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US Treasury Department’s Chile Tax Treaty Takes Effect Amid Boost for Cross-Border Investments

Washington D.C. - The United States and Chile have made significant strides in streamlining international financial transactions with the entry into force of a comprehensive income tax treaty, announced by the US Department of the Treasury on December 19.

A Major Milestone in US-Chilean Economic Relations

The treaty marks a major milestone in US-Chilean economic relations, reducing tax-related barriers to investments between the two countries. It is only the second comprehensive bilateral tax treaty signed by the US with a South American nation, following the one with Brazil.

Ratification and Implementation

Approved by the US Senate with an overwhelming majority on June 22, President Biden ratified the treaty earlier this month, paving the way for its implementation. The instrument of ratification was exchanged between the two countries on December 19, bringing the treaty into effect.

Key Provisions

The treaty includes provisions aimed at fostering economic cooperation, including:

• Reduced withholding taxes on certain payments
• Exemptions from taxation of business profits in the absence of a permanent establishment
• Beneficial rules for individuals regarding income from employment and pensions

Impact on Businesses

The treaty will have significant implications for businesses operating between the US and Chile. Tax authorities in both countries will be able to exchange information more freely under the agreement’s comprehensive provision.

Effective Dates

The treaty will take effect as follows:

• Taxes withheld at source will apply to amounts paid or credited on or after February 1, 2024
• All other taxes will affect taxable periods beginning on or after January 1, 2024