DT4852 - Double Taxation Relief Manual: Guidance by country: Chile: Treaty summary
The table summarises the provisions of the treaty as they relate to income beneficially owned by UK residents. The rate shown is the ‘treaty rate’ and does not reflect taxes chargeable under domestic law before relief is given under the provisions of the treaty. The ‘treaty rate’ is the maximum rate at which Chile is permitted to tax income in the relevant categories under the treaty. Rates chargeable under domestic law may be higher or lower.
In all cases other conditions for relief (e.g. beneficial ownership) will have to be met before relief is due under the treaty. The text of the treaty itself should be consulted for the full details. The text of the treaty can be found on gov.uk.
| Subject | Comments | Article |
|---|---|---|
| Portfolio dividends | 15% | 10 |
| Dividends on direct investments | 5% | 10 |
| Conditions for lower rate on dividends on direct investments | The beneficial owner must be a company which hold directly or indirectly at least 20% of the voting power in the company paying the dividends | 10 |
| Property income dividends | 15% | 10 |
| Interest | 10% (Note 1) | 11 |
| Royalties | 10% (Note 2) | 12 |
| Government pensions | Taxable only in Chile | 17 |
| Other pensions | Taxable only in Chile | 17 |
| Arbitration | No | N/A |
Note 1: The text of the convention provides for a 15% rate, however the protocol to the convention contains a Most Favoured Nation (MFN) clause. This has been activated by the terms of the 2016 Chile-Japan Convention. This provides for a rate of 10%, which therefore applies to the UK-Chile Convention from 1 January 2019.
The convention applies a 5% rate to interest derived from:
- loans granted by banks and insurance companies
- bonds or securities that are regularly and substantially traded on a recognized securities market
- a sale on credit paid by the purchaser of machinery and equipment to a beneficial owner that is the seller of the machinery and equipment
However, the terms of the Chile-Japan convention should also be considered as a result of the MFN, notably Article 11(2)(a) which provides for a 4% rate on interest beneficially owned by:
- a bank
- an insurance company
- an enterprise substantially deriving its gross income from the active and regular conduct of a lending or finance business involving transactions with unrelated persons, where the enterprise is unrelated to the payer of the interest. For the purposes of this clause, the term “lending or finance business” includes the business of issuing letters of credit, providing guarantees or providing credit card services
- an enterprise that sold machinery or equipment, where the interest is paid with respect to indebtedness arising as part of the sale on credit of such machinery or equipment
- any other enterprise, provided that in the three taxable years preceding the taxable year in which the interest is paid, the enterprise derives more than 50% of its liabilities from the issuance of bonds in the financial markets or from taking deposits at interest, and more than 50% of the assets of the enterprise consist of debt-claims against unrelated persons
These provisions do not apply if the payments are part of arrangements involved back-to-back loans. See Article 11(4) and (6) of the Chile-Japan Convention for further details.
Note 2: A 5% rate applies to royalties for the use of, or the right to use, any industrial, commercial or scientific equipment. This is reduced to 2% from 1 January 2017 as a result of the Chile-Japan Convention activating the MFN.