SF: Chile's tax authority has confirmed that taxpayers cannot claim a foreign tax credit or seek a refund when net foreign-source income is zero or results in a loss, reinforcing that the credit mechanism exists only to relieve genuine double taxation where positive income is taxable in both Chile and abroad.
Chile’s tax authority (SII) issued Letter Ruling No. 286 on 4 February 2026, clarifying the conditions under which taxpayers may claim a credit for foreign taxes paid. The ruling responds to a taxpayer request seeking both a foreign tax credit where net foreign-source income was zero or a loss, and a refund of excess tax paid due to an unused credit.
The SII confirmed that the foreign tax credit mechanism exists solely to prevent international double taxation. Under Article 3 of the Income Tax Law, Chile taxes residents on worldwide income, but a credit is only triggered when foreign income is also positively taxable in Chile. The credit may be applied against First Category Tax, Second Category Tax, Global Complementary Tax, and Additional Tax — but only where there is actual taxable income to offset.
Since calculating the credit requires a positive net foreign result, a zero or loss position from foreign operations generates no entitlement to a credit. Consequently, no refund of foreign taxes paid is available in such circumstances either.
The SII noted that this position is consistent with existing guidance under Circular No. 31 of 2021 and remains unchanged.
