Law 20,630 was published in the Official Gazette on 27 September 2012. This law includes a new article 41 E of the Income Tax law which deals with the new Chilean transfer pricing rules. The main issues covered by article 41 E are as follows:


Transfer pricing is the value placed between related parties in their cross-border transactions. Transfer pricing is based on the arm’s length principle which sets forth that prices or values imposed between related parties should correspond to those established between independernt parties in similar transactions. Chilean Transfer pricing legislation is applicable to any type of cross-border transactions between related parties, including, for example, purchase and sale of products, furnishing of services, financial transactions, technology transfers or transfer of rights to use patents, trademark, copyrights.

Arm’s length principle:

Cross border operations between related parties must be carried out at arm´s length values. It will be understood to be arm´s length the value agreed between independent parties in comparable operations and circumstances taking into account the characteristics of the goods or services transferred, the functions performed by the parties, the economic circumstances of the parties and any other relevant circumstances.

Related parties:

Under the new legislation two parties are considered to be related for transfer pricing purposes as follows:

Transfer Pricing Methods:

Upon request from the Internal Revenue Service, taxpayers must demonstrate that their operations with related parties have been made at arm´s length values, which shall be demonstrated by applying some of the following methods: Comparable Uncontrolled Price Method, Resale Price Method, Cost Plus Method, Profit Split Method and Transactional Net Margin Method. Exceptionally if none of the refered methods can be applied due to special circumstances and this is duly justified, other reasonable methods will be allowed.

To determine which method is to be applied in each particular case, the taxpayer must apply the most appropriate method to reflect an arm’s length value considering the circumstances of the case.

For the purpose to select the most appropriate method it should be taken into account the respective strengths and weaknesses of each method, the appropriateness of the method in relation to the relevant operation, the availability of relevant information on comparables and the reliability of comparability adjustments.

Transfer Pricing Adjustments and Penalties:

If the Internal Revenue Service considers that the taxpayer has not proved that his operations have been made at arm´s length values the Internal Revenue Service shall determine such value, using the information delivered by such taxpayer and any other information under its power, applying the referred methods. Upon determination of an arm´s length value the adjustment will be subject to taxation in accordance with Article 21 of the Income Tax Law. Regular interests and fines will apply accordingly.

An additional transfer pricing fine of 5% of the transfer pricing adjustment will be applied unless the taxpayer has timely submitted the documentation required by the Internal Revenue Service during the relevant audit.

Documentation requirements:

Taxpayers carrying out operations with related parties abroad shall submit annually to the Internal Revenue Service a sworn statement regarding such operations, according to the information and format established by the Internal Revenue Service. Likewise, the Internal Revenue Service may request taxpayers to provide information regarding their related parties abroad.
In case of non-compliance, delay, or incomplete or erroneous submission of the annual transfer pricing statement a specific penalty equivalent to 10 to 50 UTA may be applicable.

Advance Pricing Agreement:

Taxpayers carrying out operations with related parties will be entitled to request an advanced pricing arrangement (APA) with the Internal Revenue Service. To request an APA, taxpayers must deliver all the documentation requested by the Internal Revenue Service which will be available in a specific regulation.

A taxpayer may request a bilateral or multilateral APA with other tax administrations.

Where the operations related to the APA involves import of goods the Customs Agency should concur to the agreement.
An APA will apply from the date of its signing and will last for the following three commercial years. A renewal may be requested.
Once the APA is signed, the Internal Revenue Service will not be able to determine price differences regarding the operation concerned thereon. However, if at any moment the main circumstances taken in consideration for agreeing the APA, change substantially both the taxpayer and the Internal Revenue Service are entitled to terminate the APA based on such circumstances. Likewise, the Internal Revenue Service may terminate an APA where it determines that the documents delivered by the relevant taxpayer at the moment of the request of an APA were false or erroneous.

Corresponding Adjustments:

Taxpayers are entitled to request from the Internal Revenue Service a corresponding adjustment where an adjustment has been made by a State with which Chile has a double tax convention in force and provided that in such convention a clause stipulating such a corresponding adjustment exists. In order to proceed with such adjustment the Internal Revenue Service must agree both in principle and in the amount of the adjustment concerned. Taxpayers have five years to request from the Internal Revenue Service a corresponding adjustment, which will be counted from the date in which the dateline to declare the relevant income in Chile is due.