Chile's SII ruled in Letter No. 1801 of 20 July 2026 that the OECD's DEMPE framework can determine the arm's length value of intangibles under Article 64, though its suitability in each case remains subject to audit verification.
The Chilean tax authority (SII) has released Letter Ruling No. 1801, dated 20 July 2026, in response to a taxpayer inquiry on whether the DEMPE analysis set out in Chapter VI of the OECD Transfer Pricing Guidelines is an appropriate method for determining the arm’s length value of intangibles under Article 64 of the Tax Code.
The taxpayer argued that the comparability factors listed in Article 64 of the Tax Code are illustrative rather than exhaustive, and that they align with the arm’s length principle established in Article 41 E of the Income Tax Law.
In its ruling, the SII provided several important clarifications regarding the valuation of intangibles under Article 64:
- Definition of normal market value: The second paragraph of Article 64 defines normal market values as the prices that unrelated parties would have agreed upon in comparable operations and circumstances.
- Comprehensive comparability factors: To determine this value, taxpayers and authorities must consider industry characteristics, the specific functions, assets, and risks assumed by the parties, as well as the specific characteristics and components of the goods, services, or contracts in question.
- Flexibility in the absence of comparables: The SII explicitly noted that the law allows for the consideration of any relevant circumstance for a particular case. Importantly, this includes determining values in situations where there is no existing market or direct comparable.
- Conditional approval of DEMPE: The SII concluded that, in principle, the DEMPE analysis can indeed be used to evaluate intangibles. However, it established a clear caveat: the actual suitability of the DEMPE framework for any specific case must be verified during tax audits, and its acceptance will depend heavily on the concrete circumstances of the transaction being analysed.
Furthermore, the ruling outlines procedural expectations for both the tax authority and the taxpayer. If the tax authority exercises its appraisal powers to determine a value, the administrative act must clearly indicate the parameters used and adequately justify the valuation.
Conversely, under Article 21 of the Tax Code, taxpayers maintain the right to prove their market values using all legally established evidentiary methods.
