Treasury announced on Dec. 19, 2023 that the tax treaty between the U.S. and Chile has entered into force. For taxes withheld at source, the treaty will have effect for amounts paid or credited on or after Feb. 1, 2024. For all other taxes, the treaty will have effect for taxable periods beginning on or after Jan. 1, 2024.
The adoption of the treaty may be important for many companies with investments or activities in Latin America. The treaty generally aligns with the U.S. Model Treaty, but there are key differences in select areas around dividends, interest, royalties and capital gains on shares. The treaty’s permanent establishment language also deviates significantly from other similar types of agreements. You can find more in-depth analysis of the treaty from Grant Thornton here.
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By reducing barriers and creating a more favorable tax environment, the treaty promotes trade and investment, opening up new opportunities for economic growth. The addition of this new treaty jurisdiction in Latin America may also provide planning opportunities for businesses with operations in other Latin American countries. The only other countries in the Americas with a tax treaty with the U.S. are Canada, Mexico, Barbados, Jamaica, Trinidad and Venezuela, according to the latest IRS information.
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