close
Share with your friends

Chile: New transfer pricing reporting requirements, Master file and Local file

Chile: New transfer pricing reporting requirements

The Chilean tax authority (Servicio de Impuestos Internos—SII) issued Resolution No. 101 (31 August 2020) that establishes the annual requirements to file two “affidavits” regarding transfer pricing by taxpayers that are part of a multinational enterprise (MNE) group and when certain criteria are met.

1000

Related content

The new requirements generally follow the recommendations of the OECD’s base erosion and profit shifting (BEPS) project.

In general, taxpayers that conduct transactions with related parties that are located abroad during “business year 2020” (Chilean fiscal year 2021) are required to file the following documents:

  • Master file (Archivo Maestro) on form F-1950
  • Local file (Archivo Local) on form F-1951

Master file

Concerning the Master file (F-1950), the reporting taxpayer is to provide an overview of the MNE group’s global business, including the nature of the global business operations, the overall transfer pricing policies, and the global allocation of income and economic activity. The Master file is intended to provide a high-level overview that places the MNE group’s transfer pricing practices in their global economic, legal, financial, and tax context.

Taxpayers that satisfy the following criteria will be required to file a Master file on form F-1950:

  • Parent or controlling entities of an MNE group having residence in Chile for tax purposes, with consolidated turnover of €750 million or more in the previous financial year (ending 31 December). The exchange rate to be used to determine the equivalent amount in CLP (Chilean peso) will be based on an exchange rate published by the Chilean Central Bank.
  • A surrogate parent company of the MNE group having residence in Chile for tax purposes and that has been appointed by the parent entity of the MNE group as the sole substitute in order to file the country-by-country (CbC) report for all members of the group in Chile.

The resolution includes more details concerning the requirement under the Master file obligation.

Local file

Concerning the Local file (F-1951), taxpayers are to provide details about their transactions with foreign related parties, and the amount of applicable turnover is CLP 200 million or more. Other information to be reported concerns financial transactions (regardless of the amount) conducted during the last calendar year.

The Local file reporting is to include conclusions about the economic analysis (such as method used, comparables used, interquartile range obtained, comparability adjustments, and other information), and this implies that the taxpayer also must perform an adequate functional and economic analysis of its intra-group transactions in order to select the best transfer pricing method for purposes of documenting its transactions. Additionally, the taxpayer is directed to provide additional supporting documentation such as intercompany agreements, segmented financial information, and advance pricing agreement (APA) process, among others.

Taxpayers that satisfy the following criteria must file a Local file on F-1951:

  • Entities having a tax residence in Chile that are listed by the SII as “big companies”
  • The parent or controlling entity of the MNE group is required to file a CbC report in its home jurisdiction
  • The Chilean entity conducting transactions with foreign related parties (pursuant to the rules under Article 41 E of the Chilean income tax law) and the amount of the turnover is CLP 200 million or more in the previous financial year ending 31 December (the exchange rate to be used to calculate the equivalent amount in CLP will be an exchange rate published by the Chilean Central Bank for the last business day of the year under analysis)

The resolution includes more details on the obligations for filing F-1951.

General rules

The resolution includes other reporting requirements for both the Master and Local files, such as:

  • Both the Master and Local files must be in the Spanish language, and the SII may require the translation of any document into Spanish.
  • The due date for both reports will be the last business day of June of each year with respect to transactions conducted during the immediately preceding business year. This deadline may be extended for up to three months.
  • There are filing procedures for taxpayers to follow available on the SII website.


Read an August 2020 report [PDF 2.9 MB] prepared by the KPMG member firm in Chile


For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group in Chile:

Juan Pablo Guerrero | +56 229 971427 | jguerrero1@kpmg.com

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal