Chile has amended Article 41A of the Income Tax Law to reduce the caps on bilateral and unilateral foreign tax credits for certain types of income. The changes to the income tax law affect the credit claimed for income taxes paid or withheld abroad.
Law No. 20.727 (published in the official gazette on 31 January 2014) modifies Articles 41 A and 41 C of Chile’s income tax law, measures that govern the use of credits claimed against income tax on taxes paid or withheld abroad.
In general, the amount of the taxes paid abroad that can be claimed as a credit for Chilean income tax purposes is increased i.e. an increase from the current rate of 30% of the amount of net foreign source income, to:
- Without income tax treaty: 32% relating to income; and
With income tax treaty: 35% relating to income.
