The amendments introduced by Law No. 21,713 on Compliance with Tax Obligations incorporated significant changes to the Transfer Pricing regime in Chile, including an explicit provision regarding self-adjustments made by taxpayers themselves.
Under the current provisions of Article 41 E of the Income Tax Law (LIR), taxpayers may make self-adjustments to Transfer Pricing when they determine that their transactions with foreign related parties do not comply with the arm’s-length principle. However, these adjustments may only be made when they result in an increase in the taxable base for First-Category Tax (IDPC).
Consequently, it is no longer possible to unilaterally make a self-adjustment that reduces net taxable income, results in a lower tax liability, or generates a larger tax loss.
This rule is particularly relevant for multinational groups that make year-end adjustments to their intercompany transactions and must assess how to correct any deviations from the arm’s-length principle.
How Do Transfer Pricing Self-Adjustments Work?
Article 41 E, paragraph 9, allows the taxpayer to determine an arm’s-length price, value, or rate of return when the taxpayer concludes that a related-party transaction does not occur under normal market conditions.
The self-adjustment must be made before the Internal Revenue Service (SII) issues a request directly related to Transfer Pricing.
Furthermore, when two or more comparable prices, values, or profit margins exist, an interquartile range must be used, and the taxpayer may make the adjustment to any point or value within that range.
The main limitation lies in the tax effect of the adjustment: the determined amount must be included in the IDPC tax base and will only be applicable if it results in an increase in that base.
Therefore, negative self-adjustments cannot be made to reduce first-category net taxable income, pay less tax, or generate a larger tax loss.
Taxpayers must also retain the necessary documentation to demonstrate that the self-adjustment was determined using normal market prices, values, or rates of return.
DJ 1907 Confirms That Negative Adjustments Cannot Be Reported
The instructions for the Affidavit No. 1907 on Transfer Pricing for Tax Year 2026 reinforce this provision.
In the column designated for “Transfer Pricing Adjustment,” the taxpayer must report the total amount of the adjustment determined in accordance with Article 41 E, paragraph 9. The SII’s instructions expressly state that negative adjustment amounts may not be reported.
This provision is particularly important for companies that use Transfer Pricing policies based on target margins and make year-end adjustments to bring their results within the arm’s-length range.
The tax implications of these adjustments must be reviewed prior to their implementation to determine whether they are consistent with current Chilean regulations.
What happens if there is a risk of double taxation?
The inability to make negative self-adjustments does not mean that taxpayers are left without mechanisms to address situations of international double taxation.
A different scenario arises when a foreign tax authority makes a Transfer Pricing adjustment on a transaction conducted with a Chilean related party.
For example, if the tax authority of another country increases the income attributable to a related entity located in that jurisdiction, a situation of double taxation could arise with respect to income that has already been taxed in Chile.
In such cases, Article 41 E, paragraph 8, of the Income Tax Law (LIR) provides for a specific mechanism known as a corresponding or correlative adjustment.
What does the corresponding adjustment entail?
The corresponding adjustment allows a Chilean taxpayer to request a correction to the price, value, or profitability of a transaction with related parties as a result of a Transfer Pricing adjustment made by the tax authority of another country.
Unlike the self-adjustment, this mechanism requires prior authorization from the SII.
For the correction to be valid, the adjustment must have been made in a country with which Chile has a Double Taxation Treaty in force that does not prohibit this type of correction.
Furthermore, the foreign adjustment must be final. If administrative or judicial appeals were filed against the determination made abroad, the taxpayer may request the adjustment once that determination becomes final as a result of the corresponding administrative decision or court ruling.
A Deadline Multinationals Must Consider
One of the most important aspects of the procedure is the deadline.
SII Exempt Resolution No. 6 of 2025 provides that the corresponding adjustment request must be filed within one year from the date the Transfer Pricing adjustment is deemed final in the other jurisdiction.
If the request is filed after this deadline, the SII must deny it.
Therefore, multinational groups facing simultaneous Transfer Pricing audits in different jurisdictions must monitor not only the economic and tax effects of the adjustment but also the moment at which it becomes final.
Delays in handling the procedure could limit the chances of timely correcting a double taxation situation.
Corresponding Adjustment and Mutual Agreement Procedure (MAP)
In addition to the corresponding adjustment, companies should consider the Mutual Agreement Procedure (MAP) provided for in the Double Taxation Treaties signed by Chile.
SII Exempt Resolution No. 6 of 2025 establishes that initiating the procedure to request a corresponding adjustment does not preclude the taxpayer from additionally utilizing the Mutual Agreement Procedure.
Therefore, in the event of double taxation resulting from an international Transfer Pricing adjustment, it is advisable to analyze both mechanisms, taking into account the applicable treaty, the jurisdiction involved, the status of the foreign procedure, and its potential tax implications in Chile.
Self-Adjustment and Corresponding Adjustment: Two Different Mechanisms
The difference between these two mechanisms is fundamental.
The self-adjustment of Transfer Pricing provided for in Article 41 E(9) is carried out directly by the taxpayer and is applicable only when it increases the Chilean tax base.
In contrast, when a foreign tax authority makes an adjustment that could result in double taxation, the taxpayer may request a corresponding or correlative adjustment from the SII pursuant to Article 41 E(8).
The latter requires a formal procedure and authorization from the SII before the corresponding correction can be made.
What should companies with operations in Chile review?
Multinational groups should pay special attention to their Transfer Pricing policies and, in particular, to the adjustments they make at the end of each fiscal year.
Before making any correction, it is advisable to determine whether the adjustment will increase or decrease the Chilean tax base, ensure that there is sufficient documentation supporting the arm’s-length principle, and verify that the information reported in DJ 1907 is consistent with the company’s economic analyses and tax returns.
Likewise, it should be evaluated whether the Mutual Agreement Procedure (MAP) provided for in the applicable treaty can help resolve the double taxation situation.
The amendments incorporated into Article 41E establish a clear distinction between self-adjustments made directly by the taxpayer and corresponding adjustments resulting from actions by foreign tax authorities.
While self-adjustments may only be made when they increase the taxable base for First-Category Income Tax, any reduction in Chilean tax liability resulting from an adjustment made abroad must be handled through the mechanisms established by the regulations.
For multinational groups, this regulation reinforces the need to review their intra-group policies in advance, properly document year-end adjustments, and coordinate the management of Transfer Pricing disputes across the various jurisdictions in which they operate.
At TPC Group, we assist multinational groups with operations in Chile in reviewing their Transfer Pricing policies and adjustments, as well as in analyzing related adjustments and situations of international double taxation. Our specialized team provides technical support to strengthen tax compliance, anticipate contingencies, and properly manage risks arising from transactions between related parties.
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