On January 20, 2017, the tax authority (Servicio de Impuestos Internos) published Resolution No. 9 (the “Resolution”), establishing the content and format of the registry that Chilean taxpayers, which directly or indirectly control entities located abroad (“controlled entities”), should maintain in accordance with article 41 G of the Income Tax Law (ITL). The Resolution applies from this date. Chile's controlled foreign company (“CFC”) regime entered into force as from January 1, 2016. See BEPS Action 3.
Article 41 G says: “… taxpayers … domiciled, resident or established in Chile, which directly or indirectly control entities not domiciled or resident in the country must consider as accrued or received the passive income received or accrued by such controlled entities, under the rules of this Article.” Article 41 G (C) lists the following as passive income (list is not exhaustive):
- Dividends, withdrawals, distributions or accrual of profits from investments in other entities.
- Interest and other income, unless the controlled entity that generates the income is either a regulated bank or financial institution and not incorporated or resident in a tax haven or preferential tax regime.
- Income derived from the transfer of use, enjoyment or operation of trademarks, patents, formulas, computer programs and other similar services, whether it consists of royalties or any other form of remuneration.
- Income from leasing or temporary transfer of real property, unless the controlled entity’s main business is the operation of property situated in the country where it is incorporated, domiciled or resident.
- Capital gains from the disposal of property, unless it has been used or operated in a business activity that generates income.
- Income derived from the assignment of rights to use or enjoy property.
- Income that controlled entities obtained as a result of transactions with Chilean taxpayers, provided that the income constitutes a deductible expense for the taxpayers.
Taxpayers will be required to maintain a registry, and include the following information at the end of the respective business year:
- Background of the taxpayer domiciled or resident in Chile.
- Background of the controlled entity, including the following (list is not exhaustive):
- Tax identification number.
- Type of entity, such as corporation, trust, etc.
- Name and address.
- Country or jurisdiction where the controlled entity is incorporated or resident.
- Currency with which information is recorded.
- Exchange of foreign currency in force at the end of the year.
- Percentage of participation (direct or indirect) of the Chilean taxpayer in the controlled entity’s profits.
- Details of the controlled entity’s passive and other income under Article 41 G, including:
- Consolidated profit or loss.
- Net taxable income.
- Taxes paid or owed.
- Total net revenue.
- Accumulated profit.
- Taxes withheld.