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June 22, 2023

Senate approves Chile tax treaty resolution

The Senate June 22 approved the Resolution of Advice and Consent to Ratification for Treaties Cal. #1, Tax Convention with Chile (Treaty Doc. 112-8) on a 95-2 vote. Senators Rand Paul (R-KY) and Josh Hawley (R-MO) voted against the resolution.

Senate Majority Leader Chuck Schumer (D-NY) repeatedly emphasized the treaty’s importance, stating June 20, “A lot is at stake in our treaty with Chile, including America's global competitiveness and the future of our clean energy transition … Chile is one corner of the so-called Lithium Triangle, home to the world’s largest lithium reserves and currently the second largest lithium producer.” He said on the floor just prior to the vote that while the treaty hasn’t gotten a lot of attention, it is one of the more important recent items of business in the Senate.

Senate Foreign Relations Committee Chairman Bob Menendez (D-NJ) said on the floor June 21, “We must avoid unnecessary delays that undercut our competitiveness. Remember, we signed this agreement in 2010. That’s 13 years ago, and this would be only our third bilateral tax treaty in all of Latin America. … Chile is an important market for U.S. goods and manufacturing, including aircraft, vehicles, and machinery.”

The treaty, which had been approved by the Foreign Relations Committee in the last Congress but not the full Senate, was cleared by the Committee June 1 to advance in the Senate after Republican concerns about potential double taxation relating to foreign tax credits were addressed.

The Text of Resolution of Advice and Consent to Ratification includes a declaration stating, “in light of substantial changes made to the international provisions of the Internal Revenue Code in 2017, the Senate declares that future tax treaties need to reflect such changes appropriately, including in Article 23. Therefore, based on discussions with the U.S. Department of the Treasury, additional work is required to evaluate the policy of Article 23 in addressing relief of double taxation and to agree on whether further changes to the terms of the Article are necessary for future income tax treaties.”

Reuters reported, “Final approval will send the treaty to the White House, where President Joe Biden planned to sign the papers necessary for ratification.”


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