1 TAX TREATIES AND RESIDENCE
1.1 How many income tax treaties are currently in force in your jurisdiction?
Chile has 32 tax treaties. Additionally, there are two tax treaties subscribed to by Chile which have not yet entered into force.
1.2 Do they generally follow the OECD Model Convention or another model?
Yes, except for the treaty with the United States of America (not yet in force) that follows the US model.
1.3 Do treaties have to be incorporated into domestic law before they take effect?
Once treaties are ratified by the Chilean Congress and published in the Official Gazette, they become effective and enforceable, and are considered part of the domestic legislation.
1.4 Do they generally incorporate anti-treaty shopping rules (or "limitation on benefits" articles)?
Yes, most of the tax treaties have anti-treaty shopping rules and recently enacted treaties also have limitation on benefits clauses.
Chile is also a signatory party to the Multilateral Convention to Implement Tax Treaty Related Measures of BEPS Actions ("MLI").
1.5 Are treaties overridden by any rules of domestic law (whether existing when the treaty takes effect or introduced subsequently)?
No. Pursuant to the Political Constitution of Chile and the Vienna Convention (to which Chile is a signatory party), tax treaties should not be overridden by Chilean domestic laws, either existing or subsequent.
1.6 What is the test in domestic law for determining the residence of a company?
The place of incorporation.
2 TRANSACTION TAXES
2.1 Are there any documentary taxes in your jurisdiction?
Stamp Tax is applicable to documents evidencing loans.
Stamp Tax ranges from 0.066% up to 0.8% on the principal amount, depending on the maturity date (from one month or less up to 12 months or more). Loans without a maturity date or which are payable on demand are subject to a tax of 0.332%.
2.2 Do you have Value Added Tax (or a similar tax)? If so, at what rate or rates?
Yes, Value Added Tax ("VAT") exists at a 19% rate.
2.3 Is VAT (or any similar tax) charged on all transactions or are there any relevant exclusions?
As a general rule, VAT applies on: (i) customary sales of local movable and immovable property (excluding land); (ii) commercial, industrial and intermediary services provided or used in Chile; and (iii) special cases (e.g., imports, software licensing, among others).
Thus, the main exclusions refer to the sale of land and professional services.
Also, imports of working capital assets for the development of specific projects (e.g., mining, industrial, energy, among others); exports; and certain payments for services rendered abroad, are VAT-exempt.
2.4 Is it always fully recoverable by all businesses? If not, what are the relevant restrictions?
VAT taxpayers can offset the VAT surcharged in their own sales (i.e., "Fiscal Debit") against the VAT paid for in the acquisition of goods or services ("Fiscal Credit"). Fiscal Credit balance can be carried forward indefinitely.
Exporters and VAT taxpayers acquiring fixed assets and complementary services are entitled to request a VAT fiscal credit refund. Other taxpayers consider the VAT paid as a cost or as an expense (see question 4.2 below).
VAT paid for goods or services used for activities partly subject to VAT is proportionally granted as Fiscal Credit.
VAT paid is not granted as a Fiscal Credit when: (i) acquiring goods or services not related to taxpayer's business, or used in activities exempted or not subject to VAT; (ii) acquiring or maintaining vehicles, station wagons or similar, when not being the main business; and (iii) the invoice paid is deemed to be false or when issued by taxpayers not performing activities subject to VAT (unless certain formalities are taken by the taxpayer when paying the invoice).
2.5 Does your jurisdiction permit VAT grouping and, if so, is it "establishment only" VAT grouping, such as that applied by Sweden in the Skandia case?
No. Each VAT taxpayer must calculate, declare and pay its Fiscal Debit, even when it is part of the same group of related companies.
2.6 Are there any other transaction taxes payable by companies?
The transfer of motorised vehicles is subject to a transaction tax of 1.5% on the highest between the sale price and the vehicle's fiscal valuation.
2.7 Are there any other indirect taxes of which we should be aware?
The following indirect taxes should be noted:
additional tax of 15% or 50% on the first sale or import, customary or not, of some sumptuary goods (e.g., gold and platinum jewels); additional tax from 10% to 31.5% on the sale or import, customary or not, of energising, hypertonic or substitutes drinks; liquors, distilled, whiskies, wines and other alcoholic beverages; additional tax from 52.6% to 62.3% on the sale or import of cigars, cigarettes and tobacco; and additional tax on the first sale or import of gasoline or diesel, equal to 1.5 of a Monthly Tax Unit or UTM (approximately USD 72) per cubic metre of diesel, and six UTM per cubic metre in case of gasoline, which is also adjusted by adding or deducting a variable component provided in Law No. 20.943. 3 CROSS-BORDER PAYMENTS
3.1 Is any withholding tax...