Chile

Corporate - Withholding taxes

Last reviewed - 29 January 2020

Dividends paid to a non-resident recipient are subject to a 35% withholding of ‘additional’ tax, with the FCT paid at the corporate level being totally or partially creditable against this WHT, depending on the income tax system to which the source entity is subject to. This credit is added to the amount that is distributed to form the taxable base for Additional WHT. Consequently, the tax burden for a non-resident recipient of dividends, including taxes at the company level, is 35% if subject to the SME regime or resident in a DTT country and 44.45% in case it is subject to PIS and it is not resident in a DTT country.

If the entity is subject to the SME regime, the foreign recipient of the dividends will be able to credit 100% of the FCT paid at the entity level. If the entity is subject to the PIS and the foreign recipient of the dividends is resident in a country with which Chile has a DTT in force, the foreign taxpayer will be able to credit 100% of the FCT paid at the entity level against its Additional WHT. Consequently, their total Chilean tax burden will be 35%.

On the contrary, if the entity distributing the dividend is subject to the PIS, but the foreign recipient of such dividends is not domiciled in a country with which Chile has a DTT in force, the taxpayer will be able to credit against its Additional WHT only 65% of the FCT paid at the entity level. Thus, foreign taxpayers in this situation will have a total Chilean tax burden of 44.45% (see the Taxes on corporate income section).

Branches are subject to a 35% WHT rate on amounts remitted or withdrawn, less the FCT credit. See the Branch income section for more information.

Interest paid to non-residents is subject to WHT at a general 35% rate. Interest on loans granted by foreign banks or financial institutions is subject to a sole 4% WHT. Thin capitalisation rules requesting a 3:1 debt-to-equity ratio become applicable when the debt generating interest subject to the lower than 35% rate is secured by related entities.

Royalties paid to non-residents are subject to the WHT at a 30% rate. Royalty payments in connection to software are subject to Additional WHT at a 15% rate, unless the software is non-customised or standard, in which case it is exempted. Such rate is increased in case the beneficiary of the payment is resident in a tax haven. The Productivity Law eliminated the rate increase in case software-related payments were made to related parties.

Tax treaties

The following table shows the higher and lower rates of WHT applicable by Chile and the countries with which DTTs exist. The application of one or the other rate will depend on the specific provisions of each treaty.

Please note that Chile has signed DTTs with India, the United Arab Emirates, and the United States that are not yet in force.

Please note that Chile has in all its DTTs the so-called ‘Chilean Clause’, pursuant to which, Chile does not grant any remedy regarding WHT on dividends as long as the corporate tax can be fully creditable against the WHT on dividends. Consequently, WHT rules on dividends are fully applicable in DTT scenarios.

Recipient WHT (%)
Interest Royalties
Non-treaty 4/35 30
Treaty:    
Argentina 4/12/15 (1) 3/10/15 (17)
Australia 5/10/15 (2) 5/10 (18)
Austria 5/15 (3) 5/10 (19)
Belgium 5/15 (3) 5/10 (19)
Brazil 15 15
Canada 10/15 (4) 15 (20)
China 4/15 (5) 2/10 (32)
Colombia 5/15 (6) 10 (21)
Croatia 5/15 (6) 5/10 (28)
Czech Republic 5/15 (6) 5/10 (28)
Denmark 5/15 (7) 5/10 (19)
Ecuador 10/15 (8) 10 (21)
France 5/15 (3) 5/10 (19)
Ireland 5/15 (3) 5/10 (19)
Italy 5/15 (3) 5/10 (19)
Japan 4/15 (9) 2/10 (22)
Malaysia 15 (10) 10
Mexico 5/10/15 (11) 15 (23)
New Zealand 10/15 (12) 10 (24)
Norway 15 (7) 5/10 (19)
Paraguay 10/15 (13) 15 (25)
Peru 15 15 (26)
Poland 5/15 (7) 5/15 (27)
Portugal 5/10/15 (14) 5/10 (28)
Russia 15 5/10 (28)
South Africa 5/15 (31) 5/10 (28)
South Korea 5/15 (15) 10/15 (29)
Spain 5/15 (3) 5/10 (19)
Sweden 5/15 (3) 5/10 (19)
Switzerland 5/15 (3) 5/10 (19)
Thailand 10/15 (16) 10/15 (30)
United Kingdom 5/15 (3) 5/10 (19)
Uruguay 4/15 (33) 10

Notes

  1. 15% as a general rule. 4% or 12%, depending on the interest source. If the most favoured nation clause applies, the general rule rate of 15% cannot be reduced further than 12%.
  2. 5% if the interest is paid to a financial institution. 10% in all other cases. However, Chile may tax interest arising in the country at a 15% rate. Most favoured nation clause just commands to start negotiations.
  3. 15% as a general rule. Interest arising from bank or insurance company loans, bonds, some securities that are regularly negotiated on stock markets, and credit sales of industrial equipment is taxed at a 5% tax rate. Most favoured nation clause with OECD members.
  4. 15% as a general rule. If the most favoured nation clause applies, the rate cannot be reduced further than 10%.
  5. 4% if the beneficiary is a bank or an insurance company. 15% in all other cases. Please note that, as of 2019, a 10% rate will apply, which will trigger the application of several most favoured nation clauses.
  6. 5% if the beneficiary is a bank or an insurance company. 15% in all other cases.
  7. 15% as a general rule. It could be 5% by the application of the most favoured nation clause.
  8. 10% by the application of the most favoured nation clause. 15% in all other cases.
  9. 4% if the beneficiary is a bank, an insurance company, a financial institution, or arising from indebtedness arising as part of the sale on credit of machinery or equipment. 15% in all other cases. Please note that, as of 2019, a 10% rate will apply, which will trigger the application of several most favoured nation clauses.
  10. The most favoured nation clause applies only if the other country decides to exempt interests.
  11. 15% as a general rule. If the most favoured nation clause applies, 10% as a general rule, 5% if interest is paid to a bank.
  12. 15% as a general rule. 10% if interest is paid to banks or insurance companies, or if the most favoured nation clause applies. If the most favoured nation clause applies, rate cannot be reduced further than 10%.
  13. 10% if the beneficiary is a bank or an insurance company. 15% in all other cases. Most favoured nation clause is applicable with some restrictions.
  14. 15% as a general rule. 5% for interests derived from bonds and some securities that are regularly negotiated on stock markets. 10% for interest arising from bank or insurance company loans and credit sale of machinery or equipment. The foregoing is reduced to 5% by most favoured nation clause when Portugal applies a Directive of the EU Council.
  15. 5% if the beneficiary is a bank or an insurance company. 15% in all other cases. Most favoured nation clause applies.
  16. 10% if the beneficiary is a bank or an insurance company. 15% in all other cases.
  17. 15% as a general rule. 3% for the use of, or right to use, news. 10% for the use of, or the right to use, any copyright of literary, artistic, or scientific work, or for the use of, or the right to use, a patent, brand, design or model, blueprint, formula or secret procedure, or for the use of, or the right to use, industrial, commercial, or scientific equipment, the foregoing just in case the beneficiary is the author or the author’s heirs.
  18. 10% as a general rule. 5% is applicable for the use of, or the right to use, some equipment. Most favoured nation clause just commands to start negotiations.
  19. 10% as a general rule. 5% is applicable for the use of, or the right to use, some equipment. Most favoured nation clause with OECD members.
  20. 15% as a general rule. If the most favoured nation clause applies, rate cannot be reduced further than 10%.
  21. 10%. Most favoured nation clause applies.
  22. 10% as a general rule. 2% is applicable for the use of, or the right to use, some equipment. Most favoured nation clause (doesn't apply automatically).
  23. 15%. Most favoured nation clause may reduce rates until 10%.
  24. 15%. Most favoured nation clause may reduce rates until 5%.
  25. 15%. Most favoured nation clause applies.
  26. Most favoured nation clause applies with limitations.
  27. 15% as a general rule. 5% is applicable for the use of, or the right to use, some equipment. Most favoured nation clause with OECD members.
  28. 10% as general rule. 5% is applicable for the use of, or the right to use, some equipment.
  29. 15% as a general rule. 10% is applicable for the use of, or the right to use, some equipment. Most favoured nation clause with OECD members.
  30. 15% as general rule. 10% for the use of, or the right to use, any copyright of literary, artistic, or scientific work, or for the use of, or the right to use, industrial, commercial, or scientific equipment.
  31. 15% as a general rule. Interest arising from bank or insurance company loans, bonds, some securities that are regularly negotiated on stock markets, and credit sales of industrial equipment is taxed at a 5% tax rate.
  32. 10% as general rule. 2% is applicable for the use of, or the right to use, some equipment.
  33. 4% if the beneficiary is a bank, an insurance company, a financial institution, or derived from indebtedness arising as part of the sale on credit of machinery or equipment. 15% in all other cases. Most favoured nation clause applies.

Please note that notwithstanding most DTTs provide that interest paid to a bank or financial institution will be subject to a 5% or 10% WHT, as Chile applies a 4% Additional WHT rate to interest paid to foreign banks or financial institutions, the local tax rate is applied instead of the treaty rate, as local law is more favourable.

Please also note that an Exchange of Information Convention with Bermuda, Guernsey, Jersey, and Uruguay, as well as a Multilateral Convention, is in force.