An APA is an arrangement that sets, in advance of transactions between related enterprises, a set of criteria for the determination of the transfer pricing for those transactions over a fixed period of time.

In Chile, Number 7 of Article 41 E of the Income Tax Law, contained in Article 1 of Decree-Law No. 824 of 1974, contemplates the possibility for taxpayers engaged in cross-border transactions with related parties abroad to propose an APA to the Servicio de Impuestos Internos (Chilean tax authority - SII), through which the arm's length price, value, or return is determined and agreed in advance for the transactions to be carried out over a determined period of time.

This arrangement must be signed by the representative(s) of the taxpayer, the Servicio de Impuestos Internos and, when it concerns the import of goods, it must also be signed by the Servicio Nacional de Aduanas (National Customs Service), and other tax administration(s), when applicable.

Unilateral APA: Is the one entered into by a taxpayer and the tax administration of a country where it is subject to taxes.

Bilateral APA: Is the one that involves three parties: the taxpayer (including its related party), the tax administration of the country of origin, and the tax administration of the jurisdiction where its related party is subject to tax.

Multilateral APA: Is the arrangement between taxpayers and the tax administration of their country of residence and more than one foreign tax administration.

This section presents a series of key statistics regarding Advance Pricing Arrangements that provide an overview of the number of requests received by the Servicio de Impuestos Internos (Chilean Tax Administration - SII), the number of requests by type, the processing status of such requests, among others.

We will begin by examining the number of requests for advance pricing arrangements received by the Chilean Tax Authority according to the type of request: unilateral arrangements (hereinafter also referred to as APA), bilateral arrangements (hereinafter also referred to as BAPA), and unilateral arrangement renewals.

Thus, since the entry into force of Article 41 E of the Chilean Income Tax Law on transfer pricing in 20212 to date, a total of 33 requests for arrangement have been submitted (without considering rejected and withdrawn), of which 21 correspond to unilateral requests, 6 refer to bilateral requests, and 6 are related to renewals of unilateral arrangements.

In relation to the data mentioned above, when the request of advance pricing arrangements includes one or more merchandise import operations, the SII and the National Customs Service (SNA) must jointly negotiate and sign this type of arrangement. Ultimately, 11 of the 33 requests submitted include merchandise import operations, which represents 33.3% of the total, this highlights the importance of these type of operations for taxpayers. The following graph shows the distribution by type of arrangement:

Moreover, the following graph details the processing status of the 33 requests for Advance Pricing Arrangement (signed and in negotiation), also incorporating rejected and withdrawn applications:

As it can be observed, of the 38 applications submitted, 17 arrangements have been entered into, 16 requests are in the negotiation stage, 3 requests have been rejected and 2 taxpayers have withdrawn their requests. It is important to note that of the 16 requests under negotiation, 5 of them involve the National Customs Service, and of the 17 successful arrangements, the SNA has participated in 6 of them, which shows the great importance that this type of operations has for taxpayers who submit an application of Advance Pricing Arrangement.

The following graphs present quantitative information regarding the processing status of APA requests by type:

With respect to the previously shown graph, it is possible to appreciate that 17 unilateral requests have been received, 12 of which arrangements have been signed, 9 requests are in the negotiation stage, 2 requests have been rejected and 2 taxpayers have withdrawn their requests. In addition, of the 8 unilateral arrangements reached, the SNA participated in 5 of them and is currently party to in 1 of the 9 APA under negotiation.

The preceding statistic focuses on the processing status of the 7 BAPA requests received. Out of the total of these types of requests, 3 are under negotiation, 3 arrangements have been signed, and 1 has been rejected. It must be said the SNA participated in 1 of the 3 arrangements signed. It is important to note that the jurisdictions involved in bilateral requests refer to Canada, the United Kingdom, Switzerland and United States of America.

Regarding the processing status for the 6 renewal of unilateral arrangements, 2 renewal have been signed, and the remaining 4 requests are in the negotiation stage, in 3 of which the SNA is involved.

Since the current transfer pricing regulations came into effect, the Servicio de Impuestos Internos has adopted a series of measures that have allowed Chile to stand out within the region in terms of Advance Pricing Agreements. Among the actions carried out, the following stand out: the creation of a specialized team dedicated exclusively to the subscription of this type of agreements, the diffusion of this preventive tool in seminars and talks nationwide, the focused promotion of this instrument and its benefits to the main Multinational Enterprises Groups, the creation of a menu on APA on the Service's website for the community to access information related to the process, the implementation of a system to facilitate the presentation and safekeeping of the information on these requests, among others.

In this sense, the efforts deployed by the Service have allowed the requests and subscription of Advance Agreements to increase steadily over the last 4 years, which is in line with the proposals made by the OECD in BEPS Action 14, which urge strengthening preventive dispute resolution instruments, as they mean benefits for both taxpayers and Tax Administrations, such as the much valued legal and tax certainty.

The following table shows the number of requests submitted based on their type:

Applications received by type of Advance Pricing Arrangement

From the table presented, it is highlighted that, of the 38 requests for Advance Agreements submitted to the Service, a total of 31 requests have been received in the last 5 years. This shows a significant change compared to previous periods, where an average of less than 1 submission per year was recorded since the implementation of No. 7 of article 41 E of the Income Tax Law. In addition, during 2024, a great number of agreements could be reached, becoming one of the most fruitful years to date in terms of the number of agreements signed. Added to this is the increase in the number of renewals received, which reflects the trust and transparency that these agreements have generated between taxpayers and the Tax Authority.

On the other hand, when examining the evolution of requests for Advance Agreements, it can be seen that most have corresponded to unilateral agreements. However, it is expected that in the coming years bilateral requests will become more relevant, considering that Chile has signed and in force 37 agreements to avoid double taxation, with the most recent one with the United States standing out. These agreements allow the negotiation and subscription of BAPAs, the latter being a highly effective tool to avoid economic double taxation.