The US-Chile income tax treaty, effective December 19, 2023, enables MNEs to employ mutual agreement procedures and bilateral advance pricing agreements to avoid double taxation and achieve greater tax certainty, amid rising audit activity in Chile. This treaty is the second comprehensive tax treaty the US has with a South American country and the first to be enacted in over a decade.
On December 19, 2023, the income tax treaty between the United States and Chile officially came into effect. This treaty allows multinational enterprises (MNEs) to leverage mutual agreement procedures and bilateral advance pricing agreements to mitigate the risk of double taxation and enhance tax predictability. With Chilean audit activities on the rise, this development is particularly beneficial. Significantly, this treaty marks the United States’ second comprehensive bilateral tax treaty with a South American nation and its first such agreement in more than a decade.
The US-Chile treaty serves to solidify economic relations by establishing clear guidelines for tax obligations affecting MNEs operating between both jurisdictions. The essence of the treaty lies in its provisions for mutual agreement procedures (MAPs) and advance pricing agreements (APAs), essential tools for MNEs to navigate complex taxation scenarios. The treaty also comes at a time when Chile has increased its tax audit activities, thus providing a framework for ensuring compliance while avoiding double taxation.
In conclusion, the enactment of the US-Chile income tax treaty represents a significant step towards fostering tax certainty for MNEs operating in both countries. By providing mechanisms to prevent double taxation and clarify tax obligations, this treaty is poised to facilitate smoother business operations amid rising audit scrutiny. The establishment of this treaty not only reinforces US-Chile relations but also reflects a strategic move by the US to strengthen its economic ties within South America.
Original Source: news.bloombergtax.com
