March 29, 2022
BREAKING TAX NEWS | US-Chile tax treaty advances through the approval process
Today, the United States Senate Foreign Relations Committee (SFRC) approved the Convention between the Government of the United States of America and the Government of the Republic of Chile for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital (Treaty). Next, the Senate must give its advice and consent to ratification of the Treaty with a two-thirds majority vote. Once the Senate takes action to approve the Treaty, the President must sign the instruments of ratification to complete the approval and ratification process in the United States. The Chilean government undertook, in 2015, the steps necessary for the Treaty to be approved in Chile. The Treaty would enter into force when all applicable approval procedures in the United States and Chile have been satisfied.
The SFRC's approval was subject to two reservations concerning the Base Erosion and Anti-abuse Tax (BEAT) and Article 23 (Relief from Double Taxation). The reservation concerning BEAT clarifies that the Treaty shall not prevent the imposition of BEAT under IRC Section 59A. Further, pursuant to the reservation, paragraph 1 of Article 23 of the Treaty would be deleted and replaced with the following:
The Treaty was signed on February 4, 2010 (along with a Protocol), and was reported on favorably by the SFRC in 2014, and again in 2015. A vote was considered in 2019, but never materialized.
Significant provisions of the Treaty include:
If the Treaty is ratified, the withholding provisions would become effective for amounts paid or credited on or after the first day of the second month following the date on which the Treaty enters into force. For all other taxes, the provisions would take effect for tax periods beginning on or after the first day of January following the date the Treaty enters into force.