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Anti Avoidance Measures: New Regulations Enforced Regarding the Exchange of Tax Information Handled by Banks

Chile
28 Jan 2010

As a consequence of joining the OECD, new regulations regarding the exchange of information handled by banks has been released. The Chilean tax authority has also recently interpreted these regulations in relation to the concept of beneficial owner included in tax treaties. Taxand Chile discusses the details in their latest article.

On 5 December 2009, Chile enacted Law N? 20.406 that will allow the country to exchange tax information that banks have relating to taxpayers.

Likewise, on 16 October 2009, the Chilean tax authority issued Ruling N? 57 whereby it explained the concept of beneficial owner included in tax treaties and also referred to certain provisions that excluded taxpayers from particular tax treaty benefits.

On 15 December 2009, Chile was formally invited to join the OECD. Due to this invitation Chile will join the OECD on 11 January 2010 after signing the Accession Agreement.

What's more, related to this invitation from the OECD, on December 5th, 2009, Chile enacted Law N? 20.406 allowing the country to exchange tax information that banks have regarding taxpayers. Likewise, Law N? 20.406 enables Chile to exchange information with countries with which Chile has tax treaties in force. Law N? 20.406 will be effective from 1 January 2010.

As a result, Chile is now part of the OECD's list of jurisdictions that have substantially implemented the internationally agreed tax standard.

On 16 October 2009, the Chilean tax authority issued Ruling N? 57 whereby it explained the concept of beneficial owner included in tax treaties and also referred to certain provisions that excluded taxpayers from particular tax treaty benefits, such as royalties, interests, or dividends, when the main purpose of a transaction is to ensure a favourable tax treatment. It is the first time that the Chilean tax authority has issued an interpretation expressly defining these concepts, which are not defined in Chilean internal legislation.

Regarding the concept of beneficial owner, the authorities follow the interpretations issued by the OECD and, thus, excludes from this concept agents, nominees and intermediaries, as well as conduit companies.


Taxand's Take


The new regulations regarding the exchange of tax information handled by banks will be enforced in Chile as of 2010. Recent interpretations issued by the Chilean tax authority in relation to the concept of beneficial owner included in tax treaties and other legislation, will force multinational taxpayers to steer clear of any transactions that may be deemed as avoidance under international standards, particularly those that are resident in countries with which Chile has tax treaties in force.

Your Taxand contact for further queries is:
Carola Trucco
T. +56 2 378 8933
E. ctrucco@bye.cl

Taxand's Take Author