Brazil has enacted a modernised tax treaty with Chile that tightens anti-avoidance rules, caps pension taxation at 25%, and expands information sharing between tax authorities. The protocol, which updates a 2001 agreement, introduces stricter qualifying criteria for treaty benefits to combat tax evasion schemes.
Brazil officially promulgated a protocol amending its tax treaty with Chile on 2 March 2026, according to Decree No. 12,863.
The updated convention introduces significant modifications to prevent tax avoidance while eliminating double taxation on income between the two countries.
Notable changes include:
Royalty taxation now differentiates between types: 15% for industrial or commercial trademarks, and 10% for other royalties. The protocol adds robust anti-abuse provisions, including a “Limitation on Benefits” article (Article 26A) requiring residents to be “qualifying persons” to claim treaty benefits. This targets treaty shopping arrangements designed to extend benefits to third-state residents.
The agreement strengthens information exchange between tax authorities, allowing data sharing for tax administration without restrictions based on domestic tax interest. Financial institutions must provide information upon request, and confidentiality protections mirror domestic law standards.
The treaty permits both countries to apply domestic anti-avoidance legislation, including controlled foreign company (CFC) rules and thin capitalisation provisions. A principal purpose test denies benefits when obtaining them was a primary objective of transactions, unless consistent with the convention’s purpose.
The protocol, originally signed in Santiago on 3 March 2022, is the first amendment to the treaty. It entered into force internationally for Brazil on 30 October 2025 after congressional approval in September 2025.
