US-Chile Tax Treaty Enhances Tax Certainty for Multinational Enterprises
The US-Chile income tax treaty, effective December 19, 2023, allows MNEs to utilize mutual agreement procedures and bilateral advance pricing agreements to prevent double taxation. This treaty is significant due to rising audit activities in Chile and is only the second comprehensive tax treaty the US has with a South American country.
On December 19, 2023, the United States-Chile income tax treaty officially came into effect. This treaty allows multinational enterprises (MNEs) to utilize mutual agreement procedures and bilateral advance pricing agreements to mitigate double taxation and enhance tax certainty. In light of the rising audit activities in Chile, which are anticipated to persist, this development represents a significant benefit for MNEs operating in or with connections to both countries. Notably, the US-Chile treaty marks only the second comprehensive bilateral tax treaty in effect between the United States and a South American nation and is also the first such treaty signed by the US to take effect in over a decade.
The establishment of the US-Chile income tax treaty signifies a crucial advancement in international tax relations, specifically benefiting MNEs that require clear frameworks for taxation to avoid double taxation issues. The treaty aligns with broader efforts to enhance investment and trade between the two countries while providing businesses with greater predictability in their tax obligations. The significance of this treaty is further underscored by the backdrop of increasing audit activities in Chile, making the provisions available through mutual agreements especially relevant and timely.
In summary, the US-Chile income tax treaty is a pivotal development for multinational enterprises, offering mechanisms to avoid double taxation through mutual agreement procedures and advance pricing agreements. With the increase in audit activities in Chile, the certainty provided by this treaty is expected to be beneficial for future business operations. As the second comprehensive bilateral tax treaty with a South American country, it reflects a renewed commitment to fostering strong economic ties and improving international business environments.
Original Source: news.bloombergtax.com
