On March 19th, Decree No. 159/2025 of the Ministry of Foreign Affairs was published in the Official Gazette, enacting the protocol amending the Double Taxation Treaty (CDT for its initials in Spanish) between Chile and Brazil.
Among the main amendments:
The protocol expressly recognizes fiscally transparent entities (Article 1), which implies that such entities must be taken into account when analyzing structures in which these are involved.
Likewise, pension funds are recognized as “persons,” “residents,” and “beneficial owners” for purposes of the DTT, even when they are totally or partially exempt from tax under their domestic legislation (Article 3).
Regarding permanent establishments (Article 5), the regulations were updated to align with OECD (OCDE, for its initials in Spanish) standards. An anti-fragmentation rule is introduced, whereby the exceptions preventing the constitution of a permanent establishment do not apply when an enterprise or its related parties fragment the core operation into seemingly preparatory or auxiliary activities to qualify for said exception.
The definition of dependent agent is updated, broadening its scope; in this sense, it is no longer required for the agent to sign the contract, as it suffices that they have played the principal role in the negotiation leading to its conclusion.
As regards royalties (Article 12), a 15% tax rate is established for payments for the use of, or the right to use, trademarks, and a residual rate of 10% applies in other cases. The original protocol classifies payments for technical services and technical assistance as royalties.
With respect to pensions (Article 18), the taxing powers of the source State are limited when pensions derive from the social security system or from services rendered to the State. In such cases, the applicable tax rate may not exceed the rate applied to residents of the source State and, in any event, may not exceed 25% of the gross amount of the payments.
Additionally, the provisions relating to the mutual agreement procedure and the exchange of information are modernized, strengthening cooperation between the tax authorities of both contracting states.
Finally, the protocol incorporates anti‑abuse clauses (Article 26 A), including a provision known as “Limitation on Benefits” (LOB), which raises the standard of analysis required to access reduced tax rates or exemptions under the DTT (qualified person). In addition, a paragraph regulating triangular situations is introduced. This anti‑abuse rule seeks to prevent enterprises from reducing their tax burden through arrangements involving a permanent establishment located in a third jurisdiction. Lastly, the principal purpose test (PPT) is incorporated, aimed at determining whether an arrangement or transaction has as one of its principal purposes the obtaining of the benefits of the DTT.
The protocol entered into force on October 31st, 2025, and is applicable as from January 1st, 2026.
For further information and/or advice on this matter, contact our Tax team.