Foreign Tax Credits

Taxpayers who reside or are domiciled in Chile and receive income that has been taxed abroad with an income tax may use the foreign taxes as a credit towards the income taxes owed in Chile.

To take advantage of the credit, the taxpayer must register their foreign investment with the SII's Foreign Investment Register during the year the investment was made.

Mandatory income taxes that are paid or withheld abroad can also qualify for a credit, as long as they are equivalent or similar to Chilean income tax.

The taxpayer must provide evidence of the taxes paid abroad through receipts or certificates from the foreign country's competent authority, or other means of proof. In some cases, the corporate tax paid by the entity remitting the income may also be used as credit.

The credit amount is determined by the lesser of the tax actually paid abroad or 35% of the gross income from each separate type of income taxed abroad, considering separately the income from countries with and without double taxation agreements.

There is also a global cap on the credit, which is 35% of the sum of the available credits and the net foreign source income for each year.

Under the Tax Modernization Law No. 20,210, foreign investments of Chilean resident companies in foreign companies with investments in Chile can also take advantage of this credit.

The withholding tax applied in Chile can also be used as credit, as long as the income being recognized in Chile originates from Chilean source income received by taxpayers without residency or domicile in the country.