Transfer Pricing in Chile
Concept and Regulation in Chile
Chile, a member country of the OECD, has been introducing changes in its transfer pricing regulations, in such a way that it has been adapting to what the OECD has indicated related to such matter. In 1998, through Circular No. 3, Chile has incorporated regulations related to Transfer Pricing into its legislation. However, it was not until 2012, when Law 20.630 reformed the rules on this matter, incorporating in Article 41-E of the Income Tax Law (the Law) measures according to the guidelines of the Transfer Pricing Guidelines of the Organization for Economic Cooperation and Development (OECD). Being a member country of the aforementioned organization, it has continued to introduce changes to its transfer pricing regime as from 2016, according to Action 13 of the BEPS Plan (Base and Erosion and Profit Shifting), to take measures against tax evasion or avoidance.
Principle of Full Competition: Concept
Definition of Related Party in Chile
For the purposes of applying transfer pricing rules, the parties involved in the operation, reorganization, or restructuring in question must fall under one of the relationship hypotheses contemplated in section 1 of the Law, according to which such parties will be considered related in the following cases:
- When there is direct or indirect participation in the management of the entity, or the same person or persons participate directly or indirectly in the direction, control, capital, profits, or revenues of both parties, understanding all of them to be related to each other.
- When it involves a subsidiary, branch, or office regarding its headquarters, as well as with other permanent establishments of the same headquarters, with related parties of the latter, and permanent establishments of those.
- When transactions are carried out with territories of null or low tax imposition for the purposes of tax regulations, except for exceptions where there is an agreement for the exchange of information relevant to the application of tax provisions that is in force.
- In terms of natural persons, when there are links of consanguinity and/or affinity.
- When a party carries out one or more operations with a third party that, in turn, carries out directly or indirectly with a related party of that party, one or more similar or identical operations to those it performs with the first, regardless of the capacity in which said third party and the parties participate in such operations.
Transfer Pricing Methods in Chile
- Comparable Non-Controlled Price Method.
- Resale Price Method.
- Cost-plus margin method.
- Profit-Sharing Method.
- Net Margin Transaction Method.
- Residual Methods.
Comparability Analysis in Chile
According to Article 3.2 of Circular No. 29 issued by the Internal Revenue Service (SII), the following criteria will be followed to perform the comparability analysis:
- Characteristics of the goods or services.
- Analysis of the functions, assets and risks of the transactions analyzed.
- The contractual clauses of the transaction.
- The economic circumstances of the market.
- The business strategies.
Documentation and Declarations of Transfer Pricing in Chile
Informative Affidavit in Chile
- Taxpayers that as of December 31 of the year reported belonging to the Medium or Large Company segments, and that in such year have carried out operations with related parties abroad.
- Those taxpayers, which are not classified in the previous assumption, carry out operations with a country or territory of low or zero taxation, preferential regimes or non-cooperative jurisdiction.
- Taxpayers who, not being in the first case, in the corresponding reporting period have carried out transactions with related parties abroad for amounts exceeding $ 500,000,000 (five hundred million Chilean pesos).
Local File
As established by the Internal Revenue Service (SII), they will be required to present this declaration when they meet these conditions:
- Belong to the Large Companies segment, according to criteria established by the IRS.
- Their parent or controlling entity of the Multinational Group of Companies (GEM) must have filed the Country by Country Report with the Internal Revenue Service or other Tax Administration for the respective tax year.
- In the year in question, they have carried out one or more operations with related parties not domiciled in Chile, for amounts exceeding Ch$200,000,000 (two hundred million Chilean pesos).
Master File
According to the above-mentioned Resolution, taxpayers who meet any of the following conditions must file the “Informative Affidavit” called Master File through Form 1950 and attachment:
- The parent or controlling entity of the “GEM”, which has a residence in Chile for tax purposes, to the extent that the income of the group of entities that are part of such group in Chile and abroad, as of December 31st of the year being reported, is at least seven hundred and fifty million Euros (EUR 750,000,000) at the time of the closing of the consolidated financial statements.
- The entity that integrates or belongs to the GEM, that has a residence in Chile for tax purposes, and that has been designated by the parent or controlling entity of such group as the only substitute of the latter to submit the “Country by Country Report” Affidavit in its country of tax residence, in the name of the parent or controlling entity.
Country by Country Report
- Controlling or parent entity of the Multinational Group of Companies, which has a residence in Chile for tax purposes, to the extent that the income of all entities forming part of such Group, in the 12 months previous to the beginning of the corresponding tax period, is at least 750 million euros at the time of the closing of the consolidated financial statements.
- An entity that forms part of or belongs to the Group, that is resident in Chile for tax purposes, and that has been designated by the parent or controlling entity of said Group as the only substitute for it.
Technical Study of Transfer Pricing in Chile
Sanctions for Non-Compliance in Chile
Presentation of Affidavit | Penalty fee |
---|---|
Late Submission of Sworn Statement | Up to 45 days delay: 15 UTA – From 46 days delay to 90 days delay: 20 UTA – 91 days delay onwards: 30 UTA |
Non-submission | 50 UTA |
Incomplete or erroneous submission: | 10 UTA |
Maliciously false submission | 50% to 300% of the value of the tax evaded and with imprisonment from mid to maximum degree. |
Offices in Chile
- Av. Nueva Providencia 1881, Oficina 1414, Edificio Nuevo Centro Providencia – Santiago
- contacto@tpcgroup-int.com
- +562 29402125
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Transfer Pricing Ranking 2024
We are pleased to inform you that we belong to the 2024 Ranking of Transfer Prices by World TP in Chile