Introduction
In Chile, Article 41 E of the Income Tax Law establishes the regulatory framework for related party transactions, including corporate reorganizations. This article also obliges taxpayers to file annual Transfer Pricing statements.
Obligation to file returns
In order to comply with OECD international standards and BEPS actions, three levels of documentation were implemented: Master File (Form N°1950), Local File (Form N°1951) and Country by Country Report (Form N°1937). These declarations allow the tax authorities to obtain a detailed view of multinational company transactions.
Penalties for Non-Compliance
Failure to file these declarations may result in severe penalties:
- Filing Failure: 50 Annual Tax Unit (ATU) fines.
- Late Filing: From 15 to 30 ATU progressive fines, depending on the delay.
- Incomplete or Erroneous Declarations: From 30 ATU, increased to 10 ATU fines for each late rectification.
- Maliciously False Declarations: From 50% to 300% fines of the evaded tax and corporal penalty.
Procedure and Condonation
Remission in justified cases may result in fines, which must be processed through the Regional Director or the Director of Large Taxpayers.
Conclusion
Taxpayers must comply with filing Transfer Pricing obligations to avoid penalties and ensure transparency and legal certainty in their operations. This article provides essential guidance to understand the responsibilities and consequences regarding Transfer Pricing reporting in Chile, contributing to better tax management and compliance.
Source: SII
