in the country.

The wide network of DTA´s and free trade agreements currently in force put Chile in a great position to capitalise on investments providing foreign investors from the most relevant economies of the world favourable tax conditions.

On a more practical level, Harris Gomez Group has helped companies take advantage of Chilean double taxation and free trade agreements in a number of ways:

1. We have structured royalties on software sales to help providers minimise taxation;
2. We have assisted mining suppliers set up manufacturing facility’s in order to produce products and export into other Latin American and European markets;
3. We have assisted companies with structuring contracts that involved technical services so they may benefit from the DTA´s;
4. We have given legal support in cross-border funding matters, drafting contracts according to the best possible structure to undertake business in Chile and countries of LatAm; and
5. We have assisted clients with settling the main issues when properly applying a DTA such as: Permanent Establishments issues, Business Profit, Residency, Capital gain and exit plans, among others; giving the necessary legal background so that managers may make the best decision for their business.

Treaties in Force

TREATIES BEING NEGOTIATED