JURISDICTIONS WITH PREFERENTIAL TAX REGIMES

A territory or jurisdiction is considered to have a preferential tax regime under the fulfilment of 2 or more of the following conditions, but would not be applicable to OECD member countries:

  • They levy taxes on foreign sourced income with an effective tax rate lower than 17,5%;

  • They have not entered into an agreement with Chile that allows the exchange of information for tax purposes;

  • They do not have transfer pricing rules or such rules do not comply with OECD or UN standards;

  • They do not meet the conditions to be considered compliant or substantially compliant of OECD standards on transparency and exchange of information for fiscal purposes;

  • They have one or more preferential regimes for fiscal purposes according to a qualification made by the OECD;

  • They only impose tax on income from local sources (territorial source principle of taxation).


Where a territory or jurisdiction is considered to have a preferential tax regime, the following provisions are relevant:

  • Reporting obligations are required regarding investments in jurisdictions with a preferential tax regime;

  • Under transfer pricing rules, an entity resident of a jurisdiction with a preferential tax regime is considered a related party;

  • Under thin capitalization rules, the payee resident of a jurisdiction with a preferential tax regime is considered a related party;

  • Under CFC rules, an entity resident of a jurisdiction with a preferential tax regime is considered a controlled entity and all of its income is considered passive income;

  • Under withholding tax rules, the tax rate on royalties and fees for the provision of services is increased to 30% and 20% in each case.