The Netherlands signs a tax treaty with Chile

The Netherlands has concluded a tax treaty with Chile. This treaty contains agreements that must prevent citizens or companies from paying double tax on the one hand and avoiding taxation on the other.

The treaty was signed in Santiago on Monday 25 January 2021 by the Chilean Minister of Finance Briones, in the digital presence of State Secretary Vijlbrief of Finance.

The tax treaty removes potential barriers (double taxation) that could otherwise hinder economic activities in Chile and from Chile in the Netherlands. A treaty also provides legal certainty for taxpayers in both treaty countries.

Tax evasion

The treaty includes a comprehensive anti-abuse provision that prevents the treaty from being used to avoid taxation. This provision allows a country to refuse treaty benefits if a company transfers money through the Netherlands or Chile, purely to avoid tax. With this anti-abuse provision and the other provisions of the treaty, this tax treaty meets the minimum standards of the so-called BEPS (Base Erosion and Profit Shifting) project of the OECD / G20 against tax avoidance.

The treaty is very similar to recent treaties that Chile has concluded with other European countries and with Japan. The convention contains elements of the Model Convention of the OECD and that of the United Nations for the distribution of tax rights over corporate profits. This means that this tax treaty leaves relatively more tax in Chile compared to other countries. Withholding taxes on interest and royalties are limited to 10% and in some cases even further. Pensions may be taxed in the country where they are accrued. The treaty also contains provisions to ensure that the Netherlands can levy tax on income from a substantial interest upon emigration.

Furthermore, agreements have been made with Chile on the mutual exchange of information and assistance in the collection of taxes. The treaty also contains a provision on arbitration in the event that Chile and the Netherlands cannot mutually agree on the position of a taxpayer who considers that the treaty has not been correctly applied.

The treaty will now go through the required approval process in both countries. In the Netherlands, this means that the treaty is first submitted to the Council of State for advice and then to parliament for approval.

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