Chile: Credit for taxes paid abroad by companies domiciled in foreign jurisdictions

Treatment of a credit for taxes paid abroad by companies domiciled in foreign jurisdictions

Treatment of credit for taxes paid abroad by companies domiciled in foreign jurisdictions

A report prepared by the KPMG member firm in Chile briefly discusses the treatment of a credit for taxes paid abroad by companies domiciled in foreign jurisdictions.

In this situation:

  • A group of natural and legal persons residing in Chile maintain investments abroad through a company (company A) domiciled in another jurisdiction that participates in the total rights over the capital of an entity (company B) domiciled in the United States that, in turn, makes investments in financial and real estate assets in the country.
  • The profits generated by company B will be subject to corporate tax. Then, the profits remitted to company A are subject to a withholding tax, in addition to being taxed with corporate tax in its jurisdiction. The remittance to Chile is also subject to a withholding tax.
  • As long as the taxes meet the requirements (that is, equivalent to those established under Chile’s income tax law, as determined based on real or presumptive results, definitive and having a mandatory nature), and an income tax treaty or information exchange agreement is in force between Chile and the United States (currently both Chile and the United States have an agreement for the exchange of information by virtue of the convention on mutual administrative assistance in tax matters), in determining the credit for taxes borne abroad, it is necessary to consider both corporate and withholding taxes paid in both jurisdictions.
  • Regarding meeting the requirements of the foreign investment registry, these requirements are met by submitting affidavit No. 1929 (both the investments made in company A and in entity B must be included).

Read an October 2021 report (Spanish and English) [PDF 901 KB] prepared by the KPMG member firm in Chile

 

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