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June 9, 2023 U.S.-Chile tax treaty advances toward ratification
On 1 June 2023, the U.S. Senate Foreign Relations Committee (SFRC) voted out of committee (20-1) the proposed U.S.-Chile Double Taxation Agreement (Treaty). The Treaty includes two reservations and two declarations. Text of the resolution of advice and consent to ratification can be found here. Senate Majority Leader Chuck Schumer (D-NY) stated that ratifying the Treaty is crucial for access to critical minerals such as lithium. Senate Schumer has also indicated that getting it done is a priority. Once the Senate takes the next step to give its advice and consent to the Treaty, the President must sign the ratification instruments to complete the approval and ratification process in the U.S. The Treaty would enter into force when all applicable approval procedures in the U.S. and Chile have been satisfied. Background A prior edition of the Treaty was signed on 4 February 2010 (along with a Protocol) and was reported on favorably by the SFRC in 2014, 2015 and again in March 2022. As in 2022, the SFRC's 2023 approval is subject to two reservations concerning the Base Erosion and Anti-abuse Tax (BEAT) and Article 23 (Relief from Double Taxation). The reservation concerning BEAT clarifies that (i) the Treaty shall not prevent the imposition of BEAT under U.S. Internal Revenue Code Section 59A and (ii) paragraph 1 of Article 23 of the prior Treaty would be deleted and replaced with the following: 1. In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle thereof):
Treaty provisions Significant provisions of the Treaty from a Chilean perspective would:
If the Treaty is ratified, the withholding provisions would become effective for amounts paid or credited on or after the first day of the second month following the date on which the Treaty enters into force. For all other taxes, the provisions would take effect for tax periods beginning on or after the first day of January following the date the Treaty enters into force. ____________________________ For additional information with respect to this Alert, please contact the following: EY Chile, Santiago
Ernst & Young LLP (United States), Washington
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor | |||