On 6 March 2026, Chile's tax authority issued Ruling No. 578/2026, which, consistent with Ruling No. 1611/2025, reaffirms that payments for software distribution rights made by a Chilean entity to a United States (US) supplier are treated as business profits under the Chile-US tax treaty. The authority confirms that no Chilean withholding tax (WHT) applies, even when the Chilean distributor subsequently sublicenses the software to customers located outside Chile, thereby reinforcing Chile's attractiveness as a regional licensing hub. The ruling further clarifies that onward licensing to nonresident customers may qualify as an export of services, enabling value-added tax (VAT) relief. (For details on Ruling No. 1611/2025, see EY Global Tax Alert, Chile confirms US Tax Treaty-based exemption for software program reseller payments, dated 11 September 2025.)

Importantly, this non-WHT treatment applies regardless of where the end customers are located. The ruling expressly analyzes a scenario in which a Chilean distributor acquires software in Chile and sublicenses it to clients in third-country markets, such as Central America, confirming that the geographic location of the final users does not alter the WHT conclusion. The absence of WHT thus applies even if software acquired in Chile is intended for distribution to users outside the country. This provides meaningful certainty for regional operating models in which a Chilean entity serves as a platform for distributing software throughout Latin America or other foreign jurisdictions.

Regarding VAT, the ruling clarifies that although the inbound acquisition of software from a foreign supplier is subject to VAT through the reverse-charge mechanism, the subsequent provision of sublicensing services to customers with no domicile or residence in Chile may qualify as an export of services under Article 12 E No. 16 of the VAT Law, subject to Customs validation. If this condition is met, the outbound service becomes exempt from VAT, and the Chilean distributor may seek recovery of the input VAT paid on the cross-border acquisition of the software used to generate the exported service. This framework reinforces the practical feasibility of regional distribution structures by aligning non-WHT treatment with potential VAT relief mechanisms.

Overall, Ruling No. 578/2026 broadens the practical relevance of Ruling No. 1611/2025 for regional software-distribution models in which Chile serves as a hub for third-country markets.

Implications

This ruling is particularly relevant for multinational groups operating multijurisdictional software distribution models in which Chile may serve as a regional hub. The framework is most applicable in situations in which software is acquired from a US-based provider, the Chilean entity acts or may act as a distributor, and end users are located in foreign jurisdictions. Taxpayers may consider revisiting historical structures and prior payments to evaluate alignment with the treaty-based criteria reinforced in the rulings.