Although transfer pricing only was introduced into local legislation in 2012, the market in Chile has rapidly matured with businesses and authorities having a better understanding of the possible impacts of rules on intra-group transactions. The market has also been subject to some changes over the past year.
One of these changes is the implementation of country-by-country reporting (CbCR), with the first information exchanges expected to begin in 2017. Chile is one of 83 countries worldwide that have signed the multilateral competent authority agreement (MCAA) for the automatic exchange of CbCR. From June 2013, taxpayers were also required to submit an annual notification to the authorities regarding transactions with foreign-related parties and the relevant transfer pricing policy.
With regards to the BEPS Actions 8-10, which relate to aligning transfer pricing outcomes with value creation, a reform in 2014 introduced new rules to enhance the oversight of the tax authorities of cross-border transactions. Large companies are required to submit a sworn declaration on their global tax footprint, Deloitte reports.
For taxpayers, this increase in documentation requirements means that they will have to prove that transfer prices in transactions with related parties are consistent with the arm's-length principle.
Chile signed up to become a member of the OECD in 2010 and is still the only South American member country. Practitioners say that more and more changes are being implemented in order to comply with the OECD's regulations. As more changes come into effect, the transfer pricing market is becoming a bigger focus for both taxpayers and the authorities.
"Transfer pricing is something that wasn't viewed very much, but now it has become much more complicated and it is an area with which we are engaging much more," said Jaime Carey, managing partner and co-head of tax at Carey. "The market has become a lot more sophisticated and people are starting to realise that."
While the authorities discuss TP policies openly with companies, the growth in sophistication has been matched by a growth in aggression. The authorities carried out far more in-depth audits in 2015 than in previous years.
"They are very aggressive in their auditing in transfer pricing," said Juan Pablo Guerrero, partner at KPMG.
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(As of April 2016)
|Corporate income tax rate||24%|
|Capital gains tax rate||24/35%|
|Branch tax rate||24%|
|Royalties from patents, trademarks, formulas and similar items||0/15/20/30% (a)(d)|
|Technical services||15/20% (e)|
|Other fees and compensation for services rendered abroad||35% (a)|
|Branch remittance tax||35% (f)|
Net operating losses (years)
Source: EY 2016 Worldwide Corporate Tax Guide