Definition of permanent establishment (“PE”)
A definition is included in the law following the OECD guidelines. Definition considers fixed place of business, independent agent test and excludes preparatory or auxiliary activities.
- Thin-capitalization rules
Project finance with third-party debt is not considered for thin-cap rules, even if structured with related party guarantee. This, to the extent that, for legal, financial or economic reasons, the guarantee is required by the lending institution. The agreed interests must obey to market values.
- Project finance with back-to-back structures
Limitation on the application of the reduced 4% WHT rate on interest payments made abroad to banks and financial institutions. For this rate to apply, the bank or financial institution must be the beneficial owner of the interests.
Additionally, new concepts and requirements are established to qualify as a foreign financial institution.
Refund obligation for Withholding Tax taxpayers
Extends until December 31, 2026, the period during which taxpayers who are residents of countries with which Chile has signed a treaty to avoid double taxation will be able to use 100% of the Corporate Tax paid as credit against the WHT, even if the treaty is not in force. (This is currently applicable to residents of the United States of America and United Arab Emirates).