Chile: “Most favored nation” clause triggered under treaties with Canada and Mexico

“Most favored nation” clause triggered provisions concerning the rate of withholding tax imposed on certain interest payments

“Most favored nation” clause triggered under treaties with Canada and Mexico

The income tax treaty between Chile and Japan has triggered the “most favored nation” clause contained in Chile’s income tax treaties with Canada and Mexico. Specifically, the triggered provision concerns the rate of withholding tax imposed on certain interest payments.

Accordingly, with the trigger of the “most favored nation” clause:

  • Under the Chile-Canada income tax treaty, the withholding tax rate on interest cannot exceed 10% if the beneficial owner is a resident of the other treaty partner.
  • Under the measures of a Protocol to the income tax treaty between Chile and Mexico, the withholding tax rate on interest cannot exceed 5% if the interest is paid to a bank or 10% in all other situations.

Read a November 2021 report (Spanish and English) [PDF 854 KB] prepared by the KPMG member firm in Chile

Other recent tax developments described briefly in this KPMG report concern:

  • Cross-border reverse mergers
  • Tax implications of early termination of an agreement
  • Recognition of profits by holding companies
  • Change of subject in construction agreement
  • Purchases and sales of crypto assets
  • Depreciation of physical assets of fixed assets

 

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