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U.S.-Chile Dual Taxation Issues and Strategies: Key Tax Treaty Provisions, Reporting, and Pitfalls

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Tuesday, March 5, 2024

Recorded event now available

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This CLE/CPE webinar will provide tax professionals guidance on the key provisions of the U.S.-Chile Tax Treaty, tax reporting requirements, and opportunities for U.S. taxpayers with earnings or assets in Chile, as well as Chilean citizens and businesses with U.S. tax reporting obligations. The panel will discuss U.S. tax law and treaty provisions designed to avoid or mitigate dual taxation, review residency and expatriation rules, and detail the U.S. reporting and payment obligations specific to passive income as well as Chile trade or business activity.

Description

On Dec. 19, 2023, the U.S. Treasury Department put the U.S.-Chile Income Tax Treaty in force providing reduced withholding tax rates dividends, interest, and royalties aimed at minimizing double taxation and furthering commerce and investment between the U.S. and Chile. Tax counsel and advisers must understand key provisions of this new tax treaty and navigate challenges stemming from its interpretation and enforcement to avoid adverse tax liability from either country.

One of the challenges for cross-border activities is reconciling the U.S. and Chile rules governing residence and domicile, as well as the creation of permanent establishments. A misapplication of domicile rules can be costly, and so can be the inadvertent creation of a permanent establishment. U.S. tax advisers serving clients with a presence in the U.S. and Chile will need to understand how to reconcile these to avoid costly tax and penalties.

Another challenge is understanding dual taxation pitfalls on income and gains, and appropriate ways to mitigate these. The U.S.-Chile tax treaty is comprehensive in addressing most dual taxation on income concerns. However, tax advisers must understand the particular provisions beforehand to avoid unpleasant surprises like losing benefits on capital gains, where different beneficial rates (and sometimes exemptions) apply depending on the circumstances.

Most importantly, U.S. service providers doing business with Chilean clients will need to understand whether the Tax Treaty disables the Chilean withholding tax on their service fees and if so, whether this triggers an obligation to pay Chilean VAT, and whether that obligation is borne on them or their customers.

Listen as our experienced panel discusses U.S. tax law and treaty provisions designed to avoid or mitigate dual taxation, outlines residency and expatriation rules, and details the U.S. reporting and payment obligations specific to passive income as well as Chile trade or business activity.

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Outline

  1. The U.S.-Chile income tax treaty overview and dual tax mitigation provisions
  2. Domicile and residency rules
  3. Passive and unearned income treatment
  4. U.S. tax reporting requirements of Chile-sourced investments
  5. Limitation of benefit provisions

Benefits

The panel will review these and other important topics:

  • What are the tax treaty provisions for mitigating dual taxation on ownership of cross-border pass-through entities?
  • Limitation of benefits clauses and provisions in the U.S.-Chile Income Tax Treaty
  • Key risks and challenges of passive/unearned income in cross-border situations
  • U.S. reporting requirements of Chile-sourced investments
  • Specific benefits on certain types of income
  • Chilean tax implications for U.S. service providers with Chilean customers

Faculty

Cibie, Cristóbal
Cristóbal Cibie
Attorney
Bofill Escobar Silva

Mr. Cibie's practice focuses on Chilean tax and business law. He is regularly engaged in the advice and...  |  Read More

Khvatskaya, Mariya
Mariya Khvatskaya
Associate
Kramer Levin Naftalis & Frankel

Ms. Khvatskaya advises on a broad range of federal, state and local tax issues. She assists clients with the tax...  |  Read More

Reshtick, Avi
Abraham (Avi) Reshtick
Partner, Co-Chair, Israel Practice
Kramer Levin Naftalis & Frankel

Mr. Reshtick advises strategic businesses and private equity and hedge funds and their portfolio companies on...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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