Chile updates its list of preferential tax regimes
The Chilean Internal Revenue Service (SII) has published its Exempt Resolution N°30, which updated the list of territories or jurisdictions that qualify as preferential tax regimes according to the criteria of the new rule.
This update is part of the Tax Obligations Compliance Law, published in October 2024. That law modified article 41 H of Chile’s Income Tax Law (LIR), which defines the requirements for a territory or jurisdiction to be considered a preferential tax regime.
The Exempt Resolution, which went into effect January 1, 2025, privileges the exchange of information and standards of transparency for tax purposes over other criteria, such as the effective tax rate in those countries.
As a result, the list of jurisdictions with a preferential tax regime was reduced from 147 to 105 countries, removing, among others, jurisdictions such as Hong Kong, the Cayman Islands, and the British Virgin Islands.
Qualification as a territory or preferential tax regime carries several key implications, including the following:
- Preferential tax regimes can more easily meet criteria that generates taxation for the indirect sale of Chilean assets (Article 10 LIR).
- Qualification presumes the existence of control over foreign entities that generate passive income that must be declared in Chile (Controlled Foreign Company Rules, Article 41 G LIR).
- Qualification establishes a relationship with territories for the purposes of applying specific anti-avoidance rules, such as transfer pricing (Article 41 E LIR) and excess indebtedness (Article 41 F LIR).
- The LIR promotes a higher withholding tax rate for certain types of royalties paid by Chilean entities to entities residing abroad (Article 59 LIR).
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