The US-Chile income tax treaty, effective December 19, 2023, enables multinational enterprises to use mutual agreement procedures and advance pricing agreements to avoid double taxation and secure tax certainty. This treaty represents a significant development amid rising audit activities in Chile and is only the second comprehensive tax treaty between the US and a South American country in over ten years.
On December 19, 2023, the income tax treaty between the United States and Chile officially came into effect. This treaty allows multinational enterprises (MNEs) to engage in mutual agreement procedures and bilateral advance pricing agreements, thereby mitigating the risk of double taxation. As audit activities are anticipated to intensify in Chile, the treaty provides a significant benefit for MNEs seeking greater tax certainty. Notably, this treaty marks the second comprehensive bilateral tax treaty signed by the United States with a South American nation and represents the first such treaty to be implemented in over a decade.
The newly established US-Chile income tax treaty is expected to facilitate improved tax compliance for multinational enterprises operating in both countries. With the growing trend of increased audit scrutiny in Chilean tax administration, the treaty is particularly timely. By providing mechanisms to resolve disputes and enhance tax transparency, the treaty aims to attract further U.S. investments into Chile while fostering closer economic ties between the two nations. The significance of the treaty is underscored by its strategic importance as one of the few comprehensive tax treaties the U.S. has engaged in with South America.
In summary, the US-Chile income tax treaty establishes a critical framework for enhancing tax certainty for multinational enterprises. By utilizing mutual agreement procedures and bilateral advance pricing agreements, MNEs can effectively manage tax liabilities and navigate complex tax challenges. The treaty not only supports economic collaboration between the United States and Chile but also reflects a strategic effort to bolster investment and trade relations in light of evolving global tax landscapes.
Original Source: news.bloombergtax.com
