On June 22nd, the US Congress finally approved the Treaty to avoid double taxation with our country. With that, only the approval by the Chilean Congress remains, since the United States included reservations, which were not considered in the text in Chile (approved in 2015). In fact, these were delivered to the Chilean Foreign Ministry last Tuesday, August 8th, through a diplomatic note.
The approval of the United States-Chile Tax Treaty is of special relevance for our country, since it would allow us to position as an investment center and as a holding company for the entry of capital from the United States to Latin America, competing with Mexico, especially considering the extensive network of treaties that Chile has with other countries in the region (in South America, the United States only has another agreement in force with Venezuela).
This will bring various benefits and opportunities to Chilean companies investing in the United States, and vice versa. Among others, it would benefit Chilean pension funds investing in the US, which could receive dividends from the companies they invest in free of withholding taxes. This should be highly advantageous for their profitability and will make it possible to strengthen the participation of Chilean pension funds in the North American market.
Additionally, it will reduce the applicable withholding tax rates on remittances made between both countries for concepts such as services, interest or royalties; it will facilitate the possibility of using as a credit the taxes paid in the other contracting State; the amount of credits for taxes paid abroad available in Chile will increase (for example, for taxes paid on interest); and it will permanently establish the possibility of using the entire first category tax borne by the company against the additional tax levied on dividends remitted from Chile to the United States (possibility that in the case of the United States, would otherwise be found valid only until the year 2026).
Thus, it is hoped that the final approval of the Treaty to Avoid Double Taxation between Chile and the United States will be as expeditious as possible, so that our companies and economy can begin to benefit from the countless advantages generated by it as soon as possible.
