The Chilean tax authority (SII) has activated the Most-Favoured-Nation (MFN) clauses in its tax treaties with Belgium, New Zealand, Norway, Switzerland, and Uruguay, following the entry into force of agreements with India, Italy, and Japan, updating withholding tax rates on interest and royalties and clarifying refund procedures for excess taxes.
Chile’s tax authority (SII) issued Circular No. 65 on 3 December 2025, addressing the activation of Most-Favoured-Nation (MFN) clauses in Chile’s tax treaties with Belgium, New Zealand, Norway, Switzerland, and Uruguay.
These clauses are triggered by the recent entry into force of Chile’s tax agreements with India, Italy, and Japan, and affect withholding tax rates on interest and royalties.
Chile Treaties and MFN Activation
Chile–Belgium (2007)
The MFN clause is activated by the Chile–Japan treaty (2016). For interest income, withholding rates from 1 January 2017 are 4% for banks, insurance companies, finance companies, machinery sellers, or companies with significant bond/debt-claim activity; 5% for bonds or securities traded on recognized markets; and 10% in other cases (15% during 2017–2018). Special rules apply for back-to-back loan arrangements. Royalty income is taxed at 2% for industrial, commercial, or scientific equipment royalties and 10% in other cases.
Chile–New Zealand (2003)
Triggered by Chile–Japan (2016) and Chile–Italy (2015). Interest withholding rates were 10% for bank/insurance loans, traded securities, or companies active in lending or machinery sales, and 15% for other cases, until 31 December 2018. From 1 January 2019, all interest is subject to a 10% rate.
Chile–Norway (2001)
Activated by Chile–Japan (2016). Interest and royalty rates mirror those under the Chile–Belgium treaty, including the 4%, 5%, and 10% brackets for interest and 2%/10% for royalties.
Chile–Switzerland (2008)
MFN triggered by Chile–Japan (2016). Interest and royalty withholding rates follow the same structure as the Norway and Belgium treaties.
Chile–Uruguay (2016)
MFN triggered by Chile–India (2020) for interest. From 1 January 2023, interest is taxed at 4% for long-term bank loans or machinery sales and 10% otherwise, consistent with the original treaty.
Refunds
Circular 65 clarifies that if interest or royalty withholding taxes were collected at higher rates than those established under the MFN clauses, residents or domiciled taxpayers in Chile, Belgium, New Zealand, Norway, Switzerland, and Uruguay may apply for a refund according to each country’s tax regulations.
