Transfer Pricing Penalties and Fines in Chile 2024

June 5, 2024

Introduction

In Chile, Article 41 E of the Income Tax Law (LIR) establishes the regulatory framework for related party transactions, including corporate reorganizations. This article also obliges taxpayers to file annual Transfer Pricing returns.  

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 the operations of multinational companies.  

Penalties for Non-Compliance

Failure to comply with the filing of these declarations may result in severe penalties:  

  1. Failure to File the Declaration: 50 UTA fine.  
  2. Late Filing: Progressive fines from 15 UTA to 30 UTA, depending on the delay.  
  3. Incomplete or Erroneous Declarations: Fine of 30 UTA, increased to 10 UTA for each late rectification.  
  4. Maliciously False Declarations: Fine of 50% to 300% of the evaded tax and corporal penalty.  

Procedure and Condonation

Fines may be requested for remission in justified cases and must be processed through the Regional Director or the Director of Large Taxpayers.  

Conclusion

It is essential for taxpayers to comply with Transfer Pricing filing obligations to avoid penalties and ensure transparency and legal certainty in their operations.  

This article provides essential guidance to understand the responsibilities and consequences associated with the filing of Transfer Pricing returns in Chile, contributing to better tax management and tax compliance.  

Source: SII