Corporate - Corporate residence

Last reviewed - 15 December 2020

Companies incorporated in Chile are considered to be Chilean residents.

Permanent establishment (PE)

The definition of a PE under local law includes a (i) fixed place of business PE and (ii) an agency PE (or dependent agent PE). Construction or project PE and service PE are not covered by Chilean law. Additionally, a PE is not generated under domestic law if only auxiliary and preparatory activities are being performed.

Please bear in mind that an entity may be considered as a PE under DTT terms but not under domestic law. In this case, in principle, the corresponding WHT should apply over the gross basis of the remittance.

However, Chilean IRS rulings have interpreted the relation between the two different PE concepts, in the sense that, even though domestic requirements are not met, the taxpayer may choose to be treated as a local PE in order to be allowed to deduct the expenses incurred in the PE’s business.

For purposes of determining whether an entity is considered a PE, the substance-over-form principle will apply according to an administrative interpretation issued by the Chilean IRS in December 2017.