June 17, 2021
Chilean tax authorities issue resolution amending the regulations for claiming reduced withholding rates
The Resolution modified the sworn statement, including when the foreign beneficiary of a cross-border payment must deliver the statement to the local taxpayer.
On June 11, 2021, the Chilean tax authorities (CTA) issued Resolution Ex. No. 58 of 2021 (Resolution), amending the regulations for complying with the local tax requirements to claim reduced withholding tax (WHT) rates when a double tax treaty (DTT) applies. The amendments are based on changes introduced by Law 21,210 of 2020.
According to the regulations, local taxpayers that want to apply a reduced WHT rate or no WHT rate on a cross-border payment must request the following from the foreign beneficiary receiving the payment: (a) a tax certificate of residence issued by the competent authority of its country; and (b) a sworn statement declaring that it (i) does not have a permanent establishment in Chile to which the income can be attributed and (ii) meets the requirements to claim treaty benefits.
The Resolution modifies the regulations on the sworn statement that foreign taxpayers need to produce and deliver to local taxpayers to claim DTT benefits. Specifically, the Resolution includes updated templates of the sworn statement that need to be used by foreign taxpayers to comply with this requirement.
The Resolution also requires the foreign beneficiary to deliver the sworn statement to the local taxpayer before the local taxpayer files its WHT filings. The local taxpayer must file the WHT filings on or before the 12th day of the month following the payment. Previously, the regulations required the sworn statement to be delivered within the month of the cross-border payment being made.
Additionally, the Resolution reduces the penalties for failing to deliver the sworn statement or satisfy the compliance requirements. If the sworn statement is not delivered or the compliance requirements are not satisfied, the local taxpayer will generally have to apply a WHT rate, according to domestic provisions (i.e., without any relief derived from the DTT). However, the foreign beneficiary may request a tax refund of the excess WHT applied if conditions to claim the DTT benefit are later demonstrated. Before the Resolution, the regulations did not allow the foreign beneficiary to claim a tax refund and considered the requirements to claim DTT benefits not satisfied.
Local taxpayers are deemed jointly liable for the foreign beneficiaries' WHT liability if Chilean tax authorities challenge the application of a DTT benefit.