In order to ensure compliance with international tax obligations, the Internal Revenue Service (IRS) developed a control strategy to ensure that profits are taxed where business activities are performed, and value is created.
In this regard, in view of the increase in cross-border transactions in the last five years, the IRS created this strategy based on three pillars:
- Monitoring of international transactions based on economic indicators.
- Strengthening international collaboration
- Use of information by foreign administrations
The last one of the three pillars above includes the development of risk analysis models with the use of information technology, artificial intelligence, and databases, as well as the application of sanctions and fines to taxpayers who fail to comply or cause non-compliance with these obligations.
1. Investments with an Upward Trend
There is evidence of a sustained increase in the accumulated number of Chilean investments abroad. In 2017, it stood at 57 billion pesos; conversely, in 2021, this figure was exceeded by 100 billion pesos, which is equivalent to 41.9% of GDP.
2. Identification of 26 Jurisdictions
The IRS identified 26 countries, states, or jurisdictions where Chileans had moved or carried out transactions to complicate the tracking of the beneficial owners of income of residents in Chile and maintain control of their investments and free access to the hidden resources they have abroad.
3. Information Exchange Agreements
Chile can exchange information with 136 countries, which collaborates and covers 96% of the Global GDP, on financial accounts abroad, which belong to resident persons in Chile, as well as income paid by foreign entities to persons residing in Chile and related party transactions.
Such access to information allows for verifying compliance and detecting possible non-compliance. By the last October, more than 4,500 bilateral exchanges with over 110 jurisdictions had been activated.
Through the Joint International Task Force on Shared Intelligence and Collaboration – JITSIC, the IRS could strengthen its relationship with other tax administrations through its participation in this network, with 41 foreign administrations dedicated to cross-border tax evasion.
Therefore, due to the anticipated agreements, $ 9.6 billion in taxes on foreign remittances were collected between 2017 and 2021, and $ 60,000 million in taxes on Transfer Pricing transactions were recovered.
Source: Servicio de Impuestos Internos (SII/IRS) 01/30/23