The general withholding tax rate in Chile for services provided from abroad is 35%. However, the Income Tax Act establishes preferential tax rates for certain services – such as royalties for the use of patents, software and technical assistance – at 15% and in other cases 20%.

A taxpayer recently sought a ruling on the taxation of payments for the broadcasting rights, distribution and marketing of a TV signal transmitted via satellite to Chile.(1) The taxpayer inquired whether the 20% withholding tax was the appropriate rate, as the provider was resident in the United States. Although Chile and the United States have signed a double tax treaty, it has not yet come into force, meaning there is no possibility of claiming treaty benefits.

The Tax Department determined that the Income Tax Act establishes a 20% withholding tax rate on the remuneration of producers and foreign distributors without domicile or residence in Chile for materials exhibited through film and television. However, according to the Tax Department, the preferential tax rate applies only to the distribution of physical material (eg, film reels, video tapes and similar items), but not when visual material is distributed via a satellite signal. As there is no preferential tax rate for satellite signals, it was concluded that the applicable rate was 35%.

For further information on this topic please contact Omar Morales at Montt y Cia SA by telephone (+56 22 233 8266) or email (omorales@monttcia.cl). The Montt y Cia SA website can be accessed at www.monttcia.cl.

Endnotes

(1) Ruling 1692 of June 15 2016.

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