The Netherlands signs a tax treaty with Chile

A tax treaty had been concluded between the Netherlands and 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.

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

The treaty removes potential barriers, such as double taxation, that could otherwise hinder economic activities in Chile and from Chile in the Netherlands. Besides, a treaty also provides legal certainty for taxpayers in both treaty countries.

Tax evasion

A comprehensive anti-abuse provision that prevents the treaty from being used to avoid taxation, is included in the tax treaty. This provision allows a country to refuse treaty benefits if a company transfers money through the Netherlands or Chile, purely to avoid tax. Together with 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.

Recently, Chile has concluded very similar treaties 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. As a result of this, relatively more tax will be left in Chile compared to other countries. Withholding taxes on interest and royalties are limited to 10% and in some cases even further. Moreover, pensions may be taxed in the country where they are accrued. Also, provisions to ensure that the Netherlands can levy tax on income from a substantial interest upon emigration are included in the treaty.

Furthermore, agreements have been made with Chile on the mutual exchange of information and assistance in the collection of taxes. The treaty also encloses 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.

Approval process

Since the treaty has been concluded, the required approval process for the treaty starts now 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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