On December 7 2017 the Tax Department issued Circular 57, which provides a definition of a 'permanent establishment' for domestic law purposes and underlines that such fixed places of business require a tax registration number.

Tax identification number

Article 66 of the Tax Code provides that all individuals, legal entities and entities or groups without legal personality, but subject to tax through their business activities, must register with the tax department and obtain a tax identification number in accordance with the applicable regulations.

Article 9 of Law 20,899/2016, which came into force on January 1 2017, introduced a new second paragraph to Article 3 of the Decree with Force of Law 3/1969, which regulates the tax identification registry. The new paragraph states that individuals or entities that have one or more permanent establishments in Chile, but which are not domiciled or resident in Chile, must register each permanent establishment separately. Taxpayers required to enrol each permanent establishment separately must do so by assigning their existing tax identification number to the permanent establishment in Chile which performs their main business activity, taking into account its volume of revenue or assets. Other permanent establishments must be registered before December 31 2018. At the request of the interested party, the tax department will certify the new authorised tax identification number and clarify its relationship with the main permanent establishment's tax number.

Permanent establishment

The Income Tax Act does not define a 'permanent establishment' – rather, it states examples of what can be considered as such. For instance, Article 38 of the act refers to "agencies, branches or other forms" of permanent establishments and Article 58(1) refers to "offices" and "representatives". Owing to these broad definitions, the tax department has identified some of the elements that enable a permanent establishment's existence to be verified, considering the dynamic reality of economic activities.

In order to clarify which parties must apply for a tax identification number, the new second paragraph of Article 3 of the Decree with Force of Law 3/1969 states that:

"it will be understood that a person or entity without domicile or residence in the country has a permanent establishment in Chile, when in the latter carries out all or part of its activities or business, through an agency, branch, office or another place or site. Also, it will be considered that there is a permanent establishment when an agent or representative acts in the country for the account or benefit of such persons or entities, carrying out all or part of their activities, for example, closing deals with clients, or playing the main role leading to the conclusion thereof, excluding simple agents who only intervene in specific actions or procedures, such as, for example, the agents for judicial or administrative notification purposes."

Circular 57 states that the administration will use a broad definition of 'permanent establishment' to justify the broad use of the term in Law 3/1969 and the broad definition of 'representatives' in Article 8(6) of the Tax Code, which includes custodians, agents, administrators, auditors, liquidators, trustees and any individual or legal person who acts for the account or benefit of another individual or legal person.

The circular also states that, where a double taxation treaty applies, it must be considered that the factual assumptions in such agreements concerning permanent establishments only fulfil the function of determining the taxation powers of the contracting states. However, the treaties do not define the internal tax treatment applied to such permanent establishments, which is generally defined unilaterally by the relevant state. In this sense, once it has been concluded that a permanent establishment exists, the specific case must be re-examined to determine whether such permanent establishment qualifies as such under the terms of the circular in order to define whether a separate tax registration number is required.


Although Circular 57 has been issued with a limited scope, it may have additional benefits, including identifying whether a foreign entity or individual has a permanent establishment operating in Chile.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

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.monttgroup.com.