New rules on low or no-tax jurisdictions
Law 20,780 – published in the Official Gazette on September 29 2014 – introduced the most complex and comprehensive tax reform in Chile for decades. Several provisions are already in force, while others will enter into force on January 1 2016. Most of the remaining provisions will be in full force by January 1 2017.
The reform introduced a series of changes to bring Chilean tax laws into line with Organisation for Economic Cooperation and Development (OECD) standards.
The changes include the introduction of Article 41(H) of the Income Tax Act, which came into effect on January 1 2015 and defines low or no-tax jurisdictions, providing different criteria for identifying these kinds of jurisdiction.
A territory or jurisdiction is considered to be a low or no-tax jurisdiction – provided that it is not an OECD member country – if it meets at least two of the following criteria:
The final paragraph of Article 41(H) provides that the tax authorities, at the request of a taxpayer, is required to issue a ruling on whether a specific territory or country is to be considered a low or a no-tax jurisdiction.
Although Article 41(H) applies generally for the purposes of the Income Tax Act, specific provisions will be relevant if a country or territory qualifies as a low or no-tax jurisdiction: