12 July 2023
United States | Tax | US Senate approves groundbreaking income tax treaty with Chile
Summary
After a 13-year journey, the US Senate finally granted its official seal of approval to an income tax treaty between the US and Chile. While the treaty still awaits formal ratification, this agreement will ease the disadvantage American employers had in Chile where lithium and copper mining has increased the movement of mobile employees between the countries. This is only the third treaty the US has in force with a Latin American country.
The Detail
On June 22, 2023, the US Senate voted 95-2 to approve the “Convention between the Government of the United States of America and the Government of the Republic of Chile for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital.” As the government of Chile had approved the initial tax treaty 13 years ago in 2010, the US Senate’s approval of the original tax treaty contains new reservations. In light of these modifications to the original agreement, Chile is now required to endorse the reservations in order for the White House to formally ratify the treaty.
The treaty follows much of the 2006 US Model Treaty, but distinguishes itself by highlighting:
What this means
For US employers with a presence in Chile, assignment structures and costs should be reviewed to determine compliance with the new treaty and to ensure cost optimization. Careful examination of pension plan participation of cross border employers should be undertaken to take advantage of the new treaty benefits.
How we can help
In order to ensure adherence to tax obligations when the treaty is ratified as well as to minimize tax liabilities, it is important to assess how the newly established conditions impact your mobile population. Vialto Partners can help you identify the impact of the treaty on your existing operations and any strategic planning opportunities to improve organizational efficiency and reduce costs.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
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