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Key Points of Tax Convention with Chile

Japanese

[Provisional translation]

1. Taxation on Profits from Business Activities

Where an enterprise has in a partner country a permanent establishment (such as a branch, including the furnishing of services by an enterprise through personnel over a certain period of time) through which the enterprise carries on business, only the profits attributable to the permanent establishment may be taxed in the partner country.

 

2. Taxation on Investment Income and Capital Gains in the Source Country

(1) Investment income (dividends, interest and royalties) is taxed in the source country as follows:

Investment income (dividends, interest and royalties)
  Dividends Interest Royalties
Between
parent and
subsidiary
companies
(shareholding
requirement)
Received
by pension
funds 
Others Received by
banks, etc 
Others Equipment Others 
Tax
Rate
5%
(at least 25%)
Exempted15%4%10%2%10%
NoteDividends paid in Chile is taxed based
on the domestic laws of Chile
For two years from the
date of entry into
force,15% shall apply for
“Others” instead of 10%
 
If Chile concludes another convention which provides more favorable treatment with a state other than Japan, the two countries shall, at the request of Japan, consult on amending this Convention.

(2) Gains from the alienation of shares representing 20 per cent or more of the capital of a company and other shares may be taxed in the source country (in the case of other shares, the tax so charged shall not exceed 16 per cent of the amount of the gains). Gains derived by pension funds are exempt.

 

3. The Provision for Prevention of Abuse of the Convention

From the perspective of prevention of tax treaty abuse, a benefit under the Convention shall not be granted if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any transaction, or if an income is attributable to the permanent establishment in a third jurisdiction under certain conditions.

 

4. Dispute Resolution between the Tax Authorities

Taxation not in accordance with the provisions of the Convention may be resolved by mutual agreement between the tax authorities of the two countries. Where the issue has not been resolved by the consultation between the tax authorities of the two countries within two years, the unresolved issues shall be submitted to arbitration and resolved by the decision of an arbitration panel composed of third parties provided that the tax authorities of the two countries agree to do so.

 

5. Exchange of Information

The Convention enables the tax authorities of the two countries to exchange information concerning all national and local taxes of the two countries.