Peer Review Report Phase 2 Implementation of The Standard in Practice

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES

Peer Review Report
Phase 2
Implementation of the Standard
in Practice
Global Forum on Transparency and Exchange of Information
for Tax Purposes
PEER REVIEWS, PHASE 2: CHILE
This report contains a Phase 2: Implementation of the Standards in Practice review, as well
as revised version of the Phase 1: Legal and Regulatory Framework review already released
for this country.
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the
multilateral framework within which work in the area of tax transparency and exchange of
information is carried out by over 120 jurisdictions which participate in the work of the
Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of the implementation
of the standards of transparency and exchange of information for tax purposes. These
standards are primarily reected in the 2002 OECD Model Agreement on Exchange of
Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax
Convention on Income and on Capital and its commentary as updated in 2004, which has
been incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably relevant
information for the administration or enforcement of the domestic tax laws of a requesting
party. Fishing expeditions are not authorised, but all foreseeably relevant information must
be provided, including bank information and information held by duciaries, regardless of the
existence of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identied by the Global Forum as
relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1
reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange
of information, while Phase 2 reviews look at the practical implementation of that framework.
Some Global Forum members are undergoing combined Phase 1 plus Phase 2 reviews.
The ultimate goal is to help jurisdictions to effectively implement the international standards
of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and they thus represent
agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency and Exchange of
Information for Tax Purposes, and for copies of the published review reports, please visit
www.oecd.org/tax/transparency and www.eoi-tax.org.
CHILE
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Consult this publication on line at http://dx.doi.org/10.1787/9789264217676-en.
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ISBN 978-92-64-21761-4
23 2014 18 1 P
9HSTCQE*cbhgbe+
Global Forum
on Transparency
and Exchange
of Information for Tax
Purposes Peer Reviews:
Chile 2014
PHASE 2:
IMPLEMENTATION OF THE STANDARD IN PRACTICE
August 2014
(reflecting the legal and regulatory framework
as at May 2014)
This work is published on the responsibility of the Secretary-General of the OECD.
The opinions expressed and arguments employed herein do not necessarily reflect
the official views of the OECD or of the governments of its member countries or
those of the Global Forum on Transparency and Exchange of Information for Tax
Purposes.
This document and any map included herein are without prejudice to the status of
or sovereignty over any territory, to the delimitation of international frontiers and
boundaries and to the name of any territory, city or area.
ISBN 978-92-64-21761-4 (print)
ISBN 978-92-64-21767-6 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews
ISSN 2219-4681 (print)
ISSN 2219-469X (online)
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OECD (2014), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
Reviews: Chile 2014: Phase 2: Implementation of the Standard in Practice, OECD Publishing.
http://dx.doi.org/10.1787/9789264217676-en
PEER REVIEW REPORT PHASE 2 CHILE OECD 2014
TABLE OF CONTENTS 3
Table of Contents
About the Global Forum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Information and methodology used for the peer review of Chile . . . . . . . . . . . . .11
Overview of Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
B.1. Competent Authoritys ability to obtain and provide information. . . . . . . . 52
B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 68
C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . 87
C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . 93
C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 94
4 TABLE OF CONTENTS
Summar y of Deter minations and Factor s Under lying Recommendations. . . .105
Annex 1: Jur isdictions r esponse to the r eview r epor t . . . . . . . . . . . . . . . . . . . .111
Annex 2: List of Chile Exchange of Infor mation Mechanisms . . . . . . . . . . . . .112
Annex 3: List of laws, r egulations and other mater ial r eceived . . . . . . . . . . . .117
Annex 4: People inter viewed dur ing the on-site visit . . . . . . . . . . . . . . . . . . . . .119
ABOUT THE GLOBAL FORUM 5
About the Global For um
The Global Forum on Transparency and Exchange of Information for
Tax Purposes is the multilateral framework within which work in the area
of tax transparency and exchange of information is carried out by over
120 jurisdictions, which participate in the Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer
review of the implementation of the international standards of transpar-
ency and exchange of information for tax purposes. These standards are
primarily reflected in the 2002 OECD Model Agreement on Exchange of
Information on Tax Matters and its commentary, and in Article 26 of the
OECD Model Tax Convention on Income and on Capital and its commen-
tary as updated in 2004. The standards have also been incorporated into
the UN Model Tax Convention.
The standards provide for international exchange on request of fore-
seeably relevant information for the administration or enforcement of the
domestic tax laws of a requesting party. Fishing expeditions are not authorised
but all foreseeably relevant information must be provided, including bank
information and information held by fiduciaries, regardless of the existence
of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by
the Global Forum as relevant to its work, are being reviewed. This process is
undertaken in two phases. Phase 1 reviews assess the quality of a jurisdic-
tions legal and regulatory framework for the exchange of information, while
Phase 2 reviews look at the practical implementation of that framework. Some
Global Forum members are undergoing combined Phase 1 and Phase 2
reviews. The Global Forum has also put in place a process for supplementary
reports to follow-up on recommendations, as well as for the ongoing monitor-
ing of jurisdictions following the conclusion of a review. The ultimate goal is
to help jurisdictions to effectively implement the international standards of
transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum
and they thus represent agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency
and Exchange of Information for Tax Purposes, and for copies of the pub-
lished review reports, please refer to www.oecd.org/tax/transparency and
www.eoi-tax.org.
EXECUTIVE SUMMARY 7
Executive Summar y
1. This report summarises the legal and regulatory framework for
transparency and exchange of information in Chile as well as the practi-
cal implementation of that framework. The international standard which is
set out in the Global Forums Terms of Reference to Monitor and Review
Progress Towards Transparency and Exchange of Information, is concerned
with the availability of relevant information within a jurisdiction, the compe-
tent authoritys ability to gain access to that information, and in turn, whether
that information can be effectively exchanged on a timely basis with its
exchange of information partners. The assessment of effectiveness in practice
has been performed in relation to a three year period (1 January 2010 through
31 December 2012).
2. Chile is a South American member of the OECD, whose economy is
largely based on its natural resources (mining and agro-industry).
3. The legal and regulatory framework for the availability of informa-
tion in Chile is in place. Information about the owners and other stakeholders
of an entity or arrangement and information on the transactions carried
out by any entity or arrangement subject to registration and tax obligations
in Chile is available at any time either from the public authorities (the tax
administration maintains a great deal of information), directly from the enti-
ties (e.g. shareholders ledgers) or from regulated third parties (e.g. public
notaries, Commercial Registrars, banks). Some information is also publicly
available. Ownership information on relevant foreign companies will also be
fully available from 1 January 2015. Accounting information is maintained
by relevant entities and arrangements. Full bank information is also avail-
able in Chile. The large database maintained by the Chilean tax authorities
allowed the competent authority to answer almost all questions related to
ownership information as well as a few requests on accounting and banking
information.
4. For information not already contained in the Chilean tax database,
the Chilean tax administration has broad powers to access accounting infor-
mation and information on the ownership of legal entities, pursuant to the Tax
Code. In particular, these powers allow the authorities to request information
8 EXECUTIVE SUMMARY
from any taxpayer and from third parties who may have the information
requested. The gathering of identity, ownership and accounting information
functions smoothly for EOI purposes.
5. Legislation was passed in 2009 that allows full exchange of bank
information, however, an issue has been identified regarding the ability
to obtain certain types of bank information in respect of transactions that
have occurred prior to January 2010, and this legal impediment has pre-
vented an effective exchange of information in practice. In addition, the
procedure introduced in the Chilean Tax Code in 2009 is largely based on
the notification of the accountholder, without allowing for any exception.
Recommendations are made for Chile to improve its legal framework in
these respects. In practice, some banking information was exchanged, but the
procedures to gather banking information have not been used in the period
2010-12 and remain largely untested in practice.
6. Chile has a network of agreements that provide for exchange of
information in tax matters to 26 partner jurisdictions and has signed EOI
agreements with a total of 83 jurisdictions, with a large increase due to the
recent signature of the Multilateral Convention on Mutual Administrative
Assistance in Tax Matters. Chile also continues negotiating new DTCs
and recently started signing TIEAs. Chile has never refused to negotiate
an exchange of information instrument with another member of the Global
Forum and has a proactive policy of TIEA negotiations to further develop its
EOI network.
7. Chile has anticipated an increase of activity with the creation in
2012 of a tax department dedicated to international tax matters including
exchange of information on request. The procedures to manage EOI requests
have also been streamlined with the adoption of a dedicated internal circular.
The Chilean authorities acknowledge that response times have slightly suf-
fered during the transition period as this restructuring was in progress. The
response times were nonetheless within 90 days from the date of receipt of
the requests in 25% of the cases, within 180 days in 67.5% of the cases and
within a year in 95% of the cases. One request has been answered after a year
and one is still pending. Some communication issues with EOI partners have
been identified and the competent authority is taking action to improve the
situation.
8. Chile has been assigned a rating for each of the ten essential ele-
ments as well as an overall rating. The ratings for the essential elements are
based on the analysis in the text of the report, taking into account the Phase 1
determinations and any recommendations made in respect of Chile legal and
regulatory framework and the effectiveness of its exchange of information
in practice. On this basis, Chile has been assigned the following ratings:
Compliant for elements A2, A3, C2, C3 and C4, Largely Compliant for
EXECUTIVE SUMMARY 9
elements A1, C1 and C5, and Partially compliant for elements B1 and B2. In
view of the ratings for each of the essential elements taken in their entirety,
the overall rating for Chile is Largely compliant.
9. A follow up report on the steps undertaken by Chile to answer the
recommendations made in this report should be provided to the Peer Review
Group of the Global Forum within twelve months after the adoption of this
report.
INTRODUCTION 11
Intr oduction
Infor mation and methodology used for the peer r eview of Chile
10. The assessment of the legal and regulatory framework of Chile was
based on the international standards for transparency and exchange of infor-
mation as described in the Global Forums Terms of Reference to Monitor
and Review Progress Towards Transparency and Exchange of Information
For Tax Purposes, and was prepared using the Global Forums Methodology
for Peer Reviews and Non-Member Reviews. The assessment has been
conducted in two stages: Phase 1, performed in 2011, assessed Chiles legal
and regulatory framework for the exchange of information, while Phase 2,
performed in 2013, looked at the practical implementation of that framework
over a three year period (2010 to 2012), as well as any amendments made to
the legal and regulatory framework since the Phase 1 review (a list of relevant
laws and regulations is set out in Annex 3). The assessment was, therefore,
based on the laws, regulations, and exchange of information mechanisms in
force or effect as of 26 May 2014. It reflects Chiles responses to the Phase 1
and Phase 2 questionnaires and supplementary questions, other materials
supplied by Chile and explanations provided during the Phase 2 on-site visit
that took place on 5-7 November 2013 in Santiago, Chile, and information
supplied by exchange of information partner jurisdictions. During the on-
site visit, the assessment team met with officials and representatives of the
Internal Revenue Service (Servicio de Impuestos Internos); Ministries of
Finance, Economy and Justice; Tax and Customs Court; Regulators of banks
and stock exchange (Superintendencia de Bancos e Instituciones Financieras
and Superintendencia de Valores y Servicios, and associations of the private
sector (Bar, Associations of Banks and of Accountants) (see Annex 4).
11. The Terms of Reference break down the standards of transparency and
exchange of information into 10 essential elements and 31 enumerated aspects
under three broad categories: (A) availability of information, (B) access to
information, and (C) exchange of information. This review assesses Chiles
legal and regulatory framework and the implementation and effectiveness of
this framework against these elements and each of the enumerated aspects. In
12 INTRODUCTION
respect of each essential element a determination is made regarding Chiles
legal and regulatory framework that either: (i) the element is in place, (ii) the
element is in place but certain aspects of the legal implementation of the
element need improvement, or (iii) the element is not in place. These determina-
tions are accompanied by recommendations for improvement where relevant.
In addition, to reflect the Phase 2 component, recommendations are made
concerning Chiles practical application of each of the essential elements and
a rating of either: (i) compliant, (ii) largely compliant, (iii) partially compliant,
or (iv) non-compliant is assigned to each element. An overall rating is also
assigned to reflect Chiles overall level of compliance with the standards. A
summary of findings against those elements is set out at the end of this report.
12. The assessment was conducted by an assessment team, which con-
sisted of two expert assessors and a representative of the Global Forum
Secretariat: Ms Shelley-Anne Carreira, South Africa; Ms Suwon Kim, Korea;
and Ms Gwenalle Le Coustumer from the Global Forum Secretariat.
Over view of Chile
13. Chile is a South American country bordered by Argentina on the
East, Peru and Bolivia on the North. It is over 4 300 km long and has an aver-
age width of close to 180 km, and a population of 17.6 million, with almost
half of it in the region of the capital Santiago. The currency is the Chilean
Peso (CLP; on 13 May 2014 CLP 1 000 equal USD 1.8 and EUR 1.3).
Economic context
14. Chiles GDP in 2010 was USD 217 billion, with a GDP per capita
of USD 15 064. In 2013, Chiles GDP slightly raised to USD 277 billion
(current), with a GDP per capita of USD 19 076. The countrys export perfor-
mance is based on natural resources, with copper and agricultural products
dominating export revenues. Chiles mining sector (predominantly copper)
accounted for over 12% of the GDP in 2013, while manufacturing accounted
for 11% and services
1
accounted for 73%. Services include electricity, gas
and water, construction, wholesale and retail trade, hotels and restaurants,
transport, communication, financial and business services, dwelling services,
personal services, public administration. Over the same period, the mining
sector accounted for around 57% of total good exports. Agriculture, forestry
and fisheries are also highly export-oriented and account for just 3% of GDP,
but around 8% of total exports.
1. Services include electricity, gas and water, construction, wholesale and retail
trade, hotels and restaurants, transport, communication, financial and business
services, dwelling services, personal services, public administration.
INTRODUCTION 13
15. Chiles main trading partners are China, the United States, Japan,
Brazil and Korea for both imports and exports.
2
Import partners are: United
States 20.2%, China 19.7%, European Union 16.6% (including Germany
4.0%), Brazil 6.4%, Argentina 4.9%, and Korea 3.5%. Export partners are:
China 24.1%, European Union 14.2%, United States 12.3%, Japan 9.6%,
Brazil 5.6% and Korea 5.4%. Foreign direct investment from Chile is primar-
ily directed to the Americas: Argentina, Brazil, Peru, Uruguay, Colombia,
Panama, the United States and Mexico.
3
Inward investments into Chile origi-
nate primarily from Spain, the United States, and Canada.
Governance and legal system
16. Chile is a representative democratic Republic organised as a unitary
State with a government headed by a President.
4
The Chilean legal system
relies on a unitary national law and is based on the civil law tradition.
17. The Constitution is the fundamental law of the State. Next in the
hierarchy of legal norms (depending on the matters and quorums required
for their adoption and amendment) are Constitutional Interpretative Laws,
Organisational Constitutional Laws, Qualified Quorum Laws, and ordinary
laws (such as tax laws). In addition, Decrees with Force of Law (DFL) are
norms enacted by the Executive by virtue of a delegation of powers made by
the Congress in certain matters determined by the Constitution. Many critical
regulations are contained in Decree-Laws (DL) enacted during certain peri-
ods of Chiles political history that have subsequently been given the value
of laws, namely the Tax Code, the Income Tax Law, the VAT Law, the Stamp
Tax Law, and the National Tax Identification Law. Finally, decrees, regula-
tions and administrative instructions issued by the Executive are the lowest
ranking norms. Article 54(1)(5) of the Chilean Constitution establishes that
The provisions of a treaty shall only be terminated, modified or suspended
in the form established under the treaty itself or according to the general rules
of international law. The Chilean authorities consider that as a result of this
provision, an international treaty has a higher hierarchy than the ordinary law
of the country. The Constitution nonetheless prevails over DTCs.
18. The legislative power relies on both the government and the two cham-
bers of the Congress: the Chamber of Deputies and the Senate. The executive
2. Central Bank of Chile: Import partners: United States 22.9%, China 18.2%,
European Union 12.6% (including Germany 3.5%), Brazil 6.6%, Argentina 6.6%,
and Korea 3.5%. Export partners: China 23.3%, European Union 16.1%, United
States 12.7%, Japan 11.2%, Korea 6%, Brazil 5.5%.
3. Central Bank of Chile and Foreign Investment Committee of Chile
4. Chile comprises 15 regions, 52 provinces, and 345 municipalities.
14 INTRODUCTION
power is exercised by the Government. The Government has the exclusive pre-
rogative of proposing to Congress any changes relating to tax matters.
19. The judiciary is independent from the Executive and the Legislative.
It is composed of a Supreme Court, 17 Courts of Appeals, 18 tax and custom
courts, and First Instance Judges dedicated to criminal, labour, civil, or
family matters. Furthermore, the Constitutional Court established in the
Constitution deals with the constitutionality of laws both before and after
they have entered into force. Finally, the Auditor General of the Republic
(Contralora General de la Repblica), an institution established in the
Constitution, supervises the legality of all acts of the Executive.
Overview of commercial laws
20. The commercial laws of Chile are based on the principles of civil law
tradition. The main type of entity is called sociedad or company, as defined in
the Chilean 1855 Civil Code. It constitutes a legal entity separate from its owners
(individuals or other legal persons) who have made a capital contribution with
the aim of participating in profits or, possibly, assuming the business losses. The
rules for the creation and functioning of the different types of sociedades are
found in the Commercial Code and dedicated laws. Trusts are not recognised in
Chile, and foundations can only pursue public, charitable purposes. Chiles laws
provide for another type of relevant entity, fidecomiso, assessed in this report.
The regulatory framework (including the f inancial sector)
21. Chiles Superintendency of Securities and Insurance (SVS) is respon-
sible for overseeing the securities and insurance markets and supervises
6 633 licensees, while separate regulators oversee pension funds and banks.
The basic principles of the Chilean banking regulations were established in
the 1997 General Banking Law, according to which banks are closely super-
vised by the Superintendency of Banks and Financial Institutions or SBIF
(Superintendencia de Bancos e Instituciones Financieras). The total value of
funds deposited in the Chilean banking sector amounts to USD 52.4 billion
for current account deposits and USD 128.9 billion for term deposits in 2012.
The taxation system
22. In Chile, the administration of taxes is undertaken by two agen-
cies: the General Treasury of the Republic and the Internal Revenue
Service (Servicio de Impuestos Internos or SII).
5
The General Treasury
5. The administration of customs and duties on cross border trade is undertaken by
the National Customs Service (Servicio Nacional de Aduanas).
INTRODUCTION 15
is responsible for the collection and payment of outstanding debts, taxes
and duties. The SII is responsible for tax compliance procedures, audit and
enforcement, the issuing of tax rulings, and acts in an administrative stage for
the settlement of tax disputes. It is also delegated by the Minister of Finances
to act as the competent authority for exchange of information purposes.
23. Income taxes include: Business Profits Tax (also called First
Category Tax); Mining Activity Tax; Second Category Tax which applies to
dependent personal services and Global Complementary Tax which is the
final tax applicable to resident individuals; and Tax on Non-residents (also
called Additional Tax). The other categories of taxes are the taxes on sales of
goods and services; specific taxes and other taxes.
6
24. Chiles income tax system is based on a full imputation system.
Business income is subject to Business Profits Tax at the rate of 20%,
7
on an
accrued basis, whereas salaries (and other dependant labour) are taxed on a
progressive basis. In addition, a Global Complementary Tax is levied on the
income earned by resident or domiciled individuals (the Business Profits Tax
paid by the individual as business owner is imputed to this one). On the other
hand, a 35% Additional Income Tax is applicable to Chilean source income
earned by non-residents. Depending on the activity from which the income
arises, the Additional Income Tax is fully withheld, or partially withheld,
with an obligation of filing a tax return to pay the final proper amount. The
Additional Income Tax is also calculated by imputing the Business Profits
Tax when applicable (e.g. dividends received by a non-Chilean resident from a
Chilean company). If the Global Complementary Tax (progressive and ranging
from 0% to 40%) is lower than the Business Profits Tax paid, the difference is
refunded. For the purpose of keeping track of distributed and retained profits
and the appropriate tax credit, a Register of the taxable earnings or profits
must be maintained (Fondo de utilidades tributables). Inter-company divi-
dends within the country are exempt from Business Profits Tax.
25. Persons (natural and legal) resident or domiciled in Chile are subject
to income tax on their world-wide income. Natural persons without domicile
or residency in Chile are taxed on their Chilean source income.
8
Foreign
persons taking up domicile or residency in Chile are taxed only on their
6. The taxes on sales of goods and services comprise the 19% value added tax, the
tax on alcoholic and non-alcoholic beverages, the tax on sales of vehicles and the
tax on luxury goods. Specific taxes are the tobacco and cigarettes tax and the
fuel tax. Other taxes are stamp duty; tax on inheritances, gifts and donations;
additional income tax for state-owned enterprises and customs duties.
7. Law 20.630 of 27 September 2012.
8. Chilean source income is defined as income arising out of: a) goods or assets
located within Chilean territory and; b) activities performed in Chilean territory.
16 INTRODUCTION
Chilean source income for the first three years, and are taxed on their world-
wide income the following years (Income Tax Act, art. 3). Law 20.630 of
September 2012 amended the rules on permanent establishments of foreign
entities in Chile (PE): prior to the introduction of this law, PEs were taxed on
their income from a Chilean source only. From the year 2013, Chilean PEs are
taxed on any income attributable to such PE regardless of its source.
26. A legal person is deemed to be resident in Chile if incorporated in
Chile. An individual is deemed to be domiciled or resident in Chile if: a) It
may be assumed from the activities that he/she wishes to stay in the country
on a permanent basis (domicile as defined in the Civil Code, art. 59) or; b) If
he/she spends more than six months in the country in a given calendar year
or over a period of two years (resident, Tax Code, art. 8(8)).
27. Law 20.630 of September 2012 has introduced many other tax meas-
ures, some of which should have an impact on transparency and availability
of information with the tax authorities. The capital gains regime was modi-
fied by extending the sole tax regime, which previously was only applicable
to the sale of shares in SAs, to the capital gains applicable to the sale of
SRL quotas. Withholding on gross amounts will only be applicable in cases
where a gain cannot be determined. In all other cases the provisional with-
holding will apply on a net basis. A tax on the indirect disposal of Chilean
assets through foreign vehicles has also been introduced. The sale of foreign
vehicles (shares, rights or quotas in a foreign company) is considered as
Chilean source income if the underlying assets are Chilean. However, cer-
tain conditions must be met. Transfer pricing rules, which follow the OECD
guidelines, have been introduced into the Chilean Tax System. The new rules
contemplate all OECD transfer pricing methods, advance pricing agreements
(APAs), corresponding adjustments and establish the taxation and penalties
imposed on the adjustments. There are also new reporting obligations for
taxpayers that will provide substantial information to the tax authorities about
the compliance with transfer pricing obligations. Prior to the amendment, in
the case of stock corporations, all expenses that were considered not ordinary
and not necessary were disallowed and subjected to a 35% penalty tax. With
the amendment, a 35% withholding tax is levied for disallowed expenses
irrespective of the nature of the taxpayer. If the beneficiary of the disallowed
expense is a foreign partner or shareholder a further penalty of 10% will be
levied.
28. In February 2014 the SII announced that all commercial invoice trans-
actions sent by companies earning more than CLP 2.4 billion (USD 4.3 million
or EUR 3.2 million)
9
annually must be submitted to the authority in a standard
9. 100 000 (UF) Unidad de Fomento valued CLP 23 850 in May 2014.
INTRODUCTION 17
electronic format for approval, effective 1 November 2014. This is a move that
will, inter alia, enhance transparency.
29. All natural and legal persons, as well as entities without legal per-
sonality that have economic activities in Chile are registered and the tax
identification number is also the civil identification number of natural per-
sons since 1969 (Decree Law 3 of 1969).
International exchange of information for tax purposes
30. Chile became the first South American member of the OECD in May
2010. Since it began talks with the OECD in 2007, Chile has taken significant
steps to improve its framework for transparency and exchange of informa-
tion, notably by amending its laws relating to access to bank information.
Law 20.406 introduced a procedure that allows the tax authority to access all
bank information, including bank information subject to confidentiality and
secrecy (see Part B).
31. In 2010-12 Chile received about 60 requests for information, from
nine treaty partners, predominantly Argentina. The EOI requests received
covered various issues, including accounting information, documentation
supporting transactions and payments, articles of incorporation of compa-
nies, addresses of individuals in Chile, banking information, tax matters
such as residence certificates and transfer pricing information. About one
quarter of the requests related to simple questions on the address of individu-
als in Chile or general questions on taxation rules in Chile, one quarter were
not answered because of issues surrounding the termination of the DTC
with Argentina during the period under review, and the other half (about
30 requests) requested information concerning ownership, accounting and/or
banking information and have been answered or are being dealt with.
Recent developments
32. The latest EOI instruments signed by Chile are DTCs with Austria
and South Africa, Chiles first TIEA, with Guernsey, as well as the
Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
At this stage it is not possible to indicate when the Convention is likely to
enter into force in Chile but the Chilean authorities expect the Convention
to be sent to Parliament in August 2014. A Bill is under preparation at the
Ministry of Finance in order to address the recommendations made in the
Phase 1 review report concerning the notification of the account holder when
accessing banking information (see below part B.2).
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 19
Compliance with the Standar ds
A. Availability of Infor mation
Over view
33. Effective exchange of information requires the availability of reliable
information. In particular, it requires information on the identity of owners
and other stakeholders as well as information on the transactions carried out
by entities and other organisational structures. Such information may be kept
for tax, regulatory, commercial or other reasons. If such information is not
kept or the information is not maintained for a reasonable period of time, a
jurisdictions competent authority may not be able to obtain and provide it
when requested. This section of the report describes and assesses Chiles
legal and regulatory framework on availability of information.
34. Information about the owners and other stakeholders of an entity or
arrangement and information on the transactions carried out by any entity or
arrangement subject to registration and tax obligations in Chile is available at
any time either from the public authorities (the tax administration), directly
from the entities (shareholders ledgers) or from regulated third parties
(banks, public notaries, Commercial Registrars). Some information is also
publicly available.
35. The Chilean tax administration maintains a very comprehensive
database that contains extensive information on taxpayers, thanks to the
annual tax returns filed by the taxpayers themselves, but also periodic tax
information returns sent by third parties like the Commercial Registrars and
banks.
20 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION
36. The tax administration is provided with the identity of the found-
ing partners of commercial entities and it annually receives information
on the identity of all shareholders. It may also obtain the identity of all the
shareholders of an SA (shareholding companies) either from the company
itself (shareholders ledgers) or from the financial institution that manages
the shares of public companies. Chilean companies are not allowed to issue
bearer shares. Although the concept of nominee does not exist in Chilean
law, the mandate is a similar arrangement by which a person can buy shares
for the account of another one with or without disclosing its quality to the
company, but on the basis of a contract that identifies all the parties to the
mandate contract. Following amendments to the tax registration procedure
in 2014, ownership information will also be available on foreign entities per-
forming economic activities in Chile from 1 January 2015.
37. The Chilean law does not recognise trusts but acknowledges the civil
arrangement of fidecomiso. If a trustee of a foreign trust invests or wishes to
acquire assets in Chile for the trust, the trustee will be recognised in Chile as
the exclusive owner of the assets for civil purposes. Some registration obliga-
tions existed in Chile but were considered not sufficient. Resolution no. 47
of 19 May 2014 now requires resident trustees and administrators to provide
identity information on the foreign trusts they manage to the tax administra-
tion. In the fidecomiso, a constituyente transfers a property to the fiduciario
subject to the obligation to pass that property to a determined beneficiary
(fidecomisario) once a specific condition is met. Both the Civil Code and
tax laws and regulations ensure the availability of ownership information of
assets subject to a fidecomiso at any time.
38. It is not possible to establish a private foundation under Chilean law.
Foundations must pursue a public interest purpose and are strictly regulated
by the authorities.
39. All commercial entities must keep their accounting documents and
underlying documentation for at least six years under tax law and until their
liquidation, under the Commercial Code.
40. Finally, banks and other financial institutions have Know-Your-
Customer obligations and must keep information about transactions carried
out by their customers.
41. Laws on the availability of ownership, accounting and banking
information are enforced in Chile. During the period under review (2010-
12), Chile received 11 requests for ownership information, 25 requests for
accounting information and 17 requests for banking information. Sufficient
information was available to answer all the requests, except in a couple of
cases where the company was no longer traceable in Chile.
A.1. Owner ship and identit y infor mation
J urisdictions should ensure that ownership and identity information for all relevant
entities and arrangements is available to their competent authorities.
42. The various types of entities in Chile are not categorised as compa-
nies or partnerships. The main type of entity is called sociedad or company,
as defined in the Chilean 1855 Civil Code, which is the basis of Chiles
private law. A sociedad (company) is a legal entity separate from its owners
(individuals or other legal persons) who have made a capital contribution with
the aim of participating in profits or, possibly, assuming business losses (Civil
Code, art. 2053).
43. A distinction can be made between Sociedades de Personas (com-
panies formed by persons) and Sociedades de Capital (companies formed by
capital), considering the different level of relevance given by the legislation
to persons or capital in their functioning. Both types of companies are treated
as separate entities liable to taxes.
44. Another distinction exists in Chilean law between commercial and
non-commercial (civil) companies. The commercial nature of an entity is
determined by its purpose (commercial activity) or by the statute pursuant
to which the entity is incorporated (Civil Code, art. 2059). In addition, the
Commercial Code defines as businesspersons or traders persons carrying
on commercial activities on a regular basis. Trader (comerciante) is a key
notion in Chilean private law. A trader is any person having a commercial
activity and hence governed by the Commercial Code from a grocer to
a bank.
45. To facilitate the comparison with other peer review reports, share-
holding companies, limited liability companies (as well as single person
companies), and comandites by shares can be described as companies,
whereas collective companies and simple comandites are best described as
partnerships, considering the level of liability of the partners, even though
these entities have legal personality in Chile.
46. For each type of entity or arrangement (companies, partnerships,
trusts, foundations and other entities) the following sections will indicate
which ownership and identity information is available with public authorities,
the entities themselves and third parties.
47. The 58 requests received by Chile during the period 2010-12 related
mainly to individuals and to a lesser extent to companies (SA and SRLs). No
request was received concerning partnerships, civil societies, trusts, fideco-
misos, or foundations.
48. Chile has received 11 requests for ownership information concern-
ing 4 tax investigations in 3 EOI partners. The Chilean authorities provided
information on the shareholders of two shareholding companies (SA), one
limited liability company (SRL) and one single person limited liability
company (EIRL). In the eight other requests related to the same foreign
investigation, it was established that one of the targeted Chilean entities did
not exist and the other one was not traceable any longer (this was sufficient to
establish that the invoices allegedly issued by these entities were fraudulent
ones).
Companies (ToR
10
A.1.1)
49. The following types of companies may be established:
a sociedad annima (SA or shareholding company) has a capital
divided into freely negotiable shares and its shareholders are liable
for the companys debts and liabilities to the extent of their capital
contribution. An SA can be classified as public or closed depending
on whether its shares are offered to the public, or otherwise held by
more than 500 shareholders or at least 10% of the capital (shares) is
owned by at least 100 shareholders.
11
Other SAs can also decide to
be voluntarily submitted to the regulations on public companies. A
board of directors manages the SA with certain decisions being taken
at the shareholders meetings. The shareholders can be either natural
or legal persons. SAs are governed by Law 18.046 on Shareholding
Companies and Supreme Decree 587 of 1982.
a Sociedad por Acciones (SpA, Company with share capital) is a
commercial company governed in principle by reference to the
rules for the SA, though its organisation is simplified and it may
be formed by a single individual or company. If the SpA has more
than 500 shareholders and at least 10% of its shares are held by 100
shareholders, it becomes a public SA by virtue of law (Commercial
Code, art. 430). The provisions on closed companies of Law 18.046
apply to them, unless otherwise provided in articles 424-446 of the
Commercial Code.
a comandite by shares (Sociedad en Comandita por Acciones or
SCA) is formed between two categories of members: i) the general
members who are jointly and severally liable for the companys obli-
gations (as in a sociedad de personas), and ii) the limited members
10. Terms of Reference to Monitor and Review Progress Towards Transparency and
Exchange of Information
11. Decree 587 of 1982 on SA, art. 1.
(also called silent members), who are the equivalent of shareholders
in a shareholding company. These companies are regulated under the
Commercial Code (art. 491-506), supplemented by the rules on simple
comandite (see Partnerships).
a limited liability company (Sociedad de Responsabilidad Limitada or
SRL) is formed by 2 to 50 members, either natural or legal persons,
the liability of whom is limited to their capital contributions. The
quotas (equivalent of shares) of an SRL are not freely negotiable and
cannot be sold without the prior notification of the other members
(they cannot use public subscriptions).
12
SRLs are regulated by Law
No. 3 918 of 1923, supplemented by the rules on collective companies
(see Partnerships).
a single person limited liability company (Empresa Individual de
Responsabilidad Limitada or EIRL) is a commercial entity formed
by only one individual, called founder, who is not personally liable
for the companys obligations. In the case that one person becomes
the sole owner (100% ownership of shares, rights or quotas) of any
other type of company, the entity is automatically dissolved unless
it is converted into an EIRL within 30 days. EIRL are regulated by
Law No. 19.857 of 2003, supplemented by the rules for collective
companies and SRL.
50. As of October 2013, there were 559 235 companies registered in
Chile: 70 511 SA (of which about 300 listed companies), 24 220 SpA (all
private), 381 comandites by shares, 391 150 SRL and 72 973 EIRL were reg-
istered in Chile as performing commercial activities. In addition, there are
5 654 branches of foreign entities (including representative offices) registered
in Chile.
51. In addition, the Chilean law also allows for the creation of a special
type of Chilean company with foreign owners. An investment company can
be characterised as a Business Platform Company if created with foreign
funds and owned by shareholders that are neither resident nor domiciled in
Chile (and if shareholders are other legal persons, their own shareholders
having more than 10% of shares must not either be resident or domiciled
in Chile). Persons domiciled or resident in Chile may invest in a Business
Platform Company but they cannot own (directly or indirectly) rights for
75% or more of the capital or profits of the company. These companies are
considered non-resident and pay taxes only on their Chilean-source income
(Income Tax Act, art. 41D, and Law 19.840 of 2002). They must disclose
12. An SRL is formally a sociedad de personas but is analysed in this section
because of the limited liability of its partners. The same apply to EIRL. An SRL
cannot undertake insurance or banking business activities.
their ownership structure and register in a special register of the SII; they are
also subject to strict control and transparency provisions and must comply
with stricter accounting reporting requirements. In 2013, there were 21 such
entities registered in Chile. Business platform companies must be created as
SAs and must keep records as other SAs under commercial law (see below).
Information held by public authorities
52. To perform economic activities in Chile, any entity must be duly
registered with the tax authorities, and comply with either (i) the execution of
a public deed and the registration with the Commercial Registry or (ii) a reg-
istration with the new online system of the Ministry of Economy (Ministerio
de Economa, Fomento y Turismo).
13
The tax administration
53. First, all companies must be registered (without exception) and dis-
close their legal ownership structure (except public SAs) with the Internal
Revenue Service (SII) within two months of starting commercial (economic)
activities in Chile (form 4415). Ownership information for all companies
(except public SAs) is then updated any time a change in the ownership struc-
ture occurs (forms 3239 and 4416).
54. In addition, the ownership structure of public and closed SAs, SpAs
and SCAs, as at 31 December of the previous year, must be annually reported
to the SII through forms 1884 and 1885.
55. SRLs (that determine their taxable income by contabilidad com-
pleta and balance general) are also required to inform the SII in May of
each year, about the identity of the companys members at 31 December of
the previous year, indicating the tax identification number (TIN, Rol Unico
Tributario) and participation in the companys capital of each of the members,
without any ownership threshold.
14
13. Other government entities which are involved in a licensing and/or supervisory
process also maintain ownership and identity information for the purpose of their
supervisory role. For instance, public SAs must register with the Supervisor of
Securities and Insurance (Superintendencia de Valores y Seguros, SVS; Decree
587 on SA, art. 2 and 3).
14. Articles 66 and 68 of the Tax Code on the initial registration. Article 60 gives
the SII powers to request written sworn from taxpayers. The SII notably applied
this power by issuing the mentioned forms. SRLs use the return no. 1803, being
formally sociedades de personas.
56. In practice, the SII maintains an electronic database of taxpayers
where all the reported information is recorded. It is based on the TIN (which
coincides with the national ID number in the case of Chilean individuals).
The TIN is therefore important in Chile as it identifies the entity or individual
to all government agencies. All entities and arrangements which may be sub-
ject to taxation therefore have a TIN in Chile.
57. The SII database contains information on all shareholders (with their
TIN) and their shares in companies at any time, except for public SAs which
rather submit annual information returns reflecting an image of the company
on 31 December of every year, as there are too many transactions involved.
With this database, tax officials can also trail a chain of ownership, up to the
level of foreign corporate shareholders.
The Registrar and notaries
58. Second, companies must comply with either (i) the execution of a
public deed and the registration with the Commercial Registry or (ii) a reg-
istration with the new online system of the Ministry of Economy (Ministerio
de Economa, Fomento y Turismo). The two systems function in parallel and
most entities can chose either one or the other.
59. In the traditional system, available to all types of companies, the
founders of any commercial entity must sign a deed before a public notary
who will keep a copy in its public registry (protocolo),
15
and send an excerpt
of it to the Commercial Registry,
16
accessible to the public.
60. Public notaries and commercial Registrars are public officers. Public
deeds granted before public notaries must precisely identify the persons
signing it, with their nationality, marital status, profession, domicile and ID
or passport number. The deed is void if the parties are not properly identified
(Code of Courts, art. 405 and 412).
61. The deed of SAs must include the name, profession, address, tax
identification number or ID document of the founders. It must also indicate
15. Deeds of companies must be public deeds, defined in article 403 of the Code of
Courts and article 1699 of the Civil Code as a document produced in front of a
public notary and registered in the notarys public registry (protocolo). This reg-
istry is annually sent to the Legal Archives (Archivo Judicial) of the competent
Appeal Court district (art. 433).
16. The Public Commercial Registry (Registro del Comercio), defined in article 446
of the Code of Courts, is regulated by articles 20 and 21 of the Commercial Code
and a Regulation of 1 August 1866. There is a Commercial Register [in each of
the 52 Chilean departments], but no centralisation of the data. Some extracts of
deeds are also published in the Official Gazette.
the companys capital and the number of shares to be issued, without mention-
ing the split between the founding shareholders. An excerpt (summary) that
includes the identification of the founders must be filed with the Commercial
Registry within 60 days, and be published in the Official Gazette (Law 18.046
on SA, art. 3 to 5). Similarly, the deed of a Sociedad por Acciones (SpA) and
the excerpt published in the Commercial Registry contain the name of the
founding shareholders (Commercial Code, art. 425-426). The deeds of SA
and SpA are not amended when shares are issued or each time a shareholder
changes, but this information is maintained by the company itself, and the tax
authorities receive this information on an annual basis (see below, Information
kept by the companies and service providers).
62. The deed of an SCA must include the name of the general members,
and be amended every time a member changes. An excerpt (and updates)
must also be sent to the Commercial Registry (Commercial Code, art. 352,
354, 355A, 474, 475 and 491). The identity of the limited members is not part
of the deed but is known to the tax authority and identity information is also
maintained by the SCA itself (see below).
63. The deed of an SRL and excerpt sent to the Commercial Registry
must include ownership and identity information concerning all members
names and address and their participation in the capital. It must be amended
every time a member changes (Law 3.918 and Commercial Code, art. 352,
3543 and 55A). Finally, extensive identity information on the founder of an
EIRL is included in the deed: not only name and address, but also national-
ity, age and marital status; an excerpt is sent to the Registrar and the deed is
amended if the owner changes (Law 19.857, art. 3 and 4).
64. Chile passed in 2013 the Law on the Simplification of the Creation,
Modification and Dissolution of Commercial Entities (Law 20.659 in force
as of May 2013), which allows for the electronic registration of commercial
entities through a website of the Ministry of Economy. The new law applies
to all entities (companies and partnerships) except public SAs. Newly created
companies can chose to follow either this new law on electronic registration
or the general provisions applicable to their category of company. Existing
companies can also decide to migrate from the paper system to the electronic
system. The simplification relates to the electronic form of the formalities,
but all the statements due pursuant to the law regulating the respective types
of entities are still due, only the form of the statement is changed.
65. The electronic registry system also allows corporate taxpayers to
obtain a TIN with the SII, file with the SII the sworn statement of com-
mencement of activities, and modify the deed or terminate a company or
partnership through the website administered by the Ministry of Economy
(www.registroempresas.cl). That does not, however, relieve the company
from the obligation to inform the SII of changes in the information provided
at the time of registration.
66. In practice, with the traditional system, the founders of a new
company deposit the documents necessary to create the entity to the public
notary with the assistance of a lawyer, where the public deed is signed. The
excerpt is sent to the Register where formalities (signature, deadlines, etc.)
are verified. The information is then transmitted to the tax authorities, who
cross-check the information with the information filed in the request for TIN,
to validate the creation of the entity. The TIN is key as several companies
can have the same name in Chile (but this has never caused any problem in
practice, as other elements may be used to identify the corporate taxpayer).
67. With the new electronic registration system, all founders of a com-
pany must fill in an electronic form (within 60 days for the first file being
submitted) and sign it with an advance electronic signature or otherwise
through a notary public (who has an advance electronic signature a token
obtained once identity information supported by national ID card or passport
is provided). The information provided by companies is maintained in an
electronic, public and free registry continuously updated by the Ministry
of Economy. A major practical advantage of this system is that it applies
country-wide, contrary to the existing 52 Commercial Registers.
68. The implementation of the new system is being done gradually, by
type of entity. The system is available for SRLs and EIRL since May and
October 2013 respectively. Other types of companies and partnerships can
opt for this system from June 2014 (SpAs), June 2015 (sociedades colectivas,
simple comandites and SCAs) and June 2016 (private SAs). Once a company
has chosen the simplified electronic system, it can no longer revert to the
general system (unless it is transformed into a type of company that is not
eligible to this system). By 25 April 2014, 22 500 SRL and 12 300 EIRL have
been incorporated through this system.
69. This new law, as well as a law under preparation concerning the
modernisation of the systems of registers and notaries, are aimed at reinforc-
ing the security of commercial transactions, as entities will be able to more
easily check the status of their business partners.
The Superintendency of Securities and Insurance (SVS)
70. The Superintendency of Securities and Insurance (SVS) supervises
all public SAs as well as all SAs that make public offer of debt instruments
(e.g. bonds), whether listed on the stock exchange or not. The SVS super-
vised 375 SAs as at 31 December 2012. Supervised entities report to the SVS
electronically every three months their list of shareholders. The website of
the SVS (www.svs.cl) publishes information on the shareholders of SAs: the
name and participation of the 12 main shareholders, and the name and partici-
pation range of all the other shareholders. If shares are held through a broker,
the name of the broker appears (see below Nominees).
71. Information is therefore available to the Chilean authorities, primar-
ily the tax authorities, that identifies the owners of companies.
Foreign companies
72. Agencies of foreign companies or other legal persons which plan
to carry on commercial or investment activities in Chile must register with
a public notary their deed and documents evidencing that the company
has been legally incorporated under the law of the corresponding country
and that the company still exists; and an excerpt must be filed with the
Commercial Registry. They have no specific obligations to provide informa-
tion relating to their ownership structure with the notary or Registrar.
17
73. Legal entities are considered tax resident in Chile if incorporated in
Chile. Therefore, a A foreign company that has its management and control
in Chile is not for that reason considered a resident of Chile for tax purposes,
even in circumstances where the connection with Chile amounts to a perma-
nent establishment. As with domestic companies, foreign companies must
register with the SII and obtain a tax identification number in order to carry
on commercial or investment activities in Chile. The information required
did not include the legal ownership of the foreign company so far, but the SII
adopted Circular no. 31 of 19 May 2014, which will require all such foreign
companies to disclose their ownership structure to the SII. The same obliga-
tion will also apply to partnerships, trusts, foundations or other entities with
or without legal personality.
74. The Circular requires the identification of shareholders, partners,
owners, participants, contributors and beneficiaries of the person or entity
incorporated or organised abroad: a) full name or legal denomination, as the
case may be, of the shareholder, partner, owner, participant, contributor or
beneficiary of the person or entity; b) date and country of birth of the natural
person or country and date of incorporation, creation or organisation in the
case of juridical persons or entities; c) address; d) country of tax residence,
which is the country where the person or entity is considered a taxpayer
for the purposes of any class of taxes; e) Chilean TIN or tax identification
number granted by the country of tax residence, as well as the type of person
(shareholder, partner, owner, founder of foundation, beneficiary of trust,
etc.). The only companies not required to provide ownership information
17. The excerpt must be published in the Official Gazette within 60 days (Law
18.046, art. 121-124, and Commercial Code, art. 447).
details are companies listed on a stock exchange affiliated to the International
Organization of Securities Commissions, pension funds, and funds that offer
its quotas to the public in countries identified by the SVS.
75. The obligation applies when registering with the tax authorities or
making a declaration of commencement of economic activity. It also applies
to companies that already have an agency, office, branch or other permanent
establishment in Chile on 1 January 2015. The Circular provides that if own-
ership changes, updated information must be disclosed to the tax authorities.
Failure to comply with the registration is liable to a fine of CLP 41 801 to
501 612 (USD 76 to 914; article 97 n1 of the Tax Code).
76. In addition, foreign companies that are clients of banks and financial
institutions in Chile are subject to the Know-Your-Customer rules established
in the Bank Regulations (Compilacin Actualizada de Normas de Bancos
e Instituciones Financieras, Chapters 2-2 and 1-14). Banks must identify
the owners of companies (shareholders or partners). Likewise, anti-money
laundering regulations issued by the Securities and Insurance Supervisor
(Circular SVS No. 1.809) and the Superintendence of Pensions (Circular 1480)
require the entities subject to their supervision, i.e. companies administrators
of pension funds, mutual funds and investment funds, insurance companies,
security agents, stock brokers and stock exchanges, amongst others, to apply
strict rules on client identification, including a foreign company and its (own-
ership) relationship with other enterprises.
77. Ownership information on foreign companies with tax nexus to Chile
will therefore be available to the tax authorities from 1 January 2015. As
stated above, the obligation applies when complying with the existing tax reg-
istration requirements for foreign companies and therefore the enforcement of
the new obligation will be part of the normal enforcement activities concern-
ing such companies. The Chilean authorities should nonetheless monitor the
implementation of the Circular on the disclosure of ownership information of
foreign companies, once in force.
Information kept by the companies and service providers
Information kept by companies
78. Sociedades Annimas must maintain a shareholders ledger at their
main office. The register must specify the name, address, identity card and
number of shares of all shareholders.
18
The transfer of shares is not binding
18. Article 23(3) of Law 18.046 requires, in the case of the granting of a usufruct of
shares, that both the name of the owner (nudo propietario) and the usufructuary
are registered in the ledger.
on the company and third parties until entered into the ledger (within 24
hours of notification by the parties to the transfer; article 7 of Law 18.046
and articles 13 to 17 of Decree 587 on SAs). SpAs must similarly maintain
a shareholders ledger which specifies the name, address, identity card and
number of shares of all shareholders (Commercial Code, art. 431).
79. Law 3.918 of 1923 on SRLs and the Commercial Code provisions
on SCAs do not provide for specific obligations for these entities to keep a
members ledger; and the rules applicable to other sociedades de personas
are therefore applicable to SRLs (see below Partnerships). The SCA and
SRLs deed must be amended each time a (general) member changes, and the
cession of quotas/shares of an SRL is null if not authorised by all the other
members (Commercial Code, art. 404). In addition, the SRLs and SCAs
inform their members of the information provided to the tax administration
annually.
19
As a result, all members know the identity of the other members.
Anti money laundering obligations
80. Law 19.913 Creating the Chilean Financial Intelligence Unit and
Amending some Provisions on Money Laundering enumerates the obliged
entities that have to report suspicious transactions. The preventive measures
are set in regulations dedicated to each category of subject entities, includ-
ing banks and financial institutions, real estate agencies, casinos, as well as
public notaries and commercial Registrars.
20
In practice, notaries also take
the fingerprints of founders of companies (as these are part of the ID card).
81. Banks and financial institutions are subject to Know-Your-Customer
rules established in the Bank Regulations (Compilacin Actualizada de
Normas de Bancos e Instituciones Financieras, Chapters 2-2 and 1-14).
They must know and identify their customers; the profile of the activities
of the customer; the amounts and origin of the transactions; etc. In case of
companies, their tax identification number and ownership details must be
provided, as well as the proof of their inscription/registration and their deed
of incorporation. The executive branch of the company as well as the legal
19. SII Resolution no. 33 of 11 February 2010.
20. The law gives the Financial Intelligence Unit (FIU) power to issue circulars for
obliged entities on the implementation of the general obligation. Circular 42 of
2008 dedicated to public notaries and registrars defines their obligation to have
a manual that contains Know-You-Customer rules, including the obligation, for
any transaction above USD 43 513 (1 000 unidades de fomento of CLP 23 880)
to request and keep for five years information including the full name, sex,
nationality, ID or passport number (or tax identification number of legal persons),
profession, domicile or address in Chile or elsewhere. This does not include
information on the ownership structure of the clients.
representative must be identified. In case of transfer of funds, special care is
required to properly identify the transferor and beneficiary. In case of non-
compliance, the Supervisor of Banks and Financial Institutions may apply
fines in accordance with article 19 of the General Banking Law. In practice, it
performs onsite supervision to banks at least once a year. Sanctions imposed
(and published on its website) are generally related to the breach of regula-
tions (i.e. mainly related to the amount of bank reserves required); however,
they are not common. (See chapter A.3 below on enforcement in practice.)
82. Considering that ownership information is fully available as a result
of the commercial and tax laws, the anti-money laundering measures only
complement the information already available and do not have an impact on
the availability of information for EOI purposes.
Nominees (mandatarios)
83. Jurisdictions should ensure that information is available to their
competent authorities that identify the owners of companies and any bodies
corporate, including legal owners, and, in any case where a legal owner acts
on behalf of another person as a nominee or under a similar arrangement, that
other person, as well as persons in an ownership chain, to the extent that it is
held by the jurisdictions authorities or is within the possession or control of
persons within the jurisdictions territorial jurisdiction.
84. The concept of nominee shareholding and the distinction between
legal and beneficial ownership that exist in some jurisdictions, in particular
common law jurisdictions, does not exist in Chilean law. The legal owner of
registered shares issued by joint-stock companies registered in Chile is in
principle considered to be the beneficial owner.
85. The Chilean Civil Code nonetheless generally provides for the con-
cept of a mandate (mandato), which is a contract by which a person entrusts
another person with the management of one or more business acts for the
account of the first person (article 2116). The mandated person therefore must
know the person for whom he/she is acting. In practice when a person creates
an entity for the account of another one, based on a mandate, the names of the
two persons appear in the deed.
86. However, persons using mandate contracts in a professional way to
acquire shares of companies are strictly framed by Law 18.045 of 1981 on
Stock Market. Only stockbrokers supervised by the Superintendencia de
Valores y Seguros (SVS) may acquire shares of public companies limited
by shares under their own name, on the basis of a contract/mandate for a
third party (clients). Similarly, only securities dealers supervised by the SVS
may acquire shares of unlisted companies limited by shares under the same
conditions (Law 18.045 on Stock Market, art. 23 and 24).
21
When buying
and selling shares, the intermediaries must indicate if they act for their own
account (art. 24) and must indicate in which capacity they act when voting
at the shareholders meeting (art. 179). The SVS explained that in practice,
there are 48 stock brokers and 11 securities dealers licenced in Chile and that
mandates are used by persons who regularly buy and sell shares. The SVS
has sanctioned licensees 15 times in 2010-12, including for executing orders
to buy or sell shares made orally and not subsequently confirming the orders
in writing when required. In practice, the SVS performs audit onsite visits
to its licensees randomly, and checks among other requirements whether the
licensees respect their KYC obligations. Sanctions imposed by the SVS (and
published on its website) are generally related to insider trading and corporate
governance.
87. These financial intermediaries must identify their clients by their
full name, tax identification number or passport number, address, marital
status, profession, and legal representative (where relevant) and maintain a
ledger of all their clients.
22
They must also maintain books that detail all the
transactions made for the account of their clients on a daily basis (SVS Norm
of General Nature no. 12 and Circular 2.108 of June 2013).
88. Finally, in the case of shares held by a bank, stockbroker or other
entity acting under a custody agreement, the SA, SpA and SCA are required
to identify the entity acting as a custodian, indicating its TIN, the number
of shares it holds and the participation in the companys capital. Custodians
must inform the SII annually of the TIN of each of the investors for whom
they hold shares, the TIN of the companies that have issued such shares and
the number of shares they hold for each investor (tax information return
No. 1885). The Chilean FIU confirmed that in practice the mandate is always
disclosed to business partners. The SII has not faced any issues regarding
the identity of mandatos for EOI purposes and the peers have not raised any
issues on this topic.
21. Stockbrokers (Corredores de bolsa) are members of stock markets while securi-
ties dealers (agentes de valores) act out of the stock market (Law No. 18.045 on
Stock Market, art. 24).
22. Moreover, the SVS also issued special instructions, Circular 1.809 dated
10 August 2006, to prevent money laundering and financing of terrorism. Under
No. 4 letters b) and c), the intermediaries must obtain certain information such
as the complete identification of the client, the ownership relation between enter-
prises and if there is a holding structure involved.
Bearer shares (ToR A.1.2)
89. The Chilean law prohibits the issuance of bearer shares. Article 12
of the Law 18.046 on SA, article 434 of the Commercial Code on SpA and
article 494 of the Commercial Code on comandites by shares all stress that
all shares are registered (acciones nominativas), thereby ensuring that bearer
shares are prohibited.
Partnerships or Sociedades de personas (ToR A.1.3)
90. The Chilean law does not provide for entities comparable with
common law partnerships, since all entities have a legal personality. On the
other hand some of the Chilean entities give more emphasis to their mem-
bers than others, i.e. sociedades de personas. In sociedades de personas the
owners have social rights or quotas and the capital is not divided into
shares. There are two types of sociedades de personas:
a Sociedad Colectiva is formed between two or more collective
members (either natural or legal persons, Chilean or non-Chilean
nationals) who are jointly and severally liable for the companys obli-
gations. In a Sociedad Colectiva, the management is carried out by
members themselves or through an appointed manager (Collective
Company, Civil Code, art. 2053-2115, in particular art. 2071-2081 and
Commercial Code, art. 348-423).
a simple comandite is established by two categories of members:
(i) one or more general members who are jointly and severally liable
for the partnerships obligations and who are responsible for manag-
ing the company, and (ii) one or more limited or silent members who
invest capital in the partnership but cannot undertake management,
and whose liability to third parties is limited to the capital sub-
scribed by them (Civil Code, art. 2053-2115 and Commercial Code,
art. 470-490). The rules applicable to Sociedad Colectiva Comercial
are applicable to the general members of the comandite (Civil Code,
art. 2063).
91. In 2013, there were 2 343 sociedades colectivas and 10 simple
comandites registered with the Chilean administration. Colectivas are usually
used for small local business. Partnerships represent less than 1% of all legal
entities registered in Chile.
92. No EOI request was received concerning a Chilean partnership.
Information held by public authorities
93. The names of the members of Colectivas and simple comandites are
registered in the database of the tax administration, the Legal Archives of
public notaries, and partially in the Commercial Registers.
94. First, the tax obligations of Colectivas and simple comandites are
the same as those of companies (see above): they must file a registration
application with the SII that indicates their ownership details, and any subse-
quent changes of ownership and participation must be reported on an annual
basis.
23
95. Second, the founders of any commercial entity, including Colectivas
and simple comandites, must sign a public deed before a public notary, an
excerpt (summary) of which must be filed with the Commercial Registry
within 60 days (Commercial Code, art. 350 to 353).
96. The deed of a Colectiva kept in the Legal Archives and excerpt sent
to the Commercial Registry must include ownership and identity information
concerning all members their names and address and their participation in
the capital (Commercial Code, art. 352 and 354). The deed of a simple coman-
dite kept in the Legal Archives must similarly include the name of general
and limited members, but the excerpt sent to the Commercial Registry does
not include the names of the limited members (Commercial Code, art. 474
and 475). The deed of the entity must be amended every time a member
changes (Commercial Code, art. 355A and 474).
97. Foreign partnerships carrying on business activities in Chile through
a branch or agency established therein or deriving income from Chilean
sources must be registered with the SII, as any other entity, and declare their
legal ownership structure. They must also register their original deed of
incorporation with a public notary and the Commercial Register, pursuant to
article 447 of the Commercial Code.
98. In practice, the registration of partnerships is performed in the same
way as the registration of companies and the information on partnerships is
maintained in the same electronic database of the SII. Partnerships also have
a TIN. It will also be possible to create Colectivas and simple comandites
using the new system of electronic registration of commercial entities from
May 2014 (see chapter A.1.1 above).
23. Tax information return no. 1803.
Information held by the partners and service providers
99. Considering the importance given to the identity of the members in
a sociedad de personas, quotas are not freely negotiable and any amendment
of the deed must be approved unanimously including transfers of quotas
or the arrival of a new collective member in the entity (Commercial Code,
art. 404(3)). In addition, the entities inform their partners of the information
provided to the tax administration annually.
24
As a result, all partners know
the identity of the other partners.
100. As indicated under section A.1 on companies, many service provid-
ers (including public notaries and financial intermediaries) are required to
maintain ownership information in respect of their clients, sociedades de
capital and sociedades de personas alike.
101. The registration and rules on the availability of ownership infor-
mation concerning colectivas and comandites are straight forward and
comprehensive and there have been no issues in practice. No EOI request was
received concerning a Chilean partnership.
Trusts (ToR A.1.4)
102. The concept of trust does not exist under Chilean Law, and Chile
has not signed The Hague Convention of 1 July 1985 on the Law Applicable
to Trusts and on their Recognition. There is, however, no prohibition in
Chilean domestic law that prevents a Chilean resident from acting as a trus-
tee, or for a foreign trust to invest or acquire assets in Chile. In addition,
Chilean law knows the concept of fidecomiso that has some similarities with
trusts.
103. In practice, the tax administration has never come across the situa-
tion of a Chilean trustee of a foreign trust, either in its domestic work or in
relation to exchange of information. None of the EOI requests received was
related to a trustee of a foreign trust or to a fidecomiso.
Foreign trusts
104. The general tax obligations apply to trusts having some tax nexus to
Chile (see below). More importantly, Chile introduced a new obligation in
2013 for any resident trustee to fill in a declaration disclosing identity infor-
mation of the persons related to the trusts they manage, and reinforced the
obligation in 2014.
24. SII Resolution no. 33 of 11 February 2010.
105. First, in order to ensure that all foreign trusts with a resident trustee
or administrator in Chile are known to the authorities, the SII issued a reso-
lution on 10 September 2013 (Resolution no. 81). It is repealed and replaced
with Resolution no. 47 of 19 May 2014, which will be in effect from 1 July
2014, in view of improving the system and facilitate compliance. Both reso-
lutions require all persons who are taxpayers in Chile as well as foreigners
domiciled or resident in Chile that act as trustee or administrator of a foreign
trust to make a declaration when they take up their duties. This declaration
must be made by 30 June of the year following which the trustee or adminis-
trator took up his/her duties. Any changes must be reported by 30 June of the
following year. A declaration is therefore required only when some changes
have occurred in the year.
106. The 2014 declaration must disclose, with respect to the trust: its
name, country of residence, registration or origin of the trust, as well as its
foreign tax identification number. The declaration must also disclose, with
respect to settlor(s), beneficiary(ies) and trustee(s): their name; country of
residence, registration or origin; and Chilean or foreign tax identification
number.
107. The 2014 Resolution further requires that be declared, from 2015
the date of creation; country of residence for tax purposes; and capital of the
trust. The 2014 Resolution also clarifies the concept of country of origin and
obligation to declare a tax identification number: the country of origin means
the country the law of which determines the effects of the trust terms (appli-
cable law or governing law). The identification number to be declared are the
tax identification number used abroad to carry out transactions with respect
to the trust assets, identifying the issuing country; and the Chilean TIN of
the trust. If the trust is not a resident for tax purposes of any country, or if it
does not have a tax identification number issued by a foreign country, or if it
does not have a Chilean TIN, the remaining information shall be provided.
The 2014 Resolution also requires that if the assets of a trust shall or may be
applied to a specified purpose (s), such purpose(s) shall be informed.
108. From 2015, with respect to settlor(s), beneficiary(ies) and trustee(s),
the declaration must also include the exact domicile of these persons (in
addition to their country of tax residence). The same obligations apply to the
administrator(s) of the trust with the 2014 Resolution. The 2014 Resolution
clarifies the situation of discretionary trusts: information must be provided
on the class of beneficiaries to which the beneficiaries belong, when this is
the case. If a particular class of beneficiaries may include persons that are
not known or have not been determined at the time of filing the affidavit,
for example, because they have not been born or because the referred class
allows that new people is added in the future, such circumstance must be
informed in the respective affidavit.
109. The obligation in the 2013 Resolution applies to trustees who have
taken up their duties in the preceding year, and does not clearly indicate that
pre-existing trustees must also fill in the return. The 2014 Resolution clearly
applies to trustees, whatever the year of creation of the trust (or similar
arrangements). The 2014 Resolution clarifies that the removal of the trustee(s)
or administrator(s) of the trust from their role, and the termination of the
trust, must be reported.
110. The International Audit Department of the tax administration will
receive the declarations (the first ones are due by June 2014) and be in charge
of verifying the accuracy of the information provided. It will be able to carry
out audits to verify both the information included in the declaration and the
liability for taxes, if they receive declarations of existence of trusts.
111. Delay, incomplete reporting or omission is considered as a breach of
the declaration obligation and sanctioned according to article 97 no. 15 of the
Tax Code, i.e. CLP 100 322 to 501 612 (USD 183 to 914).
112. Second, the general tax obligations are applicable to foreign trusts. In
particular, if a foreign trust wishes to carry out an investment or other busi-
ness activities in Chile, it must be registered with the tax administration (SII)
and obtain a tax identification number, as any natural person, legal person,
entity or arrangement without personality (Tax Code, art. 66). Article 3 of
Decree Law 3/1969 specifies that the SII must ascertain the identity, register
and provide a TIN for any natural or legal person, any fiduciary assets, de
facto companies, associations, or entity of any nature, with or without legal
personality that may be subject to tax or obliged to withhold taxes in Chile.
The reference to fiduciary assets and entity of any nature, with or with-
out legal personality means that this obligation extends to foreign trusts.
Alternatively, the trustee can register the assets of the trust in his/her own
name. Where a foreign trust with a Chilean resident trustee has some other
connection with Chile, for example, the trust property is real property situ-
ated in Chile or the income of the trust is Chilean source income, then the
trust would be registered with the SII.
113. Article 6 of Decree Law No. 3/1969 further provides that the admin-
istrators or persons responsible for the fulfilment of the tax obligations of
entities without legal personality must demonstrate to the SII the legal nature
of such entities and provide the SII with any information that the tax admin-
istration requests. A foreign trust would fall under the concept of a foreign
non juridical person and would be viewed as any other entity of any nature.
114. The SII Circular no. 31 of 19 May 2014, mentioned above under
Foreign companies, also clearly and expressly requires the disclosure of the
identity of the beneficiaries of trusts and similar arrangements that register
with the SII.
115. These provisions are complemented by other tax obligations on the
trustees and beneficiaries, as well as by measures on the prevention of money
laundering. A Chilean resident trustee is taxed on his/her income derived
from his/her functions, and must be able to justify this income. Again, this
results from the application of general tax provisions and obligations, such
as the obligation to justify effective income through truthful accounts (Tax
Code, art. 17). The Chilean authorities are confident that information should
be available on the settlor and beneficiaries of the trust in both cases: when
the trust income is taxed as fiduciary property, and when the remuneration
of the trustee is taxed. In particular, article 7 of the Income Tax Act provides
that income derived by a person acting in a fiduciary capacity is taxable in
the hand of such a person until the identity of the true beneficiaries of the
income is proven. Resolution no. 181 of 2013 specifies that the mere presenta-
tion of the declaration made thereunder does not exempt the trustee from its
obligation under article 7 to prove the identity of the true beneficiaries of the
trust income, in order for the trustee to not be taxed on the income derived by
the trust; some evidence must be provided.
116. The beneficiaries of trusts in Chile must declare in their tax returns
any benefit distributed to them, if they are Chilean residents or if they are
non-Chilean residents but the benefit is obtained from a Chilean source
(e.g. an activity (administration) developed in Chile; Income Tax Act, art. 3).
117. In practice, the tax authorities have never come across a foreign trust
with a Chilean resident trustee or with any other nexus to Chile (either in its
domestic tax investigations or in relation to exchange of information).
118. The anti-money laundering law 19.913 enumerates the entities that
have to report suspicious transactions. Trustees of Chilean fidecomicos or
foreign trusts are not subject to the AML law, nor are lawyers and attor-
neys, but banks and notaries are, as well as managers of general funds and
investment funds. In addition, the Chilean anti-money laundering laws and
regulations apply to all clients, which include trustees and foreign trusts if,
for instance, they hold a bank account in Chile. However no particular guide-
lines are given as concerns foreign trusts.
119. In practice the Compliance department of the SBIF considers that
trusts should be regarded by its licensees as high risk clients. The Compliance
department has never encountered a trust when reviewing the files of a bank
for compliance purposes. The FIU added that in practice there has never been
any prosecution of suspected money laundering offence that involved a trust.
Finally, a representative of the Bar association also indicated that he never
heard of any lawyer acting as trustee in Chile.
120. To date, no trustee has been traced in Chile (and no EOI request con-
cerning a trust has been received), which supports the opinion of the Chilean
authorities that foreign trusts are not of concern in Chile. In any event, the
Chilean laws and regulations provide for clear obligations for resident trus-
tees to provide information on the settlor, trustees and beneficiaries of the
trusts they manage.
Fidecomiso
121. A fidecomiso, or fiduciary property, is a common feature of civil law
jurisdictions, regulated in the Chilean Civil Code (art. 732 and following). In
the fidecomiso, a constituyente transfers a property to the fiduciario subject
to the obligation to pass that property to a determined beneficiary (fideco-
misario) once a specific condition established by the constituyente is met.
The fiduciario is the owner and has the right to benefit from the property
as long as the condition is pending (for not more than five years, unless the
condition is the death of the fiduciario).
25
The act creating the fidecomiso
must be a public deed (in front of a notary) or a will and identify the assets
and persons involved (constituyente, fiduciario and beneficiaries). The ben-
eficiary can be a person who does not yet exist at the time of the creation of
the fidecomiso (art. 735 and 737). The fidecomiso in Chile is not a common
feature; when used, it is generally for inheritance purposes (art. 734).
26
122. The beneficiary has no property right or right to benefit from the
property until the condition is met. Once the condition is met, the full prop-
erty is transferred to the beneficiary without restrictions. When the property
includes shares of companies, the two transfers must be reported in the deed
of the entity or its shareholders ledger. This last feature of a transfer of the
full ownership of the property twice distinguishes the fidecomiso from most
Anglo-Saxon trusts. The general tax obligations are applicable and bind suc-
cessively on the constituent, the fiduciary and ultimately the beneficiary in
parallel with each transfer (i.e. the declaration of the incomes derived from
the shares).
123. Both the Civil Code and tax laws and regulations ensure the avail-
ability of ownership information at all stages, i.e. whoever is the owner of the
assets at a given time: the constituyente, the fiduciario or the beneficiaries.
124. The fidecomiso does not cause any concern in practice in Chile for
tax or EOI purposes. No EOI request to date has related to a fidecomiso
contract.
25. The Fidecomiso can be coupled with an usufruct.
26. See also the GAFISUD Evaluation report on Chile, 3
rd
round, December 2010.
The report indicates that the on-site visit determined that Chilean fidecomisos
are not used in practice.
Foundations (ToR A.1.5)
125. The concept of private foundation does not exist under the laws of Chile.
126. The concepts of Corporacin (Association) and Fundacin (Foundation)
are recognised under Chilean Law as non-profit entities, meaning that such
entities do not distribute profits to their members/founders.
27
When these
entities are dissolved, their assets are destined to the institution of same
non-for-profit nature specified in their bylaws, or in absence of a specific
provision, allocated to the State (article 561 of the Civil Code and article 31
of Decree 110 of the Ministry of Justice). These entities are regulated by
the Civil Code (art. 545 to 564) and Supreme Decree No. 110 of 1979.
Both types of entities are created under the control of the local authorities
(Municipalities) and the Ministry of Justice is given investigative powers to
ensure that they pursue their objective in compliance with the rules of the
Civil Code (Law 20.500).
127. Chilean foundations are not considered to be relevant entities under
the Terms of Reference and have never been the subject of an EOI request.
Other entities and arrangements
Sociedades civiles
128. Non-commercial (civil) entities can take the form of either a Sociedad
Colectiva Civil or a Sociedad en Comandita Civil (Civil Code, art. 2059 to
2064). These legal persons are governed by the same rules of creation as
their commercial counterparts, except that in a Sociedad Colectiva Civil each
member is only personally liable for debts up to the proportion of his/her capi-
tal contribution. The identity of all the members is included in the deed, which
however does not need to be a public document registered with a public notary.
129. As their name indicates, these entities do not carry on commer-
cial activities and are therefore not registered in the Commercial Register.
However, if they generate profit through other (i.e. non-commercial) eco-
nomic activities, they must register at the SII under the same conditions as
commercial entities and disclose their whole ownership structure (see part-
nerships above).
130. In practice, Chile has never received an EOI request about these entities.
27. If they may carry on a business activity in order to achieve their goals, these
entities must register with the SII and abide by all tax rules. As of October
2013, 1 185 fundaciones, 999 corporaciones and 23 foreign foundations were
registered with the SII, among the 14 650 fundaciones, 1 558 corporaciones and
78 foreign foundations registered with the Ministry of Justice.
Enforcement provisions to ensure availability of information
(ToR A.1.6)
131. Chile should have in place effective enforcement provisions to ensure
the availability of ownership and identity information, one possibility among
others being sufficiently strong compulsory powers to access the informa-
tion. This subsection of the report assesses whether the provisions requiring
the availability of information with the public authorities or within the enti-
ties reviewed in section A.1 are enforceable and failures are punishable.
Questions linked to access are dealt with in Part B.
132. An entity is null and void if it is not created through a deed made
in front of a public notary or if its deed is not submitted to the Commercial
Registry. The same applies to the mandatory modifications of the deeds.
28

In practice, the Registrar rejects about 20% of the requests for creation of
companies because of a breach of formalities, usually because the applica-
tion is made more than 60 days after having signed the deed in front of a
notary, contrary to the law. No sanction is applied the application is simply
rejected. If a company is incorporated through the electronic system of
law No.20.659, founders must fill in an electronic form, with all the fields
required by the general law to incorporate the company duly completed. The
same ownership and identity information requirements applicable to com-
panies incorporated through the traditional system must be provided in the
electronic form, in order for the system to accept the registration of the new
company. If the form is not duly completed and signed within 60 days by all
founders, the system does not register the company and the company does
not legally exist. In addition, the company is null and void if other require-
ments are not complied with (e.g. if the declared purposes of the company is
contrary to the law).
133. Moreover, if domestic or foreign enterprise does not register with the
SII, it is subject to a fine between CLP 41 801 to 501 612 (USD 76 to 914; Tax
Code, art. 97 no. 1). In the years 2010-12, this sanction was imposed 6 500
times on average every year (and the total of fines reached CLP 5 billion). And
if it an entity undertakes taxable commercial activities without registering
and obtaining a TIN, it commits a tax crime punishable by a fine between
CLP 150 484 to 2.5 million
29
(USD 274 to 4 570), and, where the fraud
28. Colectivas: Commercial Code, art. 355A and 360; SA: Law 18 046, art. 6; SpA:
Commercial Code, art. 428; SCA: Commercial Code, art. 497, EIRL Law 19 857,
art. 7.
29. From 30% of the Annual Tax Unit to 5 Annual Tax Units. The Annual Tax Unit
(UTA) and the Monthly Tax Unit (UTM) are official measures used for tax pur-
poses and pecuniary sanctions. The value, fixed by law, varies with the consumer
price index. See: www.sii.cl/pagina/valores/uta.htm.
is intentional, the responsible individual is punishable by imprisonment
between 541 days and 3 years, and the confiscation of its installations and
products, pursuant to article 97 no. 9 of the Tax Code. In the years 2010-12,
80 individuals have been sanctioned in 55 criminal prosecutions.
134. If the shareholders ledger of an SA is not properly maintained, the
liability of the directors and managers can be triggered if this caused any
damages to the shareholders or third persons (article 7 of the Law 18.046 on
SAs). In addition, the SVS can impose an administrative sanction (censure or
fine) on SAs under the SVS supervision (including all public SAs) and their
directors for breach of Law 18.046, including for failing to properly maintain
the register (Law 18.046 on SAs, art. 7, and SVS Law, art. 27). (In any event,
the SII maintains information on the ownership of SA.) If a company does
not submit its list of shareholders, the SVS audit department issues a warn-
ing, which may be followed by a financial sanction up to CLP 358 million
(USD 644 000) that may be multiplied by three in case of persistent breach
of the law. In the years 2010-12 a total of 35 censures were censures and
19 fines were imposed. The offences relate usually to small entities (of less
than 100 shareholders) and are published on the SVS website.
135. Finally, the Tax Code imposes fines for the failure to comply with the
information reporting requirements (art. 97 no. 15
30
) between CLP 100 322
to 501 612 (USD 183 to 914). The SII Taxpayers Assistance Department is
in charge of verifying whether the information reported in the tax returns of
shareholders and in the sworn statements of companies or financial inter-
mediaries match. It also checks whether information in tax information
returns matches with the information provided by the Registrars. On aver-
age, 5 400 companies were identified for having not respected the deadline
to submit their annual list of shareholders (form 1884) in the years 2011-13.
The tax administration does not keep separate statistics on the amount of
fines imposed concerning this particular form, but on average 61 650 fines
are imposed every year against persons who do not fill in required forms, for
a total amount of CLP 3.3 billion (USD 5.9 million).
136. Pursuant to the new Resolutions on the declaration of trusts to the
tax authorities, delay, inaccuracies or omission in declaring a foreign trust
is considered as a breach of the obligation and sanctioned according to arti-
cle 97 no. 15 of the Income Tax Act, i.e. CLP 100 322 to 501 612 (USD 183
to 914). In addition, if a foreign trust does not register with the SII pursuant
to the general obligations of the Tax Code, it is considered to be carrying on
clandestine trade or industry and the individual who, acting on behalf of the
trust, carries on such activities is liable to a fine of 30% to 5 times the Annual
30. The fine is between 20% and 100% of the annual taxation unit, whose the
amount is CLP 501 612 in May 2014.
tax unit, with imprisonment and/or with the confiscation of goods (Tax Code,
art. 97(9)). In addition, in this case it is the trustee who is taxed in Chile,
pursuant to the provision on fiduciary relationships: incomes derived by a
person acting in a fiduciary capacity are taxable in the hands of such person
until the identity of the true beneficiaries of the income is proven (Income
Tax Act, art. 7). No registration took place and no case of failure to register
has been detected in Chile.
137. The Registrar, the SVS and the SII all take effective enforcement
measures to ensure the availability of ownership and identity information,
with regular controls and sanction of failures to implement the obligations.
138. In the years 2010-12, Chile has received 11 requests for ownership
information from 3 EOI partners. The Chilean authorities provided informa-
tion on the shareholders in three cases. The ownership information requested
in the eight other requests related to the same foreign investigation and was
no longer required after it was proved that one of the targeted Chilean entities
did not exist and the other one was not traceable any longer and had appar-
ently not had any business activities for three years (this was sufficient to
establish that the invoices allegedly issued by these entities were fraudulent,
as suspected by the requesting authorities). In this later case, the Chilean
tax authorities took action against the Chilean entity that was effectively
registered but not traceable at the registered address: a note was added to its
file so that it could no longer obtain invoices in case it would try to resume
commercial activities (in Chile invoices issued by commercial entities must
be pre-stamped by the tax authorities, so the economic activity of the entity
ceases once it no longer has stamped invoices).
Deter mination and factor s under lying r ecommendations
Phase 1 determinati on
The el ement i s in pl ace.
Phase 2 Rating
Largel y compli ant
Factors underl ying
recommendati ons Recommendati ons
The provision requiring foreign
companies with nexus in Chile to
disclose ownership information to the
tax authorities will enter into force on
1 J anuary 2015.
The Chilean authorities should
monitor the implementation of
the Circular on the disclosure of
ownership information of foreign
companies to the tax authorities, once
in force.
A.2. Accounting r ecor ds
J urisdictions should ensure that reliable accounting records are kept for all
relevant entities and arrangements.
139. A condition for exchange of information for tax purposes to be effec-
tive, is that reliable information, foreseeably relevant to the tax requirements
of a requesting jurisdiction is available, or can be made available, in a timely
manner. This requires clear rules regarding the maintenance of accounting
records. This section of the report examines whether this is sufficiently estab-
lished under Chiles legal and regulatory framework. The sources of Chilean
accounting law are the commercial laws and the Tax Code, together with
the regulations issued by the Accountants Association.
31
The section also
assesses the implementation and effectiveness of the framework in practice.
General requirements (ToR A.2.1)
140. All traders, including all commercial companies and partnerships
as well as sole traders are bound by a number of accounting obligations,
under articles 25 to 44 of the Commercial Code, including the requirement to
keep: (i) a daybook or journal, (ii) a general accounting ledger, (iii) a balance
book, and (iv) a book that records correspondence.
141. Accounting records must correctly explain all transactions and reflect
details of all sums of money received and spent, as well as all sales and pur-
chases: all the commercial transactions carried out by the trader are recorded
in the daybook, by chronological order and day by day, indicating in detail
the nature and circumstances of each of them. The trader can omit to record
the detailed records of the amounts received and of the purchases, sales and
delivery of goods made only if he/she keeps a separate cash and invoices book
(art. 27, 28 and 30).
142. Accounting records must also enable the financial position of the
entity to be determined with reasonable accuracy, and reflect details of its
31. Regulations are issued by the Accountants Association in the Accountants
Association Gazette (Boletin del Colegio de Contadores) which are to be fol-
lowed in accordance with Law 13.011, article 13(g). In addition, the regulatory
bodies, the SVS and the Supervisor of Banks, regulate listed companies and
specific industries by issuing mandatory accounting instructions. In the case of
banking entities, and according to the legal provisions contained in section 15
of the General Banking Law, the Supervisor of Banks is authorised to provide
accounting standards generally applicable to entities subject to its supervision,
in addition to generally accepted accounting principles and the regulations of the
Accountants Association (see section A.3 below).
assets and liabilities: all traders must make, in the balances book, a statement
with an estimation of all of their assets, both movable and immovable, and of
all their credits and debts. They must produce a general balance of all of their
businesses in the same book at the end of each year (art. 29).
32
143. All books and records must be kept with clarity; chronologically;
without blank spaces, writing between lines, scratches or amendments. It is
similarly prohibited to alter, delete or destroy the books (art. 31). Law 18.046
on SAs further provides that Accounting entries shall be made in permanent
registries, in accordance with the applicable laws, and they must be kept in
accordance with the generally accepted accounting principles (art. 73, see
also art. 51 and 52). Finally, the Chilean authorities indicate that the audit-
ing system has gradually changed from the generally accepted accounting
principles (GAAP) to the international financial reporting standards (IFRS),
starting with publicly traded companies in 2010. All Chilean companies,
supervised or not by the Superintendence of Securities and Insurance,
apply and present their financial statements according to IFRS rules since
1 January 2013.
144. The Tax Code complements the Commercial Code for both trad-
ers and non-traders. It requires that any person that has an obligation to
justify effective income does it through truthful accounts (art. 17). This
general requirement would encompass resident trustees of foreign trusts.
Taxpayers must submit, together with their tax returns, balance sheets
and inventory copies signed by an accountant, as well as other accounting
documents that the tax administration may request (art. 35). Furthermore,
the SII authenticates (by an official stamp) specific accounting books and
ledgers of the companies; and if kept electronically, has an access to these
accounts.
33
Finally, small businesses with a turnover below USD 400 000
or EUR 291 000 may keep a simplified accounting system (Income tax Act,
art. 14 bis). The non-compliance with these accounting obligations is punish-
able by a fine of CLP 41 801 to 501 612 (USD 76 to 914) if the taxpayer does
not present the documents within the deadline fixed by the tax administration
or if the accounts are not kept in a proper manner (Tax Code, art. 97 no. 7).
32. The agency of a foreign company must publish its yearly balance sheet in a
local newspaper within four months of the closing of the financial period (Law
No. 18.046 on SA, art. 124).
33. In addition, the Income Tax Act requires withholding agents of income taxes to
keep a special book of withholdings that records the payments of dividends, roy-
alties and interests made to non-residents (art. 77). Similarly, taxpayers subject
to business profits tax must keep a special book in which they record the profits
and losses incurred and the amount of the profits distributed/ dividends paid to
shareholders (SII Resolution No. 891/2005).
In addition, if accounting records are considered as not being trustworthy,
the SII may re-evaluate the tax base (Tax Code, article 21).
145. Reliable accounting records appear to be kept for all relevant entities
and arrangements, under either or both the Commercial Code and the Tax
Code.
146. The SII is the institution that ensures that all taxpayers keep proper
accounting books and records, in respect of obligations under both the Tax
Code and the Commercial Code. In the years 2010-12, the SII has performed
4 375 audits every year, mainly on large and medium size taxpayers, and
applied on average 1 130 fines totalling CLP 42 million (EUR 55 250 or
USD 75 700) every year against traders for failure to exhibit their accounts
and 735 fines totalling CLP 27 million (EUR 35 500 or USD 48 675) every
year against traders that did not keep their accounts properly.
Underlying documentation (ToR A.2.2)
147. The Commercial Code requires all traders to have a book recording
all correspondence (meaning letters delivered by traders, art. 25) and to keep
the original of all correspondence (art. 45).
148. Furthermore, the Tax Code provides for a general obligation for
any person to keep all documentation that supports the accounting records
(art. 17). The Chilean authorities indicate that supporting documentation
includes invoices, contracts, etc. The Value Added Tax Law also requires that
invoices be kept (art. 58).
149. In practice, Chile has been requested to provide underlying documen-
tation such as invoices and contracts and has not had any difficulty obtaining
this information.
5-year retention standard (ToR A.2.3)
150. Commercial companies and sole traders must keep their accounting
books and records until the full liquidation of their business, pursuant to arti-
cle 44 of the Commercial Code.
151. In addition, the Tax Code provides that accounting books and cor-
responding documentation must be kept for six years (i.e. until the statute of
limitations for a tax audit has expired, art. 17) and must be presented to the
tax administration upon request (art. 97).
152. Representatives of the accounting profession indicated that in
practice ledgers and books of accounts are kept indefinitely, and that the
underlying documents are kept for seven or eight years on average.
Availability of accounting information in practice
153. Accounting information was requested in 25 of the EOI requests
received by Chile from 6 EOI partners (i.e. about one third of the requests),
and covered financial statements, accounting records, ledgers, information
on specific transactions between business partners, and some underlying
documentation such as invoices and contracts.
154. Accounting information exchanged related to a variety of situations.
For instance to invoices and custom documents related to trans-border busi-
ness. In some other cases, accounting information related to the transfer of
employees from one country to another one. Some requests also related to
royalty payments. In all cases where accounting information was required, it
was properly maintained.
155. As noted under section A.1 above, in one foreign tax investigation
related to eight EOI requests, the requesting authorities wanted to ascertain
the existence of some transnational transactions, and the absence of a real
or active company in Chile was enough information to pursue their case.
The same situation happened for two other EOI requests: the alleged busi-
ness partners in Chile were not traceable by the regional tax office and the
accounting information did not exist as no activities were actually being
carried out. Again, the EOI partners were satisfied with this answer. In this
type of case, as noted under section A.1, the local tax office registers the
information in the tax database and prevents the issuance of any new stamped
invoices for the company, thus preventing any future economic activity.
Phase 2 Rating
Compli ant
A.3. Banking infor mation
Banking information should be available for all account-holders.
156. Access to banking information is of interest to the tax administra-
tion only if the bank has useful and reliable information about its customers
identity and the nature and amount of financial transactions.
157. In Chile financial institutions have full identity information on their
clients, as noted above, in application of the anti-money laundering law. They
also keep full records of their financial transactions.
Record-keeping requirements (ToR A.3.1)
158. First, banks and financial institutions are subject to Know-Your-
Customer rules established in the Bank Regulations (Chapters 2-2 and 1-14).
They must know and identify their customers; the profile of the activities
of the customer; the amounts and origin of the transactions; etc. In case of
companies, their tax identification number and legal ownership details must
be provided, as well as the proof of their inscription/registration and their
deed of incorporation. Special care is also required to properly identify the
transferor and beneficiary of a transfer of funds. In case of non-compliance,
the Superintendence of Banks and Financial Institutions may apply fines in
accordance with article 19 of the General Banking Law.
159. Second, financial institutions, as any commercial entity, are subject
to the accounting requirements of the Commercial and Tax Codes, including
the obligation to keep books, correspondence, and documentation related to
their business.
160. Third, pursuant to article 155 of the General Banking Act, finan-
cial institutions under the supervision of the Superintendence of Banks and
Financial Institutions (SBIF) are obliged to keep their books, forms, corre-
spondence, documents and slips for six years (as of the date of the last entry
made on such books or as of the date when the documents were issued, as
the case may be). Article 155 also prohibits the destruction of books or docu-
ments that are directly or indirectly related to a pending case or dispute. This
provision is very broad and the Chilean authorities confirm that it covers
transactional information (e.g. loan, transfer, delivery, deposit, withdrawal,
transfer between accounts, exchange of currency, extension of credit, pur-
chase or sale of any stock or bond, certificate of deposit, or use of a safe
deposit box).
161. Article 155 also provides that the Superintendence may authorise the
elimination of part of this file prior to the expiration of this period, but the
Superintendence of Banks and Financial Institutions has never authorised a
bank to eliminate records prior to the expiration of the six year term during
the last 30 years. A representative of the Association of Banks added that in
practice banks usually keep records for a minimum of 10 years.
162. In practice, the Superintendence audits each bank every year. When
the audit involves checking the files of a licensee on a sample basis, the
supervision department checks whether the KYC policy has been properly
implemented, and, for instance, the recording of cash transactions and
international transfers. The Superintendence indicated that banks are found
to be generally compliant with record keeping obligations pertaining to their
clients accounts as well as to related financial and transactional informa-
tion. The financial intelligence unit (FIU) in charge of the enforcement of
the money laundering offence considers that the banking sector of Chile is
generally in compliance with the law.
163. The tax administration itself maintains in its database a certain
amount of banking information periodically provided by banks in tax infor-
mation returns. First, the Chilean law requires banks to annually inform the
tax authorities of the interests and other income paid to their clients (Income
Tax Act, art. 101). Second, Banks annually submit information to the SII on
loans granted (Tax Code, art. 85). Therefore, even though the tax authorities
do not maintain a list of account holders as such, they are informed annually
of the name of all the persons that have earned an interest income during a
fiscal year and a complete record of all these persons is maintained in the SII
database. This reporting obligation is respected in practice all banks file the
sworn statements at the due date every year.
164. In conclusion, it appears that the Chilean banks respect their obliga-
tions to keep banking information on account holders and on the transactions
they perform.
Availability of banking information in practice
165. Chile received, in the period 2010-12, 17 requests covering bank-
ing information mostly concerning individuals. Banking information was
exchanged in three cases and one case is pending (see also section B.1.5
below on Access to Bank Information). In the first case where banking
information was exchanged, the competent authority asked a Chilean com-
pany about accounting information for the requesting authority to check
some transactions with this business partner, and the company provided
related banking statements showing details of the payments. In the second
case, the Chilean authorities were able to determine that the person held no
bank account in Chile, after having consulted the SBIF. In the third case, the
requesting authority wanted to know the amount of dividends distributed
by a Chilean company to a person as these dividends must be declared to
the tax administration and none had been declared, the Chilean authorities
were able to inform the requesting authority that no such dividends had been
distributed.
166. Bank information was not provided in the other cases for various
reasons not linked to any breach of the obligation to maintain banking infor-
mation. In some instances, there was no bank information to report on and
these facts were reported to the requesting authorities (although the answer
could have been more explicit; see below section C.5.1 on Communications
with EOI partners). For instance, a peer asked about the payment of divi-
dends to an individual. These payments must be reported to the Chilean tax
administration and no such report was made by the concerned bank, so the
competent authority concluded that no such dividends were distributed to the
named person. In two other cases, banking information was requested about
named individuals. In these cases, the competent authority first checked
whether this person had a tax identification number in Chile, as this is man-
datory to open a bank account. Since these individuals had no TIN in Chile,
they could not have opened bank accounts.
167. In some other instances, the bank information requested in the
EOI letter to check the amount and payment of some transaction was no
longer needed, once sufficient information was gathered to ascertain that
the invoices were false (same case as discussed under section A.1 above). In
another similar case, once accounting information was gathered from the
company, it appeared that no such transactions took place, and this informa-
tion was sufficient for the requesting authority.
168. Some other requests were not answered due to the termination of the
underlying treaty (see chapter C.1).
169. Chile also exchanges automatically some banking information with
a few partners on the basis of their DTCs, including its most important EOI
partners. This covers dividends and interests.
Phase 2 Rating
Compli ant
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 51
B. Access to Infor mation
Over view
170. A variety of information may be needed in a tax enquiry and
jurisdictions should have the authority to obtain all such information. This
includes information held by banks and other financial institutions as well as
information concerning the ownership of companies or the identity of interest
holders in other persons or entities, such as partnerships and trusts, as well
as accounting information in respect of all such entities. This section of the
report examines whether Chiles legal and regulatory framework gives to the
authorities access powers that cover the right types of persons and informa-
tion and whether rights and safeguards would be compatible with effective
exchange of information. It also assesses the effectiveness of this framework
in practice.
171. The Chilean authorities make use of their powers available for
domestic taxation purposes in order to exchange information, but do not
require a domestic tax interest to do so. The Chilean tax administration (SII)
has power to access accounting information and information on the owner-
ship of legal entities, pursuant to the Tax Code (and the tax database already
contains much information for identifying the owners of legal entities). In
particular, these powers allow the authorities to request information from
any taxpayer and from third parties who may have the information requested.
172. In practice, access powers are rarely used to gather identity and own-
ership information as most of the time the information is available with the
tax authorities. When necessary, the gathering of ownership and accounting
information for EOI purposes is performed with exactly the same measures
as the gathering of information for domestic tax purposes, and has been
efficient.
173. Up until January 2010, Chile was generally able to supply informa-
tion held by banks and other financial institutions for EOI purposes, but
was unable to obtain certain information for civil tax purposes, such as
information regarding transfer of funds, transactions carried out on checking
52 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION
accounts and account balances. Law 20.406 puts an end to this exception and
since January 2010 the SII has full access to bank information. However,
the new legislation enabling a full exchange of banking information,
i.e. including the above-listed banking information for civil tax purposes,
is effective for civil tax matters only for transactions, which occurred on or
after 1 January 2010. As a result, access is not granted for all bank informa-
tion that may be relevant for taxable periods subsequent to the entry into
force of the law. Although limited in scope, this restriction has diminished
the effectiveness of exchange of information during the period 2010-12. More
generally, some banking information was exchanged but specific provisions
on access to bank information have not been used to do so in 2010-12 (as
the information was extracted from the tax databases or provided by the
taxpayer) and the first case of direct access to bank information for EOI pur-
poses is ongoing. The provisions of the General Banking Law and Tax Code
therefore remain largely untested in practice.
174. The procedure introduced in the Chilean Tax Code requires the
approval of the accountholder or a court decision. In general, the noti-
fication of the accountholder is required without the possibility for any
exception where such notification may prevent or delay effective exchange
of information.
B.1. Competent Author it ys abilit y to obtain and pr ovide infor mation
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information).
175. The competent authority for exchanging information designated in
most of Chiles EOI instruments is the Minister of Finance, and, by delega-
tion, the Director of the Internal Revenue Service (SII), whose tasks include
to carry out exchange of information with tax authorities of other coun-
tries in order to determine the taxation of specific taxpayers (Tax Code,
art. 6(6)). Some recent EOI instruments provide that the competent authority
is the Minister of Finance, the Commissioner of the SII or their authorised
representatives. The SII therefore gathers information for both domestic and
international tax purposes.
176. Within the SII, the department in charge of gathering information
for EOI purposes has varied over time. Up to the end of 2011, and during two
thirds of the period under review, the Large Taxpayer Department was in
charge of co-ordinating EOI. Since 2012, the International Audit Department
(DFI) is the department in charge of EOI. There have not been any drastic
changes of work methods with the change of responsible department (see also
section C.5 below the term competent authority is used to describe the
two departments in an indiscriminate manner).
177. The competent authority requests other departments to gather infor-
mation, depending on their area of competence the competent regional
offices gather information from taxpayers or third parties depending on their
territorial competence, the Large Taxpayer Audit Unit gathers information
from large taxpayers, and the Special Cases Office gathers information from
banks. The competent authority itself gathers information in the tax databases,
and prepares the notices to be sent by the Commissioner to other governmental
institutions (such as the Police, Customs, Civil Registry and other regulatory
authorities). The process for gathering information and sharing of responsibili-
ties in EOI cases is now detailed in a SII Circular 18/2013 of September 2013
(Oficio Circular) which reflects the practice developed by the DFI.
178. Some requests or part of requests have been answered without using
the information gathering powers, as the requested information was already
within the SII databases, especially information on the tax situation of the
person concerned, but also information on the ownership of entities.
179. The information gathering powers of the SII are provided for in Title
IV of the Tax Code on Special investigation measures (art. 59 to 65). The
same provisions are implemented to gather ownership or accounting informa-
tion for civil or criminal tax purposes.
Ownership and identity information (ToR B.1.1)
180. Information on the ownership of corporations (companies and part-
nerships) and sociedades civiles (non-commercial entities) that perform
economic activities is maintained by the tax administration, by virtue of
the mandatory declarations of creation of these entities, and annual declara-
tions they make. In addition, the Commercial Registers and Legal Archives
of public notaries also contain ownership and identity information and are
public records accessible to anyone.
34
Moreover, article 87 of the Tax Code
gives the SII powers to request from any public official information neces-
sary for tax audit.
181. If more detailed information is requested, in particular on sociedades
de capital, the SII can use its domestic information gathering powers, in par-
ticular those provided for in article 60 of the Tax Code.
34. Article 39 of the Regulation on the Commercial register of 1866. In the Public
Commercial Registry of Santiago, online search is possible with the name of the
entity since 1993, with the reference page of the Register since 1970, at: www.
conservador.cl/.
182. Pursuant to article 60(1) of the Tax Code, the tax authorities can
access the shareholders ledgers of Chilean companies: with the object to
check the correctness of tax returns or to obtain information, the Internal
Revenue Service may examine documents of the taxpayer in any aspect
related to the elements on which the determination of the tax is based or
referring to other elements included or that must be included in the tax return.
With the same object the Internal Revenue Service may examine books and
documents of the persons obliged to withhold a tax.
183. The tax authorities can also request information from any person
domiciled in Chile about a third person, on the basis of article 60(8): In order
to apply, supervise or investigate the compliance of the tax law, the Internal
Revenue Service may request a written sworn statement or summon any
person domiciled within its office jurisdiction to declare under oath about
facts, data or records of any nature related to third persons This provision
would capture, among others, the Commercial Registers and Legal Archives
of public notaries but also Chilean resident trustees of foreign trusts. The
Chilean authorities add that although the law does not establish any time
limit within which the person must deliver the requested sworn statement,
such a limit is normally established in the request made by the Chilean tax
authority. The same provision nonetheless indicates that the persons obliged
to keep professional secrecy are excluded from this obligation (see below
Secrecy Provisions).
184. Finally, if, with the information obtained in accordance with article 60
above-mentioned, the SII concludes that there is an apparent inconsistency, it
can open a domestic tax investigation and issue a summons under article 63
requiring the taxpayer to present a new declaration, a rectification or an
explanation to the one already filed. A summons under article 63 therefore, in
general, operates when information provided by the taxpayer does not match
the SII records. A person summoned must answer the tax authorities within
one month; a deadline that can be extended once by up to one additional
month.
185. The Chilean competent authority therefore has the power to obtain
and provide ownership and identity information of relevant entities.
Access to ownership and identity information in practice
186. The Chilean competent authority never had to use its information
gathering powers to answer questions on ownership information during the
period under review.
187. The tax authorities already have a large amount of information in the
tax database, and therefore most of the requests for ownership information
received in 2010-12 have been answered directly from this internal source.
The DFI cross-checks the information with information on a privately owned
website that gathers all public deeds of companies and changes thereto, when
the auditor has some doubts, for instance when the company is not found
at its registered address. Should a peer request a copy of the original of the
deed, a certified copy could be gathered from the Notarys office or the legal
Archives (or the Ministry of Economy new website), but the case has not
occurred during the period under review.
188. A few questions were also answered with information otherwise pub-
licly available on the SVS website. If necessary, the tax authorities can also
access the database of the customs administration directly, in application of a
memorandum of understanding between the two agencies.
189. Finally, information concerning the presence in Chile and travel of
an individual was requested and obtained from the international police, in
application of article 87 of the Tax Code.
Accounting records (ToR B.1.2)
190. The Tax Code expressly provides that with the object to check the cor-
rectness of tax returns or to obtain information, the Internal Revenue Service
may examine inventory records, balance sheets, accounting books and docu-
ments of the taxpayer (art. 60). The competent authority, through a regional
office or the Large Taxpayer Audit Unit, therefore has the power to obtain and
provide accounting records for all relevant entities and arrangements.
191. The regional office or Large Taxpayer Audit Unit can also request
a taxpayer to deliver a sworn statement (or affidavit) pursuant to article 34
of the Tax Code, or to present its accounting books and records pursuant to
article 35 of the Tax Code.
Access to accounting information in practice
192. The tax authorities hold only limited accounting information in their
databases (in relation to large taxpayers mainly). Financial statements of
some companies are also available with the SVS. Most of the information
requested must therefore be gathered from outside of the administration.
193. The competent authority requested various regional offices to
gather accounting information from the concerned taxpayers. In practice,
the regional tax auditor contacts the entity by phone to request the needed
information. If no phone contact is possible, a notification is sent to the entity
with a deadline to provide the information. The representative of the taxpayer
entity must then visit the regional office and submit the original documents
to the tax auditor, who checks the documents, makes copies and certifies the
copies (each auditor has a stamp with a unique personal reference number).
The copies are then forwarded to the competent authority.
194. It has also happened that the tax auditor requested the taxpayer to
sign a sworn statement or affidavit, for instance to indicate that it never had
any business relationship with a named foreign business entity. This was sent
together with the supporting accounting documents.
195. In one case, the information received in the EOI request triggered the
opening of a domestic investigation and additional information was submitted
to the requesting authority on a spontaneous basis.
Use of information gathering measures absent domestic tax interest
(ToR B.1.3)
196. Article 60(1) gives the tax authorities access powers not only to
check the correctness of tax returns but also more broadly to obtain infor-
mation, which encompasses EOI. In addition, article 6(6) indicates that
carrying out exchange information is part of the tasks of the Director of the
SII. The Chilean authorities access information for EOI purposes on this
basis, since EOI is one of the tasks of its Director, whether or not it would
have a domestic tax interest in doing so. SII Circular 18/2013 on EOI also
clearly indicates that information should be gathered for EOI purposes absent
a domestic tax interest (chapters 2.1.3 and 2.4)
Compulsory powers (ToR B.1.4)
197. Jurisdictions should have in place effective enforcement provisions
to compel the production of information. The Chilean Tax Code provides for
compulsory measures.
Sanctions for non-disclosure
198. Every time the taxpayer does not exhibit its accounting books and
records or documents, or impede the examination of these, a constraining
measure (apremio) is applicable against the individual (or, in the case of a
legal person, the managers, administrators (or the individuals acting as such),
and partners that are required to comply with the obligation concerned). In
these cases, the SII can request the court to order imprisonment up to 15 days
against the person who does not comply, after having been required twice to
concur come to the SII offices to provide information (Tax Code, art. 93, 95
and 99).
199. The non-respect of the obligation set out in article 34 to provide a
sworn statement and in article 60(8) to provide information on third persons
is punishable by a fine between 20% and 100% of the annual taxation unit,
the amount of which is CLP 501 612 in May 2014 (USD 914). The above
mentioned constraining measure is also applicable after a second summons.
The non-respect of the obligation set out in article 35 to present its books of
account to the regional tax office is also sanctioned with a fine between one
monthly taxation unit and one annual taxation unit, i.e. between CLP 41 801
and 501 612 (USD 76 to 914).
200. As far as banking information is concerned, if some or all the infor-
mation requested is not provided or is provided with delay even though the
accountholder accepted their disclosure, the bank can be sanctioned by a fine,
the amount of which depends on the delay. Pursuant to article 62 of the Tax
Code, any delay by a bank as well as partial or total omission in providing the
requested information is subject to a fine of CLP 38 827 501 000 (USD 76
912).
35
However, if a third party (i.e. the bank) requested by the SII to provide
information under a warning measure (apercibimiento) does not comply
within 30 days, an additional fine is applicable, the amount of which depends
on the delay and the number of persons with respect of whom the information
has been omitted or with respect of whom there has been a delay in submit-
ting the respective information. The maximum fine applicable cannot exceed
CLP 15 million (USD 27 413).
36
If the bank does not conform to a court deci-
sion for disclosure, the sanctions referred to above are applicable.
201. The other breaches of articles 59 to 63 of the Tax Code do not entail
any specific sanction but article 109 of that Code stipulates that any infringe-
ment to the tax obligations for which no specific sanction is mentioned are
punishable with a fine between CLP 5 016 to 501 612 (USD 9 to 914)
37
or
three times the tax avoided (if avoidance took place). These sanctions appear
to be quite low or difficult to implement in EOI cases (since the SII may not
know the amount of taxes avoided in the requesting jurisdiction).
202. SII Circular 18/2013 reminds tax auditors of the existence of these
various sanctions.
203. It has not happened during the period under review that a taxpayer
or information holder refused to submit the information requested by the tax
authorities for EOI purposes. Therefore no sanctions have been applied in
practice.
204. In practice, if the entity does not provide the information by the
deadline despite a reminder, the tax auditor puts it in the restricted activity
35. One monthly tax unit to one annual tax unit; paragraph 2 number 1 of article 97,
jointly applied with paragraph 1.
36. 30 Annual tax units.
37. 1% and 100% of Annual Tax Unit valued CLP 501 612 in May 2014.
category, meaning that no new stamped invoices will be issued to that entity.
As noted under section A.2, in Chile invoices are numbered and stamped by
the tax administration. Commercial entities must request new invoices when
their stock is used, and will not get them if restricted. This measure was
applied twice when the entity was not present at the registered address, and a
domestic investigation was opened. This had no negative impact on the EOI
requests at stake, as the information that the entity was no longer active was
sufficient for the requesting authority.
Search and seizure
205. Article 60(4) and (5) of the Tax Code provides for the power to search
premises for the purpose of preparing or checking inventory records. The
assistance of the police force may be requested by the Regional Director of
the SII and a search warrant be issued, if necessary. The same provision does
not give the SII a right to seize documents and appears to restrict search spe-
cifically to inventory records.
206. During the period under review, the regional tax office never had to
visit the office of any entity to gather information. It has happened on two
occasions that the regional auditor visited the premises of the taxpayers, to
check whether it really had an economic activity at the given address, but not
to gather documents.
Secrecy provisions (ToR B.1.5)
207. Chile has a number of secrecy and confidentiality provisions in vari-
ous pieces of legislation, primarily the General Banking Law.
208. Chile received EOI requests covering banking information. Chile did
not receive EOI requests related to attorney-client privilege or other secrecy
duties. In practice, banking information was gathered from the tax databases
(interests and dividends) or from the taxpayer directly (bank statements) but
never from banks, as noted under section A.3 above on the Availability of
Banking Information. One case is pending.
Bank secrecy
209. The Chilean competent authority can obtain banking information
from the accountholder pursuant to section 60 of the Tax Code, or from the
bank, pursuant to specific procedures.
The General Banking Law
210. The General Banking Law provides for secrecy and confidentiality
duties. Article 154 of the General Banking Law distinguishes between bank
secrecy and bank confidentiality. Bank secrecy covers a broad segment of the
banking operations, such as the movements and balances of current accounts,
and the deposits and placements of any kind performed by the banks, and
this protection extends to savings accounts, time deposits and other forms of
placement. The remaining banking operations are subject to confidentiality.
38
211. The General Banking Law lifts the secrecy and confidentiality
duties in limited cases: banks can disclose secret information to the deposi-
tor or whoever expressly authorised by him/her.
39
Pursuant to this provision,
accountholders can give the bank an anticipated authorisation to disclose
information to the tax administration. Confidential information can more
broadly be disclosed if the requesting person can prove a legitimate inter-
est and that disclosing such information may not cause foreseeable damage
to the accountholder. Article 154 further provides that courts may order the
remittance of information on specific transactions directly linked to ongoing
proceedings or investigations.
212. Banks may therefore disclose confidential information on current
accounts if the SII establishes a legitimate interest and that such disclosure
has no negative impact on the customers net worth. The determination of
whether or not the disclosure of confidential information has a negative
impact on the customers net worth might be difficult to make. For instance,
where a foreign competent authority requests confidential information in
order to check the tax liability of a person linked to the client of the bank (and
not directly of the client), this may not cause any damage for the account-
holder and the bank should provide the information. If the bank disagrees, the
information can only be obtained with the approval of the client or a judicial
decision (see below).
The Tax Code
213. The Tax Code also provides for various ways to lift bank secrecy
and confidentiality. First, the tax authorities of Chile routinely receive
information from banks, for instance on interest payments and other income
paid to banks clients (Income Tax Act, art. 101) as well as information on
loans granted (Tax Code, art. 85), as noted under section A.3 above. The SII
38. See also article 1 of Decree with Force of Law no. 707 on the Law on Current
Bank Accounts and Cheques.
39. The breach of banking secrecy is punishable by imprisonment between 61 days
and 3 years.
therefore maintains this information and does not need to use its information
gathering powers.
40
In practice, the Chilean authorities have exchanged such
information (i.e. on whether dividends had been paid to a particular person).
For the rest, the Tax Code provides for a procedure of disclosure of banking
information for domestic tax purposes and EOI purposes.
214. Articles 62 and 62 bis of the Tax Code set the main procedure for
accessing any type of banking information for EOI purposes. This procedure is
available for bank transactions taking place after 1 January 2010, in accordance
with Law 20.406. Chile was previously not able to obtain full bank informa-
tion, i.e. information on the amounts of deposits and current account activity/
balances in civil tax matters were inaccessible (and remain inaccessible before
1 January 2010, see below). For the same reason, Chile was not able to subscribe
to the 2005 wording of Article 26 of the Model Tax Convention (in particular
paragraph 5) before 2009, when it withdrew its reserved position to Article 26.
215. The procedure distinguishes between information requested in
criminal tax matters and the establishment of tax sanctions on one hand (for
which the authorisation from an ordinary court is necessary), and information
requested to check the accuracy of domestic tax declarations or linked to an
EOI request on the other hand (for which the approval of the accountholder or
an authorisation from a tax court is required).
216. The following paragraphs present the full procedure for accessing
banking information for EOI purposes in both civil and criminal tax matters.
When Chile receives an EOI request for banking information, the SII requests
the information from the bank, and provides the following information:
the identity of the accountholder;
the operations or banking products subject to the request, and the
concerned periods;
indication on whether the request relates to a domestic tax assessment
or an EOI request, in which case the bank is informed of the request-
ing jurisdiction and the reasons for the request.
217. Chilean law is clear that the information required in order to pro-
cess a request for bank information is that information that is sufficient to
identify the person whose bank information is requested. As a matter of
40. Another express exception to bank secrecy and confidentiality relates to
Business platform companies, a special type of shareholding company dedi-
cated to allowing foreign investors to manage investments abroad without paying
income tax on these investments in Chile. The rules regarding bank secrecy and
confidentiality established in article 154 of the General Banking Law are not
applicable to these companies (Income Tax Act, art. 41D).
practice, the Chilean tax authorities have an understanding with the bank
industry whereby they agree to provide the name of the accountholder
to the bank on the basis of the information provided by the treaty partner
(SII Circular no. 46 of 6 August 2010). Where the requesting party is only
able to provide an account number, then the Chilean authorities can use this
information to obtain the name of the accountholder from the bank, as this
information is not confidential (SBIF Circular no. 110 of 1987). Chile has
not received any request for banking information where the identification of
the person concerned would have been done otherwise than by a name and
address. However, it is noted that the SII has in practice used this procedure
in domestic cases. In addition, representatives of the SBIF confirmed that this
information is not confidential or secret and that with a bank account number,
the SII can ask the 24 banks to check whether they manage the account and
the identity of the account holder.
218. When the bank receives a request for information, it can directly
answer within the given deadline (not less than 45 days) if its client gave the
bank an anticipated authorisation to answer requests from the tax authorities.
In the absence of a blanket authorisation, the bank notifies its client within
5 days, and the client can answer within the next 18 days.
41
The law provides
for a minimum but no maximum deadline, for the bank to provide informa-
tion when the client agrees with this. The deadline given in practice to the
banks, if too long, may unduly delay exchange of information.
219. As of November 2013, to the knowledge of the Chilean authori-
ties, only one bank in Chile had proposed to its clients to make anticipated
authorisation of disclosure of information to the SII. A representative of
the Association of Banks confirmed that in general banks do not promote
these anticipated disclosure authorisations (to the courts of justice under the
Banking Law and to the SII under the Tax Code) and that clients have to
proactively ask for it. The Association also notes that only a couple of banks
acknowledged to have received requests from the SII.
220. If the client does not authorise the disclosure of information or does
not answer, the bank informs the SII within 5 days (and cannot submit the
information). In these cases, the SII solicits a court order from the Tax and
Customs Court having territorial jurisdiction (depending on the address of
the accountholder). It informs the court of which competent authority submit-
ted an EOI request and provides supporting information (the whole procedure
is confidential). The judge decides on the request according to the merit of
the information provided by the parties. The law does not provide any further
41. If the anticipated authorisation covers only part of the requested information, the
bank must provide this information to the tax authorities and notify the client for
the rest (Circular 46 of 6 August 2010).
guidance on when the court has to accept or can refuse to order the transmis-
sion of the requested information.
221. Article 62 bis does not set any deadline for the court to summon the
parties to a hearing, but the hearing must be scheduled within 15 days of the
summons and the accountholder is notified of the date and purpose of the
hearing. The judge decides on the request during the hearing or within the 5
following days, except where he/she considers that 5 more days are necessary
to provide more evidence. The decision of the court can be appealed within
5 days and the Court of Appeal must decide through a swift procedure.
Once the SII has obtained a final court decision, it notifies the bank, which
must provide the information within 10 days. In total, the procedure can last
63 days to which must be added the period taken by the courts to issue sum-
mons and swiftly decide on the appeal. The overall time for information to
be obtained when a court order is needed is not set in the law and the effec-
tiveness of information exchange will depend on the practice of the Tax and
Customs Court on summoning the parties to the hearing and of the Court of
Appeal on swiftly decide on appeals made.
222. This process for access to banking information is only available for
banking operations performed after 1 January 2010 in accordance with Law
20.406 (this being the effective date, as stipulated in Transitional Article
Second, with respect to bank operations carried out as from that date; this
also corresponds to the withdrawal by Chile of its reserved position on the
Model Article 26). According to the Chilean authorities, treaties override
laws, but since most treaties do not contain Model paragraph 5, access to
banking information is limited to what is allowed for in domestic laws, in
application of paragraph 3. The recent treaties that contain paragraph 5 con-
tain a restrictive provision, similar to the one in law. However, a transaction
may occur prior to 1 January 2010, but relate to a tax period subsequent to the
entry into force of the applicable EOI instrument.
223. The Chilean authorities consider that with the entry into force of the
Multilateral Convention in Chile, the issue of transactions pre-dating 2010 but
still relevant to a taxable period posterior to its entry into force will be solved:
The Chilean authorities indicate that treaties override domestic laws and that
with the entry into force of the Multilateral Convention and its explicit and
precise provisions on which transactions the exchange of information applies to
(Articles 21 and 28), the issue will be solved to a large extent, since most of its
EOI partners are also signatories to the Multilateral Convention. Whereas the
Phase 1 of the review report indicated that DTCs and TIEAs were international
treaties that have the same value as laws dealing with the same topic, i.e. the
value of ordinary laws, the Chilean authorities indicate that case law clearly
indicates that this past interpretation has evolved treaties have the value of
laws, which means that they are part of the Chilean hierarchy of laws, but they
override conflicting domestic laws. When the provisions are precise and explicit,
the treaty provisions apply directly and the conflicting domestic provision must
be ignored. This explanation is based on court decisions on the place of treaties
in the hierarchy of laws
42
(not related to taxation or exchange of information)
and published parliamentary debates, which serve as secondary source of law.
224. It remains that, currently, access to information on transactions pre-
dating 2010 is not possible, since the Multilateral Convention is not in force
in Chile: the domestic limitation prevents full EOI in treaties without para-
graph 5, and the provision of the other treaties similarly limits EOI.
The relationship between the General Banking Law and the Tax Code
225. In practice, the provisions of the General Banking Law have never
been used to gather information for EOI purposes (this could have been rel-
evant in the case of confidential information pre-dating 2010 for instance). In
domestic cases, the authorisation of the client is usually granted, for the SII
to gather information from the banks.
226. Some uncertainties arose in practice in the domestic context, as to
which information is covered by secrecy or confidentiality, and on whether
the Chilean tax authorities have a legitimate interest in gathering confidential
information. In 2005, a group of 21 banks had filed a claim before the lower
court requesting the invalidation of a SII Resolution to require automatic
reporting from banks on international transfers of USD 10 000 or more (or
the equivalent). The banks and the SII disagreed on the confidential or secret
nature of the information concerned. The lower court and subsequently the
appeal court agreed with the banks claim. However, the Supreme Court
decided on 25 March 2013 in favour of the SII. According to the Supreme
Court, the concerned transactions are covered by bank confidentiality, and
because the SII is legally responsible for ensuring compliance with tax law, it
has a legitimate interest in having access to such information.
227. However, the banks raised a new question in front of the civil court
in August 2013 on whether the provisions of the General Banking Law can
still be relied on by the SII now that the Tax Code contains some specific
provisions on access to bank information for tax purposes. The SII consid-
ers that both laws apply, as explained during the Phase 1 review: the laws
are not inconsistent and nothing in Chilean law provides that the provisions
of the General Banking Law should no longer apply to the SII. The appel-
lant and the Association of Banks consider that the Tax Code provisions are
more recent and special provisions which therefore prevail and exclude the
42. Supreme Court, Compaa Molinera San Cristbal vs Servicio de Impuestos
Internos, 1988
application of the General Banking Law to the SII. The court case is pend-
ing. The question is of interest for EOI purposes as the General Banking Law
would be a possibility to gather confidential information pre-dating 2010
where the account holder refuses to provide the information directly or is no
longer available for questions. The Chilean authorities are invited to report
on further court decisions on access to banking information for tax purposes.
The gathering of banking information for EOI purposes in practice
The gathering of banking information in practice
228. In practice, Chile received 17 requests for banking information in
civil tax matters in 2010-12, including some that covered transactions per-
formed before January 2010. Of these requests, 13 have not been answered
because of the termination of the underlying EOI instrument (see chapter C.1.
below). Three other requests have been answered without using access
powers on banks (see section A.3 above) and one is pending.
229. Two requests raised issues on the scope and interpretation in practice
of the law on access powers for banking information, concerning the date of
the transaction about which information is requested (pre-dating 2010 or not)
and the level of confidentiality of some banking information.
230. First, concerning the date of the transaction about which informa-
tion is requested, only one EOI request for banking information to date
required the gathering of information from the account holder or the bank,
and this case is pending (the original request dated 2011 got lost and a copy
was received in November 2013): part of the information requested relates
to pre-2010 transactions and the competent authority attempted to gather
the information directly from the company (as no access to the bank is pos-
sible) but the company was not found at its registered address. The rest of the
information is being gathered through judicial procedure as the bank tried to
notify the client but the letter was returned by the post office since the entity,
which is no longer a client of the bank, was not found at the address. The SII
submitted the request to the Tax and Customs Court on 29 April 2014 and
the case is pending (see also part B2 on Notification requirements below).
The Chilean authorities are invited to report progress made in this EOI case.
231. Another peer limited its request for banking information to Chile
to what is accessible, as it had been informed of the legal limitation in the
gathering of banking information in Chile even though it needed pre-2010
banking information, it asked only for the identification of bank accounts
held by a Chilean company, which is not considered confidential information.
232. Second, concerning the level of confidentiality of some banking
information, in one of the two cases mentioned above, the requesting authority
asked Chile for the identification of bank accounts held by a Chilean com-
pany, in order to audit transactions that had taken place in 2006-09. In view
of the years concerned, the Chilean authorities initially declined the request,
considering that the information pre-dated 2010. The Chilean authorities
reconsidered the issue, however, and concluded that matching a name with a
bank account number is not considered as secret or confidential information.
They explained that in practice, if a person holds a bank account in Chile, this
person is necessarily registered in the tax database, since a TIN is mandatory
to open a bank account. The SII would then check the TIN of the person, and
check in the tax file whether any bank has made sworn statements on divi-
dends or interest income. If so, the SII would ask the bank about the account
number. If not, the SII can turn to the SBIF which would be able to provide
the name of the bank and the type of products offered to this client. The SII
would then turn to the bank to get the exact account number. In the present
case, the SII ultimately contacted the SBIF, which reported the absence of
bank account for the period 2006-13. (The tax auditing department informed
that the company was not carrying out an active business during that period.
It only had immovable property in respect of which no income was declared.)
233. The other EOI requests for banking information have been handled
without using the access powers of articles 62 and 62 bis for practical reasons
(see section A.3). It is therefore not possible to assess the implementation in
practice of articles 62 and 62 bis of the Tax Code, based on one pending case.
Practice nonetheless confirms that the limitation identified in the law has
posed an impediment to accessing full bank information prior to 1 January
2010 and a recommendation is made in this respect.
234. Representatives from the Special Cases Office of the SII and of the
Tax and Customs Courts nonetheless provided useful clarifications on the
handling of future cases. The Special Cases Office of the SII is the depart-
ment in charge of the gathering of banking information for domestic and EOI
purposes. It has to date handled 17 domestic cases of access to banking infor-
mation which related to one major domestic investigation. It must be noted
that in domestic investigations, since the taxpayer must provide the docu-
ments that support his/her declarations in tax returns, the burden of proof is
generally on the taxpayer (who must provide all supporting documentation)
and it is only when the auditor wants some specific banking information that
the procedure would be used. In the mentioned 17 cases, the office notified
the headquarters or main branch of the banks, which in turn notified their
clients. In 2 instances the account holders authorised the bank to release the
information to the SII and in the 15 other instances the procedure did not
continue as the information was gathered through other ways, and there was
no need for the Legal Division of the SII to go to the Tax and Customs Court.
Therefore even in domestic cases, the full procedure in the Tax Code was not
used during the period under review.
235. Tax and Customs Courts were progressively introduced in Chile
from 2009 to 2013, with a total of 18 regional courts today. Their staff come
mainly from the tax administration and the rest from the private sector; they
all received an initial training that covers exchange of information. As there
is no backlog in these courts, the representatives of the court considered that
the court would summon the parties to the hearing within six days of receiv-
ing a request all correspondence is performed electronically. No case of
access to banking information for domestic or EOI purposes were heard at the
date of the onsite visit, but the representatives of the court indicated that they
would not enter into the substance of the request, nor would they need to see
the EOI letter. Rather, in practice they would check that the formalities are
respected, i.e. that the EOI request emanates from a competent authority and
is based on a valid international treaty, and that the different deadlines have
been respected. The account holder would not be invited, only the representa-
tive of the bank and of the SII would be summoned for a short hearing. If the
documents are in order, the court would decide immediately and otherwise
within five days. It might happen that a special period would be opened for
both parties to provide evidence. The representatives of the Bank Association
indicated that the banks would hold a neutral role in the procedure, as they do
not consider themselves as representatives of the account holders.
236. In conclusion, practice confirms that the limitation identified in the
law and treaties poses an impediment to accessing full bank information
prior to 1 January 2010. Chile should therefore ensure that all relevant bank
information may be accessed for exchange of information purposes. In addi-
tion, in the absence of use of the gathering procedure in practice, the Chilean
authorities are invited to monitor the application of the General Banking Law
and Tax Code to the access and exchange of banking information, including
the direct application of the Multilateral Convention provisions once in force.
Other professional secrecy provisions
237. Pursuant to article 60 of the Tax Code, individuals bound by pro-
fessional secrecy are not required to provide the SII with confidential
information on third parties. Article 61 also reaffirms this principle: except
express provision to the contrary, the provisions of the Tax Code do not have
impact on professional secrecy, confidentiality of banking accounts and other
operation to which the law gives a confidential nature. Therefore, the SII
may decline to exchange information where information is not available to
the SII due to professional secrecy rules.
238. This provision applies to lawyers. Both the Code of Civil Procedure
and the Code of Penal Procedure recognise an attorney-client privilege.
Indeed, lawyers (abogados) are relieved from the obligation to testify in court
in relation to facts that were communicated to them in confidence by reason
of their profession (art. 360 and 201 respectively). These Codes however do
not define the extent of the attorney-client privilege in Chile and do not, in
particular, specify whether secrecy applies only to communications produced
for the purposes of seeking or providing legal advice or for the purposes of
use in existing or contemplated legal proceedings.
239. The Chilean authorities indicate that professional secrecy covers
professional persons when acting in their capacity as such with respect to the
nature of the information held (professions that by its nature require some
degree of confidentiality and only referring to such confidential information).
It would only encompass professional communications between an attorney
and his/her clients relating to that professionals exercise of his/her profession.
The Chilean authorities provided some case law to support their interpreta-
tion that the confidentiality duty of lawyers is not absolute, even though the
cases did not relate to tax matters: in this case, the court made a distinction
between the lawyer and public official status of a lawyer of the State Defence
department (the lawyers defending the Chilean public authorities in courts).
The representative of the Bar association considered that when a lawyer acts
as the representative of the taxpayer (outside of legal advice or proceedings),
he/she acts as general attorney, rather than lawyer, and therefore the privilege
would not apply (Code of Ethics, articles 7 and 15). Similarly, the privilege
would not apply if the lawyer would act as nominee or trustee. Finally, the
privilege would not apply to documents delivered to a lawyer in an attempt
to protect such documents form disclosure. For instance, accounting records
(and other documents supporting tax declarations) are not covered by the
attorney/client privilege (Tax Code, articles 35 and 60).
240. The attorney-client privilege has never been used in Chile in order
not to provide information to the tax administration. A representative of the
Bar Association indicated that there is no practice nor case law on the extent
of the attorney-client privilege in tax matters because of the absence of mate-
rial basis for such cases the tax auditors request the taxpayers to provide
information and documents to support the declarations in their tax returns,
and would not turn to lawyers.
241. Professional accountants and auditors are also subject to secrecy obli-
gation, pursuant to their Code of Ethics, but this professional secrecy does not
apply when dealing with the SII. Finally, the Tax Code provides for an excep-
tion for the technicians and advisors that were involved in the elaboration
of a tax declaration, who are obliged to provide sworn statements or affidavits
about the points contained in that declaration (art. 34). The Chilean authori-
ties indicate that this provision applies to accountants.
The el ement i s in pl ace, but cer tain aspects of the l egal i mpl ementati on
of the el ement need i mprovement .
Factors underl ying
Chiles ability to access bank
information prior to 1 J anuary 2010
is not complete under its domestic
legislation, as information covered by
bank secrecy on deposits and current
accounts activity and balances prior
to 1 J anuary 2010 is not accessible
for civil purposes, even where the
information relates to taxable periods
or events after that date.
Chile should ensure that all relevant
bank information, which relates to
a taxable period after 2010, may be
accessed for exchange of information
purposes, to ensure that they can fully
exchange information to the standard.
Phase 2 Rating
Par ti all y compli ant
Factors underl ying
The inability to get bank information
on transactions performed before
1 J anuary 2010 has prevented full
exchange of information in practice.
Chile has never gathered banking
information from banks for exchange
of information purposes in practice.
The effectiveness of the access
powers cannot be assessed.
Chile should ensure that all relevant
bank information may be accessed
for exchange of information purposes
and monitor the implementation of the
access powers in practice.
B.2. Notification r equir ements and r ights and safeguar ds
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information.
Not unduly prevent or delay exchange of information (ToR B.2.1)
242. Rights and safeguards should not unduly prevent or delay effective
exchange of information. For instance, notification rules should permit excep-
tions from prior notification (e.g. in cases in which the information request is
of a very urgent nature or the notification is likely to undermine the chance of
success of the investigation conducted by the requesting jurisdiction).
General situation
243. The Chilean law does not require the notification of the person who
is the object of a request for information, as a general rule, even though tax-
payers have the right to be informed of any acts of auditing by the Chilean
tax authority, i.e. taxpayers have the right to obtain information regarding the
nature and subject matter of the request (if the competent authority asks them
for information, and with no suspending effect).
244. In practice, the person requested to provide information for EOI
purposes was not informed of the EOI background of the request during the
period under review. With SII Circular 18/2013, a model letter to informa-
tion holders has been drafted that indicates that the request for information
is based on an EOI request, without mentioning the name of the requesting
jurisdiction or the reason for the EOI request. The Chilean authorities are
encouraged to inform their EOI partners of this change of practice to avoid
any misunderstandings.
245. SII Circular 18/2013 also specifies that in the event that the request-
ing tax authority asks not to disclose that it is an international exchange of
information request because it may impede the success of the audit or inves-
tigation of a tax crime, this will be noted in the confidential letter sent by
the DFI [to the regional tax office]. It has happened once during the period
under review that the EOI partner asked Chile to not inform the Chilean
taxpayer of the request, and the Chilean authorities respected this condition.
246. SII Circular 18/2013 also clarifies that if the taxpayer requests
information regarding the reasons for the information request, he/she will be
instructed that it is: to comply with a request for information requested by
foreign tax authorities, under an international Convention requiring exchange
of information, not mentioning the requesting country or other information
under secrecy obligations in the conventions () and protected also by the
obligation of secrecy of our domestic law. () If the taxpayer requests more
details of the information request, the official should report this situation to
the DFI by sending an email to [the generic email address of the competent
authority]. The Department will resolve the issue in consultation with the
competent authority of the requesting country as to whether the delivery of
more information could damage the audit of that country or to what extent
they might disclose information to the taxpayer, in case it is not specified in
the request for information itself. Such a case has not occurred during the
period under review.
Banking information
247. In the case of banking information not already available in the tax
databases of the Chilean tax administration, the SII when requesting this
information from the bank, must inform the bank of who is the requesting
authority and of the basis for the EOI request (los antecedentes de la solici-
tud). Circular no. 46 also specifies that the SII must provide the bank with
the elements of identification submitted by the requesting authority. The bank
who is asked to produce information for EOI purposes must be informed of
which foreign tax authority had requested the information. This means that
it is in these cases known to the person requested to produce the informa-
tion that this information will be exchanged to the foreign tax authority of a
certain identified jurisdiction. It is recognised that, when using their access
powers, the tax authorities could state the legal basis used for asking the
information from the holder of it (i.e. the domestic law provisions and the
international information exchange arrangement). However, in some cases
this could undermine the success of obtaining the information. This is espe-
cially true when the bank informs its client of the request. No exceptions
exist or anti-tipping off provision. It is therefore recommended that Chile
introduces exceptions to the requirement of informing the person who is
asked to produce information of which foreign tax authority had requested
the information where this is likely to undermine the success of obtaining
the information or unduly delay the procedure, as the person concerned may
destroy any other relevant documents knowing that otherwise they might be
used against him/her in the requesting jurisdiction. Alternatively Chile could
introduce anti-tipping off measures.
248. In addition, the person has the right to oppose and challenge the
disclosure of such bank information pursuant to articles 62 and 62 bis of the
Tax Code (see above). If he/she has not given an anticipated authorisation to
the bank to submit any information requested by the SII, the accountholder
is notified of the EOI request and can intervene at two stages: when the bank
receives the information request from the SII, and when the court schedules
the hearing. The account holder whose information is requested is notified by
the Court either by issuance of a summons delivered to the Chilean address
registered with the bank, or by publication, if the domicile of the person is
not in Chile, is unknown to the bank, or when the person is no longer a client
of the bank. An answer or other reaction from that person is not necessary
for the procedure to proceed. A notice by publication would contain the
necessary information for the person to learn the fact that a request by the
SII regarding his/her banking information subject to secrecy or confidenti-
ality has been made, the competent court, and the date of the hearing, but
would not mention that access is required for EOI purposes. If in practice the
court does not reveal more than these basic elements, confidentiality will be
respected.
249. There is not any exception from the prior notification of the person
concerned, for instance in cases in which the information request is of a very
urgent nature or the notification is likely to undermine the chance of success
of the investigation conducted by the requesting jurisdiction. The notifica-
tion procedure of the Chilean Tax Code therefore does not conform to the
standard.
250. The deficiencies of the Chilean law cannot be overridden by the
Multilateral Convention as it does not explicitly address the issue of possible
exceptions to prior notifications. Amendments to the notification rules on
access to banking information are therefore required.
In practice
251. The Chilean authorities have never gathered information from banks
during the period under review. It is therefore not possible to assess the
implementation in practice of the notification and appeal rights. Some further
indications were nonetheless provided during the onsite visit.
252. A representative of the Tax and Customs Court indicated that the
letter of request to the bank should contain a brief summary of the EOI
request. The representative of the Bank Association indicated that the banks
would perform a formal control of the SII letter of request, especially whether
it relates to EOI and whether it covers information pre-dating 1 January
2010, but they would not have an interest in the reasons for the EOI request.
Therefore there would be no reason to seek any details on the foreign inves-
tigation for instance. The representative also indicated that the bank would
most probably simply pass on the letter to the client, to comply with its obli-
gation of notification.
253. In practice one EOI case involving the gathering of banking informa-
tion is pending in Chile. In this case the SII asked the Tax and Customs Court
the authorisation to obtain the relevant information from the bank. Since the
person concerned is no longer a client of the bank and no Chilean address is
known, the person should be notified by way of publication in the coming
weeks.
Factors underl ying
The Chilean competent authority
must inform the bank of who is the
requesting authority and of the basis
for the EOI request. No exception
exists to this requirement or anti-
tipping off provision.
Chile should ensure that appropriate
exceptions exist to the notification
of the person concerned by an
exchange of information request
(e.g. in cases in which informing
that person is likely to undermine
the chance of the success of the
investigation conducted by the
requesting jurisdiction).
When a specific accountholder has
not given a general authorisation to
the bank to disclose any information
to the tax authorities, the Tax Code
requires the prior notification of the
person concerned when there is a
request for bank information and this
prior notification procedure does not
allow for any exception.
It is recommended that certain
exceptions from prior notification
be permitted, e.g. in cases in which
the information requested is of a
very urgent nature or the notification
is likely to undermine the chance
of the success of the investigation
conducted by the requesting
jurisdiction.
Phase 2 Rating
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 73
C. Exchanging Infor mation
Over view
254. Jurisdictions generally cannot exchange information for tax pur-
poses unless they have a legal basis or mechanism for doing so. In Chile, the
legal authority to exchange information is largely derived from double tax
conventions (DTCs). This section of the report examines whether Chile has
a network of information exchange that would allow it to achieve effective
exchange of information (EOI) in practice.
255. Chiles network of exchange of information instruments almost
quadrupled with the signature of the Multilateral Convention on Mutual
Administrative Assistance in Tax Matters by Chile on 24 October 2013 (the
Multilateral Convention), reaching 83 EOI partners (see annex 2): as of May
2014, Chile is the signatory to 28 DTCs (of which 26 are in force), one Tax
Information Exchange Agreement (TIEA) (not in force) and the Multilateral
Convention (not in force in Chile). A DTC with Argentina that was in force
during the three years under review was terminated by Argentina in 2012 and
a new DTC is being negotiated.
256. Of the 83 Chilean EOI relationships, five do not meet the standard,
including four instruments which reflect the legal limitations in Chile con-
cerning exchange of banking information (see above part B.1.5). In practice,
none of these deficient instruments have yet been used, either because the
treaty partners have not made requests to Chile or because the instrument is
not yet in force. However, the legal impediment identified in Chiles legisla-
tion on access to banking information has prevented the full implementation
of the EOI provisions of some DTCs and Chile should amend its legal frame-
work to allow for full EOI.
257. Chile has never refused to negotiate an EOI agreement with another
member of the Global Forum and continues negotiating new EOI instruments.
258. All EOI mechanisms and the Chilean law include confidentiality
provisions. These provisions apply equally to the information and documents
contained in any request received by Chile as they do to the replies actually
74 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION
sent to the partner. In practice, no issue was raised by any EOI partners and
the Chilean competent authority has taken concrete measures to prevent any
breach of confidentiality.
259. Moreover, the treaties concluded by Chile guarantee that the parties
involved will not be obliged to reveal information regarding an industrial,
business or professional secret, or confidential communications between a
client and an attorney, or to disclose information, the disclosure of which
would be contrary to public policy (ordre public). No issues related to these
matters have been raised in practice.
260. In practice, Chile received 58 EOI requests of different kinds during
the three years under review (2010-12) from nine treaty partners. Among
these, about one third were very simple questions on the address of individu-
als or general questions on the tax laws of Chile and were answered mostly
within 90 days. More substantial requests were most frequently answered
within one year. Some delays of a few weeks or months have occurred during
the transition period when the EOI work was transferred from one tax office
to another one. Some communication issues were noted during the period
under review. The process of handling EOI requests was streamlined and
internal deadlines introduced recently, which should guarantee that status
updates are systematically sent when the information cannot be provided
within 90 days and Chile has started improving communication with its EOI
partners.
261. The office in charge of EOI since 2012 appears to be appropriately
staffed and trained, and the plan to also train the regional offices that gather
information is welcome.
262. In September 2013, the Chilean tax authorities issued Circular
18/2013, the objective of which is to provide guidance on the provisions on
the exchange of information incorporated into a DTC or a TIEA in force in
Chile.
C.1. Exchange of infor mation mechanisms
Exchange of information mechanisms should allow for effective exchange of information.
263. The competent authority, under most of Chiles DTCs, is the Minister
of Finance or his authorised representative. The Commissioner of the
Revenue Service (SII) has received the delegation of competence and deals
with all EOI requests. The Commissioner is also designated as competent
authority in recent instruments (DTC with Austria and TIEA with Guernsey).
264. Chile has signed EOI instruments with 83 jurisdictions. The EOI
provisions in Chiles DTCs are based on the OECD Model Tax Convention.
Administrative agreements complementing existing DTCs have also been
signed with Spain in 2006 and Canada in 2011, and contain some provisions
drawn from the Model Tax Information Exchange Agreement (TIEA).
265. Chile recently signed a TIEA with Guernsey in 2012 and signed the
Multilateral Convention on Mutual Administrative Assistance in Tax Matters
(the Multilateral Convention) on 24 October 2013.
266. In September 2013, the Chilean tax authorities issued Circular
18/2013, the objective of which is to provide guidance on the provisions on
the exchange of information incorporated into a DTC or a TIEA in force in
Chile. It expressly indicates that the Model DTC, the Model TIEA and the
OECD Manual on EOI are of assistance in the interpretation of the EOI pro-
visions contained in the instruments in force in Chile. This internal circular
is binding on tax officials.
267. Chile signed its first DTC with Argentina in 1976. This treaty con-
tains a limited provision on consultation and information. As a result, Chile
and Argentina signed in 2006 an administrative Agreement on the Exchange
of Tax Information to exchange information on a reciprocity basis, most
provisions of which are drawn from the Model Tax Information Exchange
Agreement. The DTC was however terminated by Argentina (for reasons not
linked to EOI) towards the end of the period under review, on 29 June 2012,
with effect on 31 December 2012 (see below paragraph 276). The Chilean
authorities consider that the administrative agreement no longer applies
either, as it was tied to the DTC.
268. Once the treaty is terminated, the requested authority can no longer
exchange the requested information as this would breach their duty of con-
fidentiality (see chapter C.3 below), even if the request has been received
before the date of termination of the treaty. This position is consistent with
the Commentary on the OECD Model Tax Convention, at Paragraph 10.3 on
Article 26.
269. The treaty provides: This Convention shall remain in force indefi-
nitely but either Contracting State may terminate the Convention by giving
to the other Contracting State written notice of termination from 1 January
to 30 June in any calendar year beginning after the expiration period of five
years from the date of its entry into force and, in that case, the Convention
shall cease to have effect: a) in respect of income, gains or profits derived
and net wealth owned by individuals and their undivided estates on or after
1 January in the calendar year next following that in which the notice of ter-
mination of this Convention is given; b) in respect of gains, income, profits or
capital of enterprises corresponding to any fiscal or accounting period begin-
ning after the date on which the notice of termination is given.
270. The termination clause is geared towards the benefits of the treaty,
but in any event requests sent between the notice and the date of termina-
tion of the effects of the treaty all covered past tax periods. The Argentinean
authorities therefore expected to receive information in response to a pending
EOI request sent before the notice of termination and to the EOI requests sent
in July 2012, following the notice. The Chilean authorities stopped its EOI
activities with Argentina as of the date of the notice of termination of the
treaty, i.e. 29 June 2012. The Chilean tax authorities were unsure whether the
requests were valid and could be answered, because of the particular drafting
of the termination clause of the treaty and uniqueness of the situation. They
asked for an internal legal opinion which was not delivered until December
2012. As a result Chile did not act on these requests, and failed to inform
Argentina of the reason of the non-answer during the period under review.
The Chilean authorities informed the Argentinean authorities in August
2013 that they were unable to answer EOI requests after the termination of
the treaty, for confidentiality reasons. They recognise that they should have
raised their concern earlier with the Argentinean authorities. The termination
of a DTC is, however, a complicated issue that goes beyond EOI; these are
very unusual circumstances linked to a very specific bilateral situation. The
authorities of the two countries will be able to exchange information again
once the Multilateral Convention has been entered into force in Chile.
Forms of exchange of information
271. Chile received 58 requests for information during the period 2010-12
from nine partners, predominantly from neighbouring Argentina, other Latin
American jurisdictions and European jurisdictions. All requests were based
on DTCs as only these instruments were in force during the period under
review. The EOI experience of Chile in practice covers about 30 requests only
in 2010-12, as the other half is composed of requests for the address of indi-
viduals to refund tax, questions on the Chilean tax systems, or requests sent
after the termination of the underlying treaty. Chile has also sent a number
of EOI requests to treaty partners during the period under review, predomi-
nantly to the same jurisdictions that sent requests to Chile.
272. Chile also exchanges information automatically with a growing
number of DTC partners and spontaneously from time to time. These forms
of exchange have had limited impact on EOI to date, but more interactions
are expected in the future.
273. The Multilateral Convention also provides for multiple forms of
mutual assistance: exchange on request, spontaneous exchange, tax examina-
tions abroad, simultaneous tax examinations and assistance in tax collection,
while protecting taxpayers rights. It provides the option to undertake auto-
matic exchange, while requiring an agreement between the Parties interested
in this form of assistance. Chile has not yet deposited its instrument of ratifi-
cation, the extent of the assistance is thus not known to date.
274. SII Circular 18/2013 on EOI addresses in details EOI on request,
spontaneous exchange and sectorial information exchange, and mentions the
possibility to use other means such as simultaneous tax audits.
Foreseeably relevant standard (ToR C.1.1)
275. The international standard for exchange of information envis-
ages information exchange upon request to the widest possible extent.
Nevertheless it does not allow fishing expeditions, i.e. speculative requests
for information that have no apparent nexus to an open inquiry or investiga-
tion. The balance between these two competing considerations is captured in
the standard of foreseeable relevance which is included in paragraph 1 of
Article 26 of the OECD Model Tax Convention set out below:
The competent authorities of the contracting states shall
exchange such information as is foreseeably relevant to the
carrying out of the provisions of this Convention or to the admin-
istration or enforcement of the domestic laws concerning taxes of
every kind and description imposed on behalf of the contracting
states or their political subdivisions or local authorities in so far
as the taxation thereunder is not contrary to the Convention. The
exchange of information is not restricted by Articles 1 and 2.
276. Only the most recent instruments use the term foreseeably rel-
evant (Austria, Australia, Belgium, Colombia, Guernsey, the United States
and the Multilateral Convention). Most of Chiles DTCs provide for the
exchange of information that is necessary for carrying out the provisions
of the Convention or of the domestic tax laws of the Contracting States; the
treaty with Canada relates to relevant information. The commentary to
Article 26 of the OECD Model Tax Convention refers to the standard of
foreseeable relevance and states that the Contracting States may agree to
an alternative formulation of this standard that is consistent with the scope
of the Article, for instance by replacing foreseeably relevant with neces-
sary or relevant. The Chilean authorities confirm that they adhere to this
interpretation, and all the DTCs concluded by Chile meet the foreseeably
relevant standard.
277. The scope of the 2006 Agreement with Argentina covered informa-
tion in view of the administration and enforcement of the domestic laws of
the contracting parties concerning taxes covered by the agreements (includ-
ing income taxes, article 4).
278. The treaty with Switzerland restricts exchange of information to
three circumstances: (i) information necessary for carrying on the DTC
applicable to residents, (ii) information necessary for the administration or
enforcement of the domestic laws in cases of tax fraud committed by a resi-
dent or a person subjected to a limited tax liability in a Contracting State,
and (iii) information necessary for the administration or enforcement of the
domestic laws in the case of holding companies. The three circumstances do
not cover all information that may be foreseeably relevant to the implementa-
tion of the administration or enforcement of the domestic laws of the parties
(e.g. information on non-holding companies absent tax fraud). This issue will
be solved once the Multilateral Convention has been entered into force in the
two jurisdictions.
279. A few instruments set a checklist for the validity of requests: the
TIEA with Guernsey, the protocol to the DTC with Austria, the Memorandum
of Understanding with Canada and the Multilateral Convention. All are based
on the Model TIEA, but none has been used in 2010-12.
280. During the period under review, the Chilean authorities had not
developed a checklist of items that a requesting jurisdiction should provide in
order to demonstrate that the information sought is foreseeably relevant. They
rather made this determination on a case-by-case basis.
281. In practice, no request was determined by the Chilean competent
authority as not relating to foreseeably relevant information. It has happened
once, that clarifications have been requested from the requesting author-
ity, when the request letter contained a mistake of dates: the information
requested related to a period longer than the tax period under review.
282. SII Circular 18/2013 of September 2013 states that the standard of
foreseeable relevance aims to make the tax information exchange as wide
as possible, and sets a procedure that the International Audit Department
(DFI) must now follow when receiving a request (chapter 3.2.1). The condi-
tions, for taking action on an EOI request, are that the request is based on an
instrument in force and comes from a competent authority; that it contains
enough data to allow the identification of the taxpayer or group of taxpayers
referred to in the request, and that there is enough information to understand
the request.
283. The request must also be foreseeably relevant, which is simply
referred to as information covered by the respective Convention and that
is available or feasible to be obtained since it may be required from the tax-
payer, a third party, or other public institution. There is no restriction to its
definition in the Circular.
284. The elements of the instructions are clear and conform to information
exchange upon request to the widest possible extent.
In respect of all persons (ToR C.1.2)
285. For exchange of information to be effective it is necessary that a
jurisdictions obligation to provide information is not restricted by the resi-
dence or nationality of the person to whom the information relates or by the
residence or nationality of the person in possession or control of the infor-
mation requested. For this reason the international standard for exchange of
information envisages that EOI mechanisms will provide for exchange of
information in respect of all persons.
286. Article 26(1) of the OECD Model Tax Convention indicates that the
exchange of information is not restricted by Article 1, which defines the
personal scope of application of the Convention and indicates that it applies
to persons who are residents of one or both of the Contracting States. Most
of Chiles DTCs contain this language under the respective EOI provisions.
The Agreement with Argentina similarly covers information that relates to a
person or held by a person, whether or not that person is a resident or national
of the contracting parties. The TIEA with Guernsey and the Multilateral
Convention also apply in respect of all persons.
287. SII Circular 18/2013 on EOI also clearly states that information can
be exchanged regarding the residents of one or both contracting parties as
well as those who do not fall under this category (chapter 2.1.1).
288. The DTCs with Malaysia and Thailand do not contain this lan-
guage but their EOI provisions apply to carrying out the provisions of the
Agreement or of the domestic laws of the Contracting States. As a result of
this language, these DTCs are not limited to residents because all taxpayers,
resident or not, are liable to domestic taxes. The DTC with Malaysia also
excludes the application of the Convention for a certain type of entities, but
the Chilean authorities have given their assurance that these exclusions have
no impact on EOI. The exclusion covers entities constituted according to Law
19.840, which relates to undertakings with foreign capital that may perform
investments outside Chile, and the EOI provision does not indicate that EOI
is not restricted by Article 1. No exchange of information has yet taken place
between the two countries, but the Chilean authorities do not consider that
EOI would be limited by this provision. The Chilean authorities sent in 2013
a proposal to Malaysia to amend the DTC so as to include Article 26 of the
2012 Model Tax Convention and are awaiting a response.
289. The DTC with Switzerland limits exchange of information to three
circumstances, as indicated in the previous section, that not only limit the
types of information that can be requested but also limit the scope of the per-
sons covered, and the EOI provision does not meet the standard. The treaty
with Switzerland has not been used to date. As noted above, the two countries
are also signatories to the Multilateral Convention and its entry into force
would solve this issue.
290. In practice Chile has exchanged information in relation to taxpay-
ers of the requesting party and to Chilean taxpayers, and has not received
a request on other persons but the competent authority confirmed that this
would not be an issue.
Obligation to exchange all types of information (ToR C.1.3)
291. Jurisdictions cannot engage in effective exchange of information if
they cannot exchange information held by financial institutions, nominees or
persons acting in an agency or a fiduciary capacity.
Bank information
292. Article 26(5) of the OECD Model Tax Convention states that a
contracting State may not decline to supply information solely because the
information is held by a bank, other financial institution, nominee or person
acting in an agency or a fiduciary capacity or because it relates to ownership
interests in a person. This provision appears in most of Chiles EOI instru-
ments signed since 2010 and the entry into force of the law giving access to
full banking information to the tax authorities with some limitation (i.e. EOI
instruments with Australia, Austria, Guernsey and the United States).
However, the Chilean authorities indicate that the Multilateral Convention
would allow a full exchange of banking information with these new partners
as well as many older partners (once in force; see section B.1.5 above).
293. The protocol to the treaty with Australia and the TIEA with
Guernsey specify that EOI is available for information on bank account
transactions covered by bank secrecy (i.e. movements and balances of current
accounts and deposits and placements with banks) that take place on or after
1 January 2010. The protocol to the treaty with the United States specifies
that access to the same type of information is possible only if the information
relates to taxable periods or events commencing after 1 January 2010. Other
bank information, like signature cards and other account opening documents,
may be exchanged, whatever the taxable period (within the limits of the arti-
cle on entry into force).
294. Therefore, these limitations pose an impediment to accessing some
relevant bank information and a recommendation is made in this respect
under element B.1.
295. The provision in the Brazilian DTC is slightly different, as it pro-
vides that the competent authority of the requested State may, taking
into account constitutional and legal restrictions, and on a reciprocity basis,
obtain and provide information that is held by financial institutions, agents
or persons acting in an agency or fiduciary capacity, as well as information
regarding social rights and shareholdings, including shareholdings of bearer
shares. Chile can exchange banking information with Brazil since January
2010, with the limitation highlighted in section B.1.5 above. There are not
any constitutional or legal restriction in Brazil,
43
and the provision therefore
conforms to the standard.
296. The protocol to the DTC with Austria provides that In the case of
information held by a bank or other financial institution, the provisions of
Article 26 shall not be interpreted as requiring the exchange of information
on transactions predating the date of entry into force of the Convention.
This provision does not appear to conform to the standards which state that
a request can cover information that precedes the effective date of the instru-
ment provided that it relates to a taxable period or chargeable event following
the effective date. The Chilean authorities stress that the provision can be
interpreted as giving the choice to the requested party to exchanging or not
information on transactions pre-dating the entry into force of the treaty, and
that Chile would interpret the provision broadly. Domestic law allows Chile
to exchange information predating the entry into force of the treaty, provided
it relates to transactions performed after 1 January 2010. This should be
monitored once the treaty enters into force and EOI requests are received.
297. The absence of an equivalent to Article 26(5) of the Model Tax
Convention does not automatically create restrictions on exchange of bank
information. The Commentary to Article 26(5) indicates that while para-
graph 5, added to the Model in 2005, represents a change in the structure of
the Article, it should not be interpreted as suggesting that the previous ver-
sion of the Article did not authorise the exchange of such information. Chile
withdrew its position on Article 26 of the Model Tax Convention in 2009
and the Chilean authorities state that since they now have access to all bank
information for EOI purposes since January 2010 (see Part B above), they
are able to exchange this type of information when requested, on the basis of
reciprocity.
44
The limitation mentioned under section B.1.5 impacts the scope
of the EOI provision in the treaties that do not contain an equivalent of para-
graph 5 since banking information pre-dating 2010 is not obtainable under
the laws of Chile (in application of Article 26( 3)). The Chilean authorities
advised most treaty partners in December 2009 that they were now able to
43. Phase 2 Peer Review Report on Brazil.
44. As noted in the Global Forum peer review reports on Argentina, Korea, Poland,
Portugal, South Africa and Sweden, these jurisdictions can exchange information
held by banks and fiduciaries under their domestic laws. The DTCs concluded
with these jurisdictions do not require the inclusion of Article 26(5) of the OECD
Model Tax Convention to be considered as meeting the standard.
also exchange banking information on deposits and current account activity
and balances in civil tax matters, provided that the transactions were carried
out since 1 January 2010.
298. According to the Chilean authorities, these impediments should be
lifted for 17 EOI partners when the Multilateral Convention will be in force
in Chile, and for 6 others when the Convention has been entered into force in
both jurisdictions. An issue would nonetheless remain for the five EOI part-
ners of Chile that are not signatories to the Multilateral Convention.
299. Finally, the DTC with Switzerland already analysed as not meeting
the standard, also fails to meet the standard on exchange of banking informa-
tion. This DTC, dated 2008, reflects the past position of Switzerland and the
reservation it had to Article 26. In respect of exchange of information for the
purposes of the domestic law of the requesting State, Switzerland would only
agree to exchange information in cases of tax fraud as defined in Swiss
law. This issue should also be solved once the Multilateral Convention has
been entered into force in the two jurisdictions.
300. In practice, banking information was requested on the basis of DTCs
that do not contain an equivalent of Article 26(5). The Chilean authorities
have nonetheless not considered the absence of this paragraph as being a
cause for declining the requests. However, EOI has not always been suc-
cessful though on exchange of banking information during the period under
review, because of impediments noted in the domestic legislation (see also
section B.1.5 above on the gathering of banking information in practice).
Absence of domestic tax interest (ToR C.1.4)
301. The concept of domestic tax interest describes a situation where a
contracting party can only provide information to another contracting party
if it has an interest in the requested information for its own tax purposes. A
refusal to provide information based on a domestic tax interest requirement
is not consistent with the international standard. EOI partners must be able
to use their information gathering measures even though invoked solely to
obtain and provide information to the requesting jurisdiction.
302. The most recent DTCs of Chile contain explicit provisions, aligned
on Article 26(4) of the Model Tax Convention, obliging the contract-
ing parties to use information-gathering measures to exchange requested
information without regard to a domestic tax interest (Australia, Austria,
Switzerland, United States). The TIEA with Guernsey and the Multilateral
Convention contain a similar provision.
303. Most DTCs of Chile contain a similar provision that indicates: If
information is requested by a Contracting State in accordance with this
Article, the other Contracting State shall [endeavour to] obtain the infor-
mation to which the request relates in the same way as if its own taxation
were involved even though the other State [does/may] not, at that time, need
such information (bracketed text indicates minor variations in wording
of different DTCs). This provision is used in treaties negotiated before the
introduction of paragraph 4 in the Model Tax Convention, with the same
purpose to avoid difficulties that a domestic tax interest might raise in partner
jurisdictions.
304. Chiles DTC with Malaysia does not contain any wording exclud-
ing the condition of domestic tax interest. However, the absence of a similar
provision does not in principle create restrictions on exchange of information
provided there is no domestic tax interest impediment to exchange informa-
tion in the case of either contracting party.
45
Chile interprets this treaty and
its domestic laws in such a way that no domestic tax interest applies (see sub-
section B.1.3 above), but this interpretation has not been tested in practice yet.
305. Chiles Agreement with Argentina did not expressly exclude the
need of a domestic tax interest in answering the EOI request but nonethe-
less indicated s that the requested authority must obtain the information as
if it was for its own tax purposes, which excluded a domestic tax interested
requirement.
306. In practice, the Chilean authorities have exchanged information
without consideration for the existence of a domestic tax interest. SII Circular
18/2013 also clearly indicates that information should be gathered for EOI
purposes absent a domestic tax interest (chapters 2.1.3 and 2.4)
Absence of dual criminality principles (ToR C.1.5)
307. The principle of dual criminality provides that assistance can only be
provided if the conduct being investigated (and giving rise to an information
request) would constitute a crime under the laws of the requested jurisdic-
tion if it had occurred in the requested jurisdiction. In order to be effective,
45. Paragraph 19.6 of the commentary to Article 26(4) states Paragraph 4 was added
in 2005 to deal explicitly with the obligation to exchange information in situa-
tions where the requested information is not needed by the requested State for
domestic tax purposes. Prior to the addition of paragraph 4 this obligation was
not expressly stated in the Article, but was clearly evidenced by the practices
followed by member countries which showed that, when collecting information
requested by a treaty partner, Contracting States often use the special examin-
ing or investigative powers provided by their laws for purposes of levying their
domestic taxes even though they do not themselves need the information these
purposes.
exchange of information should not be constrained by the application of the
dual criminality principle. There are no such limiting dual criminality provi-
sions in Chiles EOI instruments, except in the treaty with Switzerland, as
above-mentioned regarding tax fraud.
46
308. In 2010-12, all EOI requests received by Chile, but one, related to
civil tax matters. The Chilean authorities indicate that they did not apply any
dual criminality condition in the case related to a criminal tax matter.
Exchange of information in both civil and criminal tax matters
(ToR C.1.6)
309. Information exchange may be requested for both tax administration
purposes and tax prosecution purposes. The international standard is not
limited to information exchange in criminal tax matters but extends to infor-
mation requested for tax administration purposes (also referred to as civil
tax matters).
310. All of Chiles EOI instruments provide for exchange of information
in both civil and criminal tax matters. The recent DTCs contain the explicit
wording of Article 26(1) of the OECD Model Tax Convention, which refers
to information foreseeably relevant for carrying out the provisions of this
Convention or to the administration and enforcement of the domestic [tax]
laws. Most treaties rather refer broadly to information necessary for carry-
ing out the provisions of the Convention or of the domestic laws concerning
taxes covered by the Convention, without excluding either civil nor criminal
matters.
47
311. In 2010-12, all EOI requests received by Chile, but one, related to
civil tax matters and both requests on criminal and civil tax matters have
been answered.
46. As noted above, the DTC with Switzerland limits exchange of information for
domestic purposes to cases of tax fraud. The protocol to the DTC further indi-
cates that dual criminality is a condition for exchange of information to occur in
cases of tax fraud, which does not conform to the standard.
47. Two other treaties contain different, albeit conforming, provisions. The DTC with
the United Kingdom specifically mentions that the information exchange will
occur including to prevent fraud and to facilitate the administration of statutory
provisions against evasion and avoidance. Similarly the DTC with the United
States details that the exchange of information includes information relating to
the assessment or collection of, the enforcement or prosecution in respect of, or
the determination of appeals in relation to, the taxes covered by the Convention.
Provide information in specif ic form requested (ToR C.1.7)
312. There are no restrictions in Chiles EOI instruments or laws that
would prevent it from providing information in a specific form.
313. In addition, the Multilateral Convention, the TIEA with Guernsey
and eight of Chiles DTCs
48
explicitly provide that If specifically requested
by the competent authority of a Contracting State, the competent authority of
the other Contracting State shall endeavour to provide information under this
Article in the form requested, such as depositions of witnesses and copies of
unedited original documents (including books, papers, statements, records,
accounts or writings), to the same extent such depositions and documents can
be obtained under the laws and administrative practices of that other State
with respect to its own taxes. This provision is based on Article 5(3) of the
2002 OECD Model TIEA. The Agreement with Argentina also contained a
detailed provision on the specific forms a requested information can take.
The Chilean authorities confirmed that a refusal to provide the information in
the format requested does not affect the obligation to provide the information
and introduced this statement in SII Circular 18/2013.
314. SII Circular 18/2013 also indicates that Copies of the documents shall
contain a visible stamp by which the official acting as certifying officer states
that this is a true copy of the original, where applicable (Chapter 3.2.2).
315. In practice, the Chilean authorities have been requested by two EOI
partners to provide copies of accounting documents signed by the legal rep-
resentative of the company and a tax officer, which was done.
In force (ToR C.1.8)
316. Exchange of information cannot take place unless a jurisdiction has
exchange of information arrangements in force. The international standard
requires that jurisdictions take all steps necessary to bring arrangements that
have been signed into force expeditiously.
317. Chile has signed EOI instruments with 83 jurisdictions, of which 26
are in force, the important difference between the two figures being due to
the recent signature of the Multilateral Convention by Chile, as more than
53 EOI relationships will rely exclusively on the Multilateral Convention.
318. The DTCs with the United States (2010), Austria and South Africa
(2012), as well as the TIEA with Guernsey (2012) are awaiting the approval
of the Chilean Congress. The DTC with the United States was signed three
years ago, in February 2010, and has not yet been ratified by Chile or the
48. Canada, Denmark, Ecuador, Mexico, Norway, Sweden, United Kingdom, United
States.
United States. It is also noted that the recent Chilean DTCs entered into
force between two to four years after their signature. The Chilean authori-
ties acknowledge that ratification is taking time in Chile and explain that
Parliament focussed on important tax reforms in recent years. They further
indicate that they are considering ways to reduce the average time of rati-
fication (and hence entry into force) of new EOI instruments, for instance
by joining various instruments and have them considered by the Congress
together. The Chilean authorities also indicate that they will send the
Multilateral convention to the Congress as soon as possible. Chile is encour-
aged to take all steps necessary to bring all its EOI instruments into force
expeditiously, especially as the three instruments signed in 2012 have not yet
been submitted to Parliament for ratification.
Be given effect through domestic law (ToR C.1.9)
319. For information exchange to be effective the parties to an EOI
arrangement need to enact any legislation necessary to comply with the terms
of the arrangement. For a DTC or TIEA to have effect, it must be approved by
the Congress, ratified by the President of the Republic, and published in the
Official Gazette (Constitution, art. 32(15) and 54(1)). The same will apply to
the Multilateral Convention. Once an EOI instrument comes into force, Chile
does not need to take additional measures to make it effective.
Factors underl ying
A provision in Chiles legislation and
some EOI instruments limit the ability
of the competent authority to use its
access powers and exchange some
banking information on transactions
pre-dating 1 J anuary 2010. Whereas
the Multilateral Convention may
address the issue, it is not in force
and thus its application remains to be
tested.
Chile should ensure that its exchange
of information mechanisms allow for
effective exchange of information,
including exchange of full banking
information to the standard.
Phase 2 Rating
Largel y compli ant
C.2. Exchange of infor mation mechanisms with all r elevant par tner s
The jurisdictions network of information exchange mechanisms should cover
all relevant partners.
320. Ultimately, the international standard requires that jurisdictions
exchange information with all relevant partners, meaning those partners
who are interested in entering into an information exchange arrangement.
Agreements cannot be concluded only with counterparties without eco-
nomic significance. If it appears that a jurisdiction is refusing to enter into
agreements or negotiations with partners, in particular ones that have a rea-
sonable expectation of requiring information from that jurisdiction in order
to properly administer and enforce their tax laws it may indicate a lack of
commitment to implement the standards.
321. Chile has signed a total of 28 DTCs that contain an EOI provision,
a TIEA and a multilateral instrument that together cover 83 jurisdictions,
including all Chiles major trading partners. The EOI relationship with
Argentina, which ended when Argentina terminated its DTC with Chile, will
be based on the Multilateral Convention once Chile has ratified it.
322. Chile continues expanding its network, with DTC and TIEA negotia-
tions ongoing. Some TIEA negotiations have been interrupted when the other
jurisdiction is already covered by the Multilateral Convention as the two
types of instruments pursue the same objective.
323. Chile has never refused to enter an EOI arrangement with a Global
Forum member.
Phase 1 Determinati on
Factors underl ying
Chile should continue to develop its
network of EOI mechanisms with all
relevant partners.
Phase 2 Rating
Compli ant
C.3. Confidentialit y
The jurisdictions mechanisms for exchange of information should have adequate
provisions to ensure the confidentiality of information received.
324. Governments would not engage in information exchange without the
assurance that the information provided would only be used for the purposes
permitted under the exchange mechanism and that its confidentiality would
be preserved. Information exchange instruments must therefore contain
confidentiality provisions that spell out specifically to whom the information
can be disclosed and the purposes for which the information can be used.
In addition to the protections afforded by the confidentiality provisions of
information exchange instruments, jurisdictions with tax systems generally
impose strict confidentiality requirements on information collected for tax
purposes.
Information received: disclosure, use, and safeguards (ToR C.3.1)
Exchange of information mechanisms
325. All Chiles EOI instruments have confidentiality provisions to ensure
that the information exchanged will be disclosed only to persons authorised
by the instruments. While each of these Articles might vary slightly in
wording, these provisions generally contain all of the essential aspects of
Article 26(2) of the Model Tax Convention.
49
326. The majority of Chilean treaties provide that the information
obtained in the course of a request for assistance shall be accessible only to
persons directly involved in rather than concerned with the assessment
of taxes, or the administrative control of that assessment, etc. Only the use of
the latter term encompasses the taxpayers or their representatives. However,
most Spanish versions of the instruments indistinctly refer to the persons
charged with tax duties (las personas encargadas de la gestin o recaudacin
de los impuestos). The Chilean authorities indicate that their treaties follow
the official translation of the Model DTC, which does not make a difference
49. Model Article 26(2): Any information received by a Contracting State shall be
treated as secret in the same manner as information obtained under the domestic
laws of that State and shall be disclosed only to persons or authorities (including
courts and administrative bodies) concerned with the assessment or collection of,
the enforcement or prosecution in respect of, or the determination of appeals in
relation to, the taxes covered by the Agreement. Such persons or authorities shall
use the information only for such purposes. They may disclose the information
in public court proceedings or in judicial decisions.
between the two English terms, and therefore information may also be
communicated to the taxpayer, his/her proxy or the witnesses, as stated in
Commentary 12 to the Model Tax Convention.
327. While an instrument may allow information to be disclosed to the
taxpayer, it does not oblige the competent authority to do this. In fact, there
may be cases where the information is given in confidence to the requesting
party and the source of the information may have a legitimate interest in pre-
venting its disclosure to the taxpayer (see chapter B.2 above).
328. Only the treaty with Brazil substantially departs from the model text,
in that it does not cover disclosure of information in public court proceedings
or in judicial decisions. This could be restrictive as it could lead to informa-
tion being inadmissible in court. The interpretation of this provision has not
yet been tested in practice.
50
329. Chiles TIEA with Guernsey as well as the Multilateral Convention
provide for the possibility to share the received information for non-tax pur-
poses: The information may not be disclosed to any other person or entity
or authority without the express written consent of the competent authority
of the requested Party. The Multilateral Convention also gives the possibil-
ity, under the same conditions, to share the received information with a third
jurisdiction. As these instruments are not yet in force, this possibility has not
been used to date.
330. All of the instruments require the information exchanged to be
treated as secret in the same manner as information obtained under domestic
law, the Agreement with Argentina adding that more restrictive domestic
provision also apply. Chiles domestic law contains relevant confidentiality
provisions.
Chilean legislation
331. The maintenance of secrecy in the Contracting State receiving
information is a matter of domestic laws (whether it is the requested or the
requesting jurisdiction). Sanctions for the violation of such secrecy in that
State are governed by the administrative and penal laws of that State.
332. Chiles domestic legislation contains relevant confidentiality provi-
sions. First, all Chilean public officials have a general duty to keep confidential
matters considered as secret by law, regulations, their features or by particular
instructions (Administrative Statute Law 18.834, art. 61(h)). Article 40 of the
50. The treaty with Argentina was also limited but the administrative Agreement
contained a provision similar to the one in the Model Tax Information Exchange
Agreement.
SII Statute (Decree 7 of 1980) further specifies that the Internal Revenue
Services employees are under the prohibitions c) To reveal, absent the
Directors instructions, information included in issued reports or give to per-
sons not related to the Service information regarding facts or situations known
as a result of carrying out their functions. The Tax Code similarly provides
that tax officials are prevented from revealing information provided in tax
returns, unless such disclosure is necessary to fulfil the provisions of the Tax
Code or other legal provisions (art. 35).
51
333. Exceptions to this rule include the disclosure of information to other
tax authorities for determining the tax obligations of taxpayers (Tax Code,
art. 6), i.e. to other competent authorities for EOI purposes. Exceptions also
cover judges and public prosecutors, who may obtain tax return information,
for instance in the context of alimony proceedings, tax or criminal matters
(art. 35).
334. The breach of confidentiality duty is subject to administrative, civil
and criminal sanctions. Pursuant to articles 101 and 102 of the Tax Code and
articles 119-145 of the Administrative Statute Law, sanctions range from fines
to suspensions and/or dismissal. Moreover, pursuant to article 246 of the
Criminal Code, public officials that reveal confidential information may be
subject to suspension from office and a fine (and imprisonment if that caused
serious damage to the public interests). The existence of these obligations and
sanctions are reminded to officials involved in gathering information for EOI
purposes in SII Circular 18/2013 (chapter 1.4).
Confidentiality of information exchanged in practice
335. The Chilean authorities have followed the guidance in the OECD
Manual on Exchange of information, and later the Global Forum booklet
Keeping it Safe.
52
336. In practice, the competent authority has taken practical measures
to ensure the confidentiality of the information exchanged. Documents
are physically kept locked in a dedicated file cabinet placed under
51. Neither the Director nor officials can communicate, in any fashion, the amount
or source of income, losses, expenditures or any data thereof which are included
in compulsory tax returns. Likewise, they shall not allow that tax returns, their
copies or books or papers having parts or data of tax returns be known by per-
sons unrelated to the Service unless it is necessary to comply with the rules of
the present Code or other legal provisions.
52. Keeping it Safe: Guide on the Protection of Confidentiality of Information
Exchanged for Tax Purposes, 2012.
video-surveillance. Only four persons in the DFI hold a key, and documents
must be locked when not in immediate use.
337. To further ensure confidentiality, the DFI more and more works on
electronic files archived on a dedicated virtual library in the SII system cre-
ated in December 2012. Electronic access to this library is also restricted to
the officials in charge of EOI and files are password protected.
338. Communication between the DFI and other tax offices that may be
involved in the gathering of information is performed through confidential
letter (officio reservado), a form of communication which is given a con-
fidential status by circular. Electronic documents are shared in password
protected CD-ROMs.
339. All letters and envelops received by the competent authority and sent
to foreign authorities by regular post are stamped confidential, and the
documents are also stamped to indicate that the information is furnished
under the provisions of an income tax treaty signed by Chile with a foreign
government, its use and disclosure must be governed by the provisions of that
treaty. The Chilean Post Office provides a code every time correspondence
is delivered, and this code allows the DFI to track the letter through internet
or with the assistance of an officer of the Postal Office.
340. The DFI has also started using electronic means of communica-
tion in 2012 with some EOI partners to ensure smoother communication as
the postal services may be slow (see chapter C.5.1 below). Emails are now
regularly sent to three EOI partners a couple of weeks after replies to EOI
requests are sent, to ensure that the documents have been received. It has also
happened on a few occasions that the answers were sent by encrypted email,
with the password sent in a different email to a different person in the recipi-
ent EOI office.
341. The Chilean authorities also plan to create a register of access to
EOI information: every time information received from an EOI partner is
shared with a tax auditor, the DFI must be informed of the name of that audi-
tor and the information will be entered in the register. The DFI must also
be consulted whenever it is felt that the information should be shared with
the taxpayer, other tax officials, or courts for instance (SII Circular 18/2013,
chapter 3.1.5). The Circular does not mention it, but it is expected that before
information is shared with other Chilean authorities, the DFI must have con-
sulted the EOI partner that sent this information to Chile.
342. When EOI letters or answers are received in a language other than
Spanish, the translation is performed within the SII, by officials having taken
an oath of secrecy.
343. With regard to communication outside of the SII for EOI purposes,
as noted under chapters B.1.5 and B.2 above, when requesting information
to a bank for EOI purposes, the SII must indicate which jurisdiction requests
information and the reasons for the request. A representative of the Tax
and Customs Court indicated that the letter of request to the bank should
contain a brief summary of the EOI request. The representative of the Bank
Association indicated that the banks would perform a formal control of the
SII letter of request, especially whether it relates to EOI and whether it covers
information pre-dating 1 January 2010, but they would not be concerned by
the reasons for the EOI request. Therefore it does not appear necessary to
provide any details on the foreign investigation for instance. The extent of
the information disclosed in the request to the banks will be followed up
when following up on the gathering of banking information in practice (see
section B.2 above).
344. During the last three years, sanctions have been imposed against four
tax officials for breach of their confidential duty in Chile. None of these cases
was related to an EOI request, and no EOI partner indicated any concern
concerning the confidentiality of information sent to Chile.
All other information exchanged (ToR C.3.2)
345. Confidentiality rules should apply to all types of information
exchanged, including information provided in a request, information trans-
mitted in response to a request and any background documents to such
requests. Chiles EOI instruments and domestic law specify that the con-
fidentiality rules spelt out in the EOI instruments apply to all information
received (Tax Code, art. 6(6)). This is also reminded to tax officials in SII
Circular 18/2013 (chapter 2.2).
346. In practice, as mentioned above, letters of request received from EOI
partners are kept separately from domestic files in a secure manner.
Phase 2 Rating
Compli ant .
C.4. Rights and safeguar ds of taxpayer s and thir d par ties
The exchange of information mechanisms should respect the rights and
safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToR C.4.1)
347. The international standard allows requested parties not to supply
information in response to a request in certain identified situations where an
issue of trade, business or other secret may arise. Among other reasons, an
information request can be declined where the requested information would
disclose confidential communications protected by the attorney-client privi-
lege, as defined in the commentary to the OECD Model Tax Convention.
348. All Chiles EOI instruments ensure that the contracting States are
not obliged to provide information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or information
the disclosure of which would be contrary to public policy. The Agreement
with Argentina excludes expressly only information, the disclosure of which
would be contrary to ordre public; however the agreement also excludes the
exchange of information that cannot be obtained under the laws of parties,
which would typically cover trade and the other above-mentioned secrets. SII
Circular 18/2013 reminds tax officials of these exceptions and specifies that
information whose disclosure would be contrary to public order is informa-
tion that involves the vital interests of a country, such as secrets of State or
requests motivated by racial or political prosecutions (chapter 2.3), a defini-
tion which conforms to the standards.
349. Chile has not declined to provide requested information pursuant to
the above exceptions.
Phase 2 Rating
Compli ant .
C.5. Timeliness of r esponses to r equests for infor mation
The jurisdiction should provide information under its network of agreements
in a timely manner.
Responses within 90 days (ToR C.5.1)
350. In order for exchange of information to be effective, it needs to be
provided in a timeframe which allows tax authorities to apply the informa-
tion to the relevant cases. If a response is provided but only after a significant
lapse of time, the information may no longer be of use to the requesting
authorities. This is particularly important in the context of international co-
operation as cases in this area must be of sufficient importance to warrant
making a request.
351. There are no provisions in Chiles DTCs or domestic law pertain-
ing to the timeliness of responses or the timeframe within which responses
should be provided.
352. The Agreements with Argentina, Canada and Spain are the only EOI
instruments in force during the period under review that contain some time-
lines. Pursuant to the Agreements with Argentina and Spain, the requested
party should answer within six month of the request, unless the difficulty of
answering the request justifies two months extra. When it appears impossible
to answer the request within this deadline or because of difficulties in gather-
ing the information, the requested jurisdiction should inform the requesting
jurisdiction and indicate a possible date for the answer or explain the nature
of the difficulties. Finally, any refusal to answer an EOI request must be made
within three months.
353. Pursuant to the Agreement with Canada, the request must be
acknowledged within 30 days, and the requested jurisdiction must inform
on deficiencies in the request within the same deadline. The request must
be dealt with as soon as possible and the requested jurisdiction must
endeavour to respond or inform about the status of the information request,
or alternatively inform its incapacity of complying with the request within a
90 day period from the date of acknowledgement. The new TIEA signed with
Guernsey contains comparable provisions. The competent authority must use
its best endeavours to forward the requested information with the least pos-
sible delay, and must acknowledge receipt of EOI requests within 60 days,
and report difficulties in gathering information within 90 days of receipt of
a complete request (i.e. any amended requests received after clarifications
were requested by the requested authority).
354. The Multilateral Convention more broadly indicates that the
requested authority must inform the requesting authority of the action taken
and result of the assistance, or of its decision to decline providing assistance
as soon as possible.
355. As such, there appear to be no legal restrictions on the ability of the
Chilean authorities to respond to EOI requests within 90 days of receipt by
providing the information requested or an update on the status of the request.
356. SII Circular 18/2013 reminds officials to respect these provisions:
Responses to requests must be handled as a priority so as to deliver them to
the requesting competent authority as soon as possible and taking care not to
exceed the limits stated in the Conventions or administrative agreements of
information exchange in force, in case there were any.
357. The Circular also contains some precise internal deadlines: receipt of
EOI letters must be acknowledged as soon as possible, the DFI must inform
the requesting authority of any mistake within 60 days, otherwise answer
within 2 months when the information is available within the SII or within
6 months when information gathering measures are required.
358. The Circular also indicates that a status update should be sent within
90 days in all cases.
Response time in practice
Response times for r equests r eceived dur ing 3 year r eview per iod
2010 2011 2012 Total Average
num. % num. % num. % Num. %
Total number of requests received* 3 100% 29 8 40 100%
Full response**: 90 days 0 0 4 14% 6 75% 10 25%
180 days (cumulative) 0 0 21 72% 6 75% 27 67.5%
1 year (cumulative) 3 100% 28 96.5% 7 87.5% 38 95%
>1 year 0 0 0 0 1 12.5% 1 2.5%
Declined for valid reasons 0 0 0 0 0 0 0 0
Failure to obtain and provide information requested 0 0 0 0 0 0 0 0
Requests still pending at date of review 0 0 1 3.5% 0 0 1 2.5%
* Chile counts each written request from an EOI partner as one EOI request even where more than one
person is the subject of an inquiry and/or more than one piece of information is requested.
** The time periods in this table are counted from the date of receipt of the request and the date on
which the final response was issued. It does not take into account partial responses provided in the
meantime or any delays resulting from the need to seek clarifications of requests from a requesting
jurisdiction.
359. The above table reflects only 40 cases as inserting the remaining
requests would bias the purpose of the statistics on timeliness of answers. The
excluded requests are: the 3 requests for general information on the Chilean
tax system which are not counted as EOI requests, as well as the 15 requests
not answered because of the termination of the underlying EOI instrument
(see section C.1 above the description on the uniqueness of the situation of
these requests made just before or after the termination of the underlying
DTC).
360. All the requests answered within 90 days are requests for which the
answer was internally available in the SII database, i.e. the address of indi-
viduals or whether the individual was registered with the tax authorities. The
Chilean authorities indicate that requests that are not fulfilled within 90 days
typically relate to requests for accounting information and supporting docu-
ments, which are not available in the SII databases. Delays were noted when
the information requested related to earlier periods for which the taxpayer
had sent the documents into storage. The case that took more than a year is
the one where the competent authority first declined a request for banking
information and subsequently gathered the requested information (see sec-
tion B.1.5 above).
361. The other main circumstance impacting response time is the change
of responsible department within the SII and the adjustments necessary
during the transition period (appointment and training of officials). The
Chilean authorities acknowledge that this slowed down the process during
the transition period between the Large Taxpayer Department and the DFI,
but indicate that response times have started to diminish. For instance it has
occurred that some requests for which all the information requested was
maintained by the tax authorities have not been answered swiftly (and not
within 90 days), which has not occurred in 2012.
362. A factor seriously impacting response time and not reflected in
the above table that calculates response times from the moment the letter
is received by Chile is the time needed to receive request letters. Whereas
letters from South American partners are received between a couple of days
and three weeks after having been sent, requests received from other partners
take between one and two months to reach the competent authority of Chile,
and took more than 90 days to reach it on a couple of occasions, in which
case it is impossible for the requesting authorities to get status updates in due
time. The Chilean authorities also noted that due to a two-month strike of
the postal service in Chile in 2012, some letters arrived with some delay in
the competent authority office. The answer to a 2011 request has also never
reached the requesting authority, which submitted a reminder 6 months later
and subsequently received the answer. Finally, a letter sent to the Minister
directly rather than to the SII got lost, as well as a reminder letter, and it is
not known whether it ever reached the Ministry or got lost in the Ministry.
The Chilean authorities sensitised the Ministers office to the importance of
EOI letters and how to redirect them. It is expected that this situation will no
longer occur now that the delegated competent authoritys address is men-
tioned in the secure database of Global Forum competent authorities.
363. Exchange of information through secure email systems has started
with some partners in 2012 and could be further promoted to avoid these
unnecessary postal delays and threats to confidentiality when the letters
do not reach the DFI. The Chilean competent authority is closely following
the discussions started at the Global Forum competent authority meeting
on encryption systems in view of making use of these systems as much as
possible.
364. Partial answers appear to have been sent once in 2012, when infor-
mation was requested about two different companies and information was
gathered about one company faster than from the other one. The Chilean
authorities have changed their practice in this regard while answers were
always sent as a whole in 2010-11, information available in the tax database
is now sent as soon as gathered, without waiting for the information gathered
from taxpayers or third parties. The same was done in a December 2012 case
(received in 2013) for which partial information was sent in 2013 and the
remaining is still pending.
Acknowledgement of requests, status updates and communication
with EOI partners
365. Since the creation of the DFI, the Chilean authorities systematically
send an e-mail to acknowledge receipt of a request for information, but this
was not the case in 2010-11. This practice is now formalised in the 2013
Circular: The DFI will confirm as soon as possible to the competent author-
ity of the requesting State the receipt of the request in the way asked for.
Also, the State will be notified of any mistakes that the request letter could
have and/or the status of its processing, within 60 days upon receipt, by send-
ing a notification as expeditiously as possible (paragraph 3.2.1).
366. As noted above, letters from South American partners are received
between a couple of days to maximum three weeks, and requests received
from other partners take between one and two months to reach the compe-
tent authority of Chile, and took more than 90 days to reach it on a couple of
occasions. It is therefore important for EOI partners to be informed through
an acknowledgement of receipt that the long delivery time will impact the
response time. The new practice to send acknowledgements is therefore wel-
come. The practice introduced in 2012 to send an email confirming that the
requested documents have been sent by the post is also welcome.
367. Similarly, the Chilean authorities acknowledge that they have not
always sent status updates after 90 days during the period under review. This
is done systematically only since mid-2012, via email when possible (without
mentioning the name of the taxpayers involved).
368. The 2013 Circular now includes a deadline of 90 days to send an
update (paragraph 3.2.1). The sending of status updates should also be facili-
tated by the introduction of a new tracking system for incoming requests (see
below section C.5.2 on the Organisational process). The Circular also pre-
scribes that if a deadline is not respected during the gathering of information,
the concerned SII department should inform the DFI that will in turn inform
the EOI partner.
369. Chile should ensure that the new system put in place to provide
updates to EOI partners within 90 days in those cases where it is not possi-
ble to provide a partial or complete response within that timeframe operates
effectively.
370. Some misunderstanding took place during the period under review,
and the Chilean competent authority, in some instances, could provide better
explanations in responses provided to peers. For instance in several cases
peers asked for information related to the bank accounts of individuals which
appeared to not hold any bank account in Chile. The competent authority
was satisfied that these individuals had no bank accounts in Chile because to
open an account, the person must have a tax identification number, but these
persons were not registered with the tax authorities. The Chilean authori-
ties have in these cases simply indicated that the person did not have a TIN,
without explaining that this is mandatory for a bank to accept to open a bank
account and that as a consequence the person could not have a bank account
open in his name in Chile. The peer therefore considered that not all informa-
tion was received, as the question on banking information was apparently
not answered. Similarly, when Argentina sent its notice of termination of
the DTC, the Chilean authorities should have explained their position to the
Argentinean authorities, which might have permitted to resolve the interpre-
tation issue and the exchange of information.
371. The delegated competent authority and the head of the DFI meet with
counterparts at the occasion of international events, such as OECD meetings
or the Global Forum meetings of competent authorities to strengthen their
EOI relationships. The regular EOI partners of Chile indicated that commu-
nication with the DFI is performed smoothly, through telephone calls, emails
and mail.
Organisational process and resources (ToR C.5.2)
372. The competent authority for exchanging information designated in
most of Chiles EOI instruments is the Minister of Finance, and, directly or
by delegation, the Director of the Internal Revenue Service (SII), whose tasks
include to carry out exchange of information with tax authorities of other
countries in order to determine the taxation of specific taxpayers (Tax Code,
art. 6(6)).
373. Different departments were in charge of the handling of EOI requests
in 2010-11 and in 2012. In 2010-11 (i.e. during two thirds of the period under
review), the Large Taxpayer Department was in charge of co-ordinating
EOI. This department was then split into two different departments when
the SII decided to create a specialised team in international tax matters for
improving control, assistance and EOI procedures: the Large and Medium-
size Enterprise Department in charge of developing audit programmes for
SMEs and the International Audit Department (DFI), which plans tax audits
on international matters, transfer pricing audits, systematic controls on inter-
national issues, and the DFI in charge of co-ordinating EOI on request from
and to Chile, as well as spontaneous exchange (automatic exchange is handled
by the Tax Studies Department). The split was performed in August but the
effective change and transfer of pending cases was made in December 2011.
There was therefore a gap of around three months during which not much
EOI work was performed.
374. The change of responsible department has not drastically changed the
organisational process when handling EOI requests: The competent author-
ity has a hybrid role. On the one hand they gather themselves information
from the SII databases and prepare letters to the signature of the SII for other
public authorities. On the other hand, they rely on other SII departments
to gather other types of information: the competent regional office gathers
information from taxpayers or third parties, the Large Taxpayer Department
gathers information from large taxpayers, and the Special Case Unit gathers
information from banks.
Resources
375. Whereas the organisational process has not changed much with the
transition, on the contrary all the personnel handling cases changed.
376. In 2010-11, the Large Taxpayer Department was in charge of co-
ordinating EOI in addition to its domestic tasks. The team was composed of
experienced tax auditors and lawyers, but no special training was offered on
EOI.
377. Since 2012, the International Audit Department (DFI) is in charge of
co-ordinating EOI. The Head of the department is assisted by three persons:
a legal expert, a tax advisor and an IT advisor. Considering the small number
of EOI requests received and sent by Chile every year, the team does not work
exclusively on EOI: the Head spends 15% of her time handling EOI requests,
the legal expert 10%, the tax advisor 50%, and the IT advisor 10% of their
time.
378. The (delegated) competent authority for exchange of information
purposes is identified on the website of the SII.
53
In addition, the co-ordinates
of the Tax Commissioner to whom the EOI requests must be sent, as well as
the co-ordinates of the head of the DFI are now posted on the Global Forum
secure database of competent authorities.
379. Concerning training, as a general rule, all tax officials of the SII have
received internal training on audit and other relevant tax matters and received
preliminary training on exchange of information. The members of the DFI,
who have on average 10 years of experience within the SII, have received
additional training or sensitisation to EOI. The Head of the DFI has been a
delegate to the OECD Working Party 10 on Exchange of Information and
Tax Compliance and has participated in an exchange of information training
at the OECD Centre in Mexico. The head of DFI and the legal advisor have
masters in law degrees and the tax advisor is a public accountant. The team
also participates in an ongoing English programme to better answer requests
received in this language and anticipate the possible increase of such requests
once the Multilateral Convention has been entered into force in Chile.
380. Other SII officials that may be involved in the gathering of informa-
tion to answer EOI requests, in the regional offices, the Special Cases Office
and the Large Taxpayers Unit, have not yet been trained specifically on EOI
cases. The DFI plans to train tax officers in the regional offices in the near
future.
Handling of EOI requests
381. The work of the delegated competent authority is framed by internal
circulars. A first circular was issued in November 2004 on outgoing requests,
and was replaced with SII Circular 18/2013 issued in September 2013 and
that covers both incoming and outgoing EOI requests. Despite the absence of
circular in the years 2010-12, the work process remained generally the same
throughout the period, and was formalised and streamlined in SII Circular
18/2013.
53. See www.sii.cl/pagina/jurisprudencia/contactos_autoridades.htm (in Spanish and
English).
382. When the SII Tax Commissioner office receives an EOI request, it
gives it a reference code sends it to the Audit and Compliance Directorate (to
which the DFI belongs) for processing. It is given another reference number
and sent to the DFI, which registers the EOI letter in an electronic database
with an EOI reference number. As noted above, the Ministers cabinet has
also now been sensitised to the possibility of receiving EOI requests from
non-traditional partners and of the importance of forwarding these letters to
the SII. The DFI checks the validity of the request, taking into consideration:
1. That the request comes from the competent authority of a jurisdiction
with which Chile has an EOI instrument in force,
2. That it contains enough data to allow the identification of the tax-
payer or group of taxpayers referred to in the request, whenever this
applies,
3. That there is enough information to understand the request,
4. That it is foreseeably relevant, that is, information covered by the
respective Convention and that is available or feasible to be obtained
since it may be required from the taxpayer, a third party, or other
public institution.
383. In case of doubt on the validity of the request or interpretation
of the underlying EOI instrument, the DFI can request the assistance of
the International Taxation Department within the Legal and Regulatory
Directorate. This department was for instance involved in deciding how to
handle EOI requests received after the termination of the underlying treaty or
not yet answered at that date.
384. If the information requested is tax information or information
otherwise available with a public authority of Chile, the DFI gathers the
information itself. Otherwise, it sends a confidential letter of request to the
competent department (regional office or special case unit). If the taxpayer
concerned is under tax investigation, the DFI will also consult the Tax Crime
Department to check whether it gathered information that might be relevant
to the EOI partner (but this situation has not occurred in practice).
385. The regional tax offices and large taxpayer office handle the requests
as described above in chapter B.1 on access powers. SII Circular 18/2013 sets
intermediary deadlines to them: they have 10 days to request the information
to the taxpayer or third party, which has 10 days to answer, and the office
then has 10 days to prepare its report to the DFI. Deadlines may be extended
with the approval of the DFI. The information holder must go to the request-
ing tax office to submit the required documents or sworn statement (affidavit)
and the tax official makes copies that he/she certifies.
386. The Head of the respective Audit Department must ensure that the
officials involved act with the necessary speed to comply with the deadlines
and verify that the answer sent complies with all of the information required
by the DFI, which the aforementioned also verifies. If from the analysis of the
information received there is evidence to warrant an audit of the taxpayer, it
will be co-ordinated between the respective Audit Department and the DFI,
as part of the general existing auditing procedures. This has happened several
times during the period under review.
387. Deadlines and the procedure are different for the gathering of banking
information (as noted in chapter B.1.5 above on Access to bank informa-
tion). The notification to the bank is signed by the Tax Commissioner. As for
Regional offices, the Special Cases Office must verify that the information
received complies with the DFI request. The Office keeps the documents in a
safe and sends a certified copy to the DFI.
388. In cases where there is a delay in meeting the deadlines, due to fail-
ure or delay in the delivery of information by the required person, the tax
office handling the request must send reminders, using all available legal
means to ensure compliance. SII Circular 18/2013 requires them to notify
the DFI, which must promptly inform the requesting authority of the status
of their request. A status update must be sent in any event within 90 days of
receipt of the EOI letter.
389. The DFI monitors the status of EOI requests through an internal
IT system, developed with the software Share Point System, in which it is
possible to have detailed data of requests received such as requesting juris-
diction, dates (letter, reception, response), references, official in charge,
matter, taxpayers and taxes involved, and other data related to the gathering
of information (Regional Units, Special Cases Office, or another governmen-
tal authority). Where information is requested of third parties, an internal
number is allocated in order to keep track of such requests. Where informa-
tion is requested to Regional Units the official in charge of the request has
to keep track of the request and monitor compliance with the given deadline.
390. Once information is gathered, the DFI writes a letter of reply in the
language used by the EOI partner, and submits it to the signature of the SII
Commissioner. Accompanying documentation is sent in encrypted electronic
form. The DFI sends the letter by postal mail, or alternatively, through secure
Internet sites used by the SII (see chapter C.3 above on Confidentiality).
391. When drafting the response to an EOI letter, the DFI follows a check-
list of elements to include in the letter, based on the OECD Manual on EOI,
that includes: the legal reference, the foreign and Chilean reference numbers
used to log and track the request; matching the list of documents sent with the
requested information and list of additional information that may be relevant
to the requesting jurisdiction; explanation on why some information could
not be provided or will be provided later; the type of action taken to gather
information (mentioning if the taxpayer or third party was notified); calendar
period for which the information is provided and tax involved, currency used
when referring to money amounts. The letter also mentions whether feedback
is requested and a reminder of confidentiality. It finally contains the name,
phone and e-mail of the tax official to be contacted in case of need.
392. There is a limit to the period during which the DFI keeps the docu-
ments exchanged. As a general rule, documents are destroyed after 6 months
and after 3 months in case of bank information. However, the Head of the
DFI indicated that only the paper documents are destroyed at the end of the
retention period, but their scanned copy is kept longer.
Absence of unreasonable, disproportionate or unduly restrictive
conditions on exchange of information (ToR C.5.3)
393. Exchange of information assistance should not be subject to unrea-
sonable, disproportionate, or unduly restrictive conditions. Other than those
matters identified earlier in this report, there are no other unreasonable,
disproportionate or unduly restrictive conditions on exchange of information
existing in practice.
Thi s el ement invol ves i ssues of practi ce that are assessed in the Phase 2
revi ew. Accordingl y no Phase 1 determinati on has been made.
Phase 2 rating
Largel y compli ant
Factors underl ying recommendati on Recommendati on
Chile did not provide an update or
status report to its EOI partners within
90 days when the competent authority
was not able to provide a substantive
response within that time.
Chile should ensure that the new
system put in place to provide updates
to EOI partners within 90 days in
those cases where it is not possible to
provide a partial or complete response
within that timeframe operates
effectively.
Phase 2 rating
Largel y compli ant
Factors underl ying recommendati on Recommendati on
The structure of the competent
authority and management of the EOI
requests has changed in 2012, and
new internal deadlines and monitoring
procedures have been introduced.
Although the change of organisation
of the competent authority of Chile
slowed down the exchange process
during the transition period, Chile has
generally been able to answer in a
timely manner. Training programmes
are also being developed for regional
offices. Some communication issues
have nonetheless been identified.
Chile should ensure that the new
internal deadlines enable it to
respond to EOI requests in a timely
manner, and continue improving
communication with partners.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 105
Summar y of Deter minations and Factor s
Under lying Recommendations
Determinati on
Factors underl ying
J urisdictions should ensure that ownership and identity information for all relevant entities
and arrangements is available to their competent authorities. (ToR A.1.)
Phase 1 determination:
The el ement i s in place
Phase 2 rating:
Largel y Compli ant
The provision requiring foreign
companies with nexus in
Chile to disclose ownership
information to the tax
authorities will enter into force
on 1 J anuary 2015.
The Chilean authorities should
the Circular on the disclosure
of ownership information of
foreign companies to the tax
authorities, once in force.
J urisdictions should ensure that reliable accounting records are kept for all relevant entities
and arrangements. (ToR A.2.)
Phase 2 rating:
Compli ant
Banking information should be available for all account-holders. (ToR A.3.)
Phase 2 rating:
Compli ant
106 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determinati on
Factors underl ying
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information). (Tor B.1.)
The el ement i s in
place, but cer tain
aspects of the l egal
i mpl ementati on of
the el ement need
i mprovement
Chiles ability to access bank
information prior to 1 J anuary
2010 is not complete under
its domestic legislation, as
information covered by bank
secrecy on deposits and
current accounts activity and
balances prior to 1 J anuary
2010 is not accessible for civil
purposes, even where the
information relates to taxable
periods or events after that
date.
Chile should ensure that all
relevant bank information,
which relates to a taxable
period after 2010, may be
accessed for exchange of
information purposes, to
ensure that they can fully
exchange information to the
standard.
Phase 2 rating:
The inability to get bank
information on transactions
performed before 1 J anuary
2010 has prevented full
exchange of information in
practice. Chile has never
gathered banking information
from banks for exchange
of information purposes in
practice. The effectiveness of
the access powers cannot be
assessed.
Chile should ensure that all
relevant bank information may
be accessed for exchange
of information purposes and
the access powers in practice.
Determinati on
Factors underl ying
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information.
(ToR B.2.)
The el ement i s in
pl ace, but cer tain
the el ement need
i mprovement
The Chilean competent
authority must inform the
bank of who is the requesting
authority and of the basis for
the EOI request. No exception
exists to this requirement or
anti-tipping off provision.
Chile should ensure that
appropriate exceptions exist
to informing the person
who is asked to produce
information which foreign tax
authority had requested the
information (e.g. in cases in
which informing that person
is likely to undermine the
chance of the success of the
investigation conducted by the
requesting jurisdiction).
When a specific accountholder
has not given a general
authorisation to the bank to
disclose any information to the
tax authorities, the Tax Code
requires the prior notification
of the person concerned when
there is a request for bank
information and this prior
notification procedure does not
allow for any exception.
It is recommended that
certain exceptions from prior
notification be permitted,
e.g. in cases in which the
information requested is
of a very urgent nature or
the notification is likely to
undermine the chance of the
success of the investigation
conducted by the requesting
jurisdiction.
Phase 2 rating:
108 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determinati on
Factors underl ying
Exchange of information mechanisms should allow for effective exchange of information.
(ToR C.1.)
The el ement i s in
pl ace, but cer tain
the el ement need
i mprovement
A provision in Chiles
legislation and some EOI
instruments limit the ability
of the competent authority
to use its access powers
and exchange some banking
information on transactions
pre-dating 1 J anuary 2010.
Whereas the Multilateral
Convention may address the
issue, it is not in force and thus
its application remains to be
tested.
its exchange of information
mechanisms allow for effective
exchange of information,
including exchange of banking
information to the standard.
Phase 2 rating:
Largel y compli ant
The jurisdictions network of information exchange mechanisms should cover all relevant
partners. (ToR C.2.)
Chile should continue to
develop its network of EOI
mechanisms with all relevant
partners.
Phase 2 rating:
Compli ant
The jurisdictions mechanisms for exchange of information should have adequate provisions
to ensure the confidentiality of information received. (ToR C.3.)
Phase 2 rating:
Compli ant
The exchange of information mechanisms should respect the rights and safeguards of
taxpayers and third parties. (ToR C.4.)
Phase 2 rating:
Compli ant
Determinati on
Factors underl ying
The jurisdiction should provide information under its network of agreements in a timely
manner. (ToR C.5.)
Phase 1
determinati on: The
assessment team i s
not in a posi ti on to
evaluate whether thi s
el ement i s in pl ace, as
i t invol ves i ssues of
practi ce that are deal t
wi th in the Phase 2
revi ew.
Phase 2 rating:
Largel y compli ant
Chile did not provide an
update or status report to its
EOI partners within 90 days
when the competent authority
was not able to provide a
substantive response within
that time.
the new system put in place
to provide updates to EOI
partners within 90 days in
those cases where it is not
possible to provide a partial or
complete response within that
timeframe operates effectively.
The structure of the competent
authority and management
of the EOI requests has
changed in 2012, and new
internal deadlines and
monitoring procedures have
been introduced. Although the
change of organisation of the
competent authority of Chile
slowed down the exchange
process during the transition
period, Chile has generally
been able to answer in a timely
manner. Training programmes
are also being developed
for regional offices. Some
communication issues have
nonetheless been identified.
Chile should ensure that the
new internal deadlines enable
it to respond to EOI requests in
a timely manner, and continue
improving communication with
partners.
ANNEXES 111
Annex 1: Jur isdictions r esponse to the r eview r epor t
54
Chile would like to thank the assessment team for their work and guid-
ance throughout this evaluation process. We are particularly pleased with the
fact that the improved reporting requirements introduced by Chile since the
release of the Phase 1 report in March 2012, have resorted in the elimination
of the recommendations previously included under element A.1 on availabil-
ity of ownership information on foreign companies and foreign trusts. We
are also pleased that a recommendation under element B.1 on professional
secrecy has been withdrawn. We do recognize that we have received recom-
mendations that require attention and we will continue working closely with
the Forum to facilitate the implementation of measures that are needed to
comply with the international standard for exchange of information as recom-
mended in this report.
54. This Annex presents the jurisdictions response to the review report and shall not
be deemed to represent the Global Forums views.
112 ANNEXES
Annex 2: List of Chile Exchange of Infor mation Mechanisms
Multilater al agr eement
Chile signed the Multilateral Convention on Mutual Administrative
Assistance in Tax Matters on 24 October 2013 and has not yet ratified it. The
status of the multilateral Convention and its amending 2010 Protocol as at
26 May 2014 is set out in the below table. For multilateral instruments, the
date of the entry into force in the table is the latest date, among the two dates
of entry into force in the two partners.
Bilater al agr eements
The table below contains the list of Double Tax Conventions (DTCs)
and Tax Information Exchange Agreements (TIEA) signed by Chile. Chile
has also signed administrative agreements with some treaty partners
(Agreement).
For jurisdictions with which Chile has several agreements, a reference to
each agreement is made in the below list of EOI mechanisms signed by Chile
as of May 2014, in alphabetical order:
Juri sdi cti on Type of arrangement
Si gned/
extended
Date entered into
force/status
1 Albania Multilateral Convention signed in force in Albania
2 Andorra Multilateral Convention signed not in force
3 Anguilla** Multilateral Convention extended in force in Anguilla
4 Argentina
DTC (terminated) 13 Nov 1976
19 Dec 1985-
31 Dec 2012
Agreement 02 Nov 2006
02 Nov 2006-
31 Dec 2012
Multilateral Convention signed
in force in
Argentina
ANNEXES 113
Si gned/
extended
Date entered into
force/status
5 Aruba* Multilateral Convention extended in force in Aruba
6 Australia
DTC 10 March 2010 08 Feb 2013
Multilateral Convention signed In force in Australia
7 Austria
DTC 06 Dec 2012 not in force
Multilateral Convention signed not in force
8 Azerbaijan Multilateral Convention signed Not in force
9 Belgium
DTC 06 Dec 2007 05 May 2010
10 Belize Multilateral Convention signed in force in Belize
11 Bermuda** Multilateral Convention extended in force in Bermuda
12 Brazil
DTC 03 April 2001 24 J uly 2003
13 British Virgin Islands** Multilateral Convention extended in force in BVI
14 Canada
DTC 21 J an 1998 28/10/1999
Agreement 26 August 2011 26/08/2011
Multilateral Convention Signed in force in Canada
15 Cayman Islands** Multilateral Convention extended
in force in the
Cayman Islands
16 China Multilateral Convention Signed not in force
17 Colombia
DTC 19 April 2007 22 Dec 2009
Multilateral Convention Signed
in force in Colombia
01 J uly 2014
18 Costa Rica Multilateral Convention Signed
in force in Costa
Rica
19 Croatia
DTC 24 J une 2003 21 Dec 2004
In force in Croatia
1 J une 2014
20 Curaao* Multilateral Convention extended in force in Curaao
21 Czech Republic Multilateral Convention signed
in force in
Czech Republic
22 Denmark
DTC 20 Sep 2002 21 Dec 2004
Multilateral Convention signed in force in Denmark
23 Ecuador DTC
26 August
1999
24 October 2003
24 Estonia Multilateral Convention signed not in force
114 ANNEXES
Si gned/
extended
Date entered into
force/status
25 Faroe Islands*** Multilateral Convention extended
in force in
Faroe Islands
26 Finland Multilateral Convention signed in force in Finland
27 France
DTC 07 J une 2004 10 J uly 2006
Multilateral Convention signed in force in France
28 Georgia Multilateral Convention signed in force in Georgia
29 Germany Multilateral Convention signed not in force
30 Ghana Multilateral Convention signed in force in Ghana
31 Gibraltar** Multilateral Convention extended in force in Gibraltar
32 Greece Multilateral Convention signed in force in Greece
33 Greenland*** Multilateral Convention extended
in force in
Greenland
34 Guatemala Multilateral Convention signed not in force
35 Guernsey**
TIEA
04 April and
24 Sept 2012
not in force
Multilateral Convention extended
in force in
Guernsey on
1 Sept 2014
36 Hungary Multilateral Convention signed not in force
37 Iceland Multilateral Convention signed in force in Iceland
38 India Multilateral Convention signed in force in India
39 Indonesia Multilateral Convention signed not in force
40 Ireland
DTC 02 J une 2005 28 August 2008
Multilateral Convention signed in force in Ireland
41 Isle of Man** Multilateral Convention extended
in force in
Isle of Man
42 Italy Multilateral Convention signed in force in Italy
43 J apan Multilateral Convention signed in force in J apan
44 J ersey** Multilateral Convention extended
in force in J ersey
01 J une 2014
45 Kazakhstan Multilateral Convention signed not in force
46 Korea
DTC 18 April 2002 22 J uly 2003
Multilateral Convention signed in force in Korea
47 Latvia Multilateral Convention signed not in force
48 Liechtenstein Multilateral Convention signed not in force
49 Lithuania Multilateral Convention signed
in force in Lithuania
1 J une 2014
ANNEXES 115
Si gned/
extended
Date entered into
force/status
50 Luxembourg Multilateral Convention signed not in force
51 Malaysia DTC 03 Sept 2004 25 August 2008
52 Malta Multilateral Convention signed in force in Malta
53 Mexico
DTC 17 April 1998 15 Oct 1999
Multilateral Convention signed in force in Mexico
54 Moldova Multilateral Convention signed in force in Moldova
55 Montserrat** Multilateral Convention extended
in force in
Montserrat
56 Morocco Multilateral Convention signed not in force
57 Netherlands Multilateral Convention signed
in force in the
Netherlands
58 New Zealand
DTC 10 Dec 2003 21 J une 2006
in force in
New Zealand
59 Nigeria Multilateral Convention signed not in force
60 Norway
DTC 26 Oct 2001 22 J uly 2003
Multilateral Convention signed in force in Norway
61 Paraguay DTC
30 August
2005
26 August 2008
62 Peru DTC 08 J une 2001 13 Nov 2003
63 Poland
DTC 10 March 2000 30 Dec 2003
Multilateral Convention signed in force in Poland
64 Portugal
DTC 07 J uly 2005 25 August 2008
65 Romania Multilateral Convention signed not in force
66 Russia
DTC 19 Nov 2004 23 March 2012
67 San Marino Multilateral Convention signed not in force
68 Saudi Arabia Multilateral Convention signed not in force
69 Singapore Multilateral Convention signed not in force
70 Sint Maarten* Multilateral Convention extended
in force in
Sint Maarten
71 Slovak Republic Multilateral Convention signed
in force in
Slovak Republic
116 ANNEXES
Si gned/
extended
Date entered into
force/status
72 Slovenia Multilateral Convention signed in force in Slovenia
73 South Africa
DTC 11 J uly 2012 -
in force in
South Africa
74 Spain
DTC 07 J uly 2003 22 Dec 2004
Agreement 2006 in force since 2006
Multilateral Convention signed in force in Spain
75 Sweden
DTC 04 J une 2004 30 Dec 2005
Multilateral Convention signed in force in Sweden
76 Switzerland
DTC 02 April 2008 05 May 2010
77 Thailand DTC 08 Sept 2006 05 May 2010
78 Tunisia Multilateral Convention signed
in force in Tunisia
01 Feb 2014
79 Turkey Multilateral Convention signed not in force
80
Turks and Caicos
Islands**
Multilateral Convention extended
in force in
Turks and Caicos
81 Ukraine Multilateral Convention signed in force in Ukraine
82 United Kingdom
DTC 12 J uly 2003 21 Dec 2004
Multilateral Convention signed in force in the UK
83 United States
DTC 04 February 2010 not in force
* Extension of the Multilateral Convention to the countries of the Kingdom of the Netherlands.
** The Government of the United Kingdom declared, at various dates, that the United Kingdoms
ratification of the Convention as amended by its Protocol shall be extended to the territory of the
Anguilla, the British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Jersey, the Isle of Man,
Montserrat and the Turks and Caicos Islands.
*** Extension of the Multilateral Convention to the autonomous regions of the Kingdom of Denmark.
DTCs and protocols are available in English and/or Spanish on the website of the tax administration
at: www.sii.cl/pagina/jurisprudencia/convenios.htmas well as on the EOI Portal at http://eoi-tax.org/.
The chart of signatures and ratification of the Multilateral Convention is available at www.oecd.org/
ctp/eoi/mutual.
ANNEXES 117
Annex 3: List of laws, r egulations and other mater ial r eceived
Tax Code and Income Tax Act
SII Circular 18/2013 on exchange of information (oficio circular que
imparte instrucciones en material de intercambio de informacin en
el marco de lo dispuestos en convenios internacionales vigentes en
Chile).
Decree Law No. 3/1969 creating the Tax Identification Number and
establishing rules for its application
Law 19.840 of 2002 establishing tax rules on enterprises with foreign
capital making investments abroad from Chile
Circular 31 of 19 May 2014 on the obligation to register in for tax pur-
poses and declare starting business concerning companies without
domicile or residence in Chile, as well as other entities with or with-
out legal personality created or organised abroad.
SII Resolution no. 81 of 2013 on requests for information on trusts cre-
ated abroad and SII Resolution no. 47 of 2014 requesting information
on trusts and entities with similar characteristics, created under the
provisions of foreign law
Code of Courts
Civil Code
Commercial Code
Law 18.046 and Supreme Decree 587 of 1982 on Shareholding Companies
(SA)
Law 3.918 of 1923 on Limited Liability Companies (SRL)
Law 19.857 of 2003 on individual limited liability company (EIRL)
Law 20.659 of 2013 on the Simplification of the creation, modification
and dissolution of commercial entities
Law 18.045 on Stock Market and related SVS circulars
118 ANNEXES
Supreme Decree No. 110 of 1979 of the Ministry of Justice, on corpora-
tions and foundations
Law 19.913 Creating the Chilean Financial Intelligence Unit and Amending
some Provisions on Money Laundering
General Banking Law
Administrative Statute Law 18.834
Internal Revenue Service Statute (Decree 7 of 1980)
Criminal Code
ANNEXES 119
Annex 4: People inter viewed dur ing the on-site visit
Internal Revenue Service (Servicio de Impuestos Internos)
International Audit Department (DFI)
International Taxation Department
Members of the former Large Taxpayers Department (2010-11)
Large Taxpayer Unit
Special Case Unit
Santiago Regional Tax Office
Taxpayer Assistance Department
Tax Studies Department
IT Department
Tax and Customs Court
Ministry of Finance
Advisor to the Minister
Ministry of Economy
Registrar of Entities
Superintendency of Securities and Insurance (SVS, Superintendencia de
Valores y Servicios)
Superintendency of Banks and Financial Institutions or SBIF (SBIF,
Superintendencia de Bancos e Instituciones Financieras)
Ministry of Justice
Department in charge of the ownership of legal entities
Registrar Conservador de Santiago
Association of Accountants of Chile
Bar Association
Bank Association
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forefront of efforts to understand and to help governments respond to newdevelopments and
concerns, such as corporate governance, the information economy and the challenges of an
ageing population. The Organisation provides a setting where governments can compare
policy experiences, seek answers to common problems, identify good practice and work to co-
ordinate domestic and international policies.
The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech
Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel,
Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland,
Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom
and the United States. The European Union takes part in the work of the OECD.
OECD Publishing disseminates widely the results of the Organisations statistics gathering
and research on economic, social and environmental issues, as well as the conventions,
guidelines and standards agreed by its members.
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16
(23 2014 18 1 P) ISBN 978-92-64-21761-4 2014-01
GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES
Peer Review Report
Phase 2
Implementation of the Standard
in Practice
Global Forum on Transparency and Exchange of Information
for Tax Purposes
PEER REVIEWS, PHASE 2: CHILE
This report contains a Phase 2: Implementation of the Standards in Practice review, as well
as revised version of the Phase 1: Legal and Regulatory Framework review already released
for this country.
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the
multilateral framework within which work in the area of tax transparency and exchange of
information is carried out by over 120 jurisdictions which participate in the work of the
Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of the implementation
of the standards of transparency and exchange of information for tax purposes. These
standards are primarily reected in the 2002 OECD Model Agreement on Exchange of
Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax
Convention on Income and on Capital and its commentary as updated in 2004, which has
been incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably relevant
information for the administration or enforcement of the domestic tax laws of a requesting
party. Fishing expeditions are not authorised, but all foreseeably relevant information must
be provided, including bank information and information held by duciaries, regardless of the
existence of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identied by the Global Forum as
relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1
reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange
of information, while Phase 2 reviews look at the practical implementation of that framework.
Some Global Forum members are undergoing combined Phase 1 plus Phase 2 reviews.
The ultimate goal is to help jurisdictions to effectively implement the international standards
of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and they thus represent
agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency and Exchange of
Information for Tax Purposes, and for copies of the published review reports, please visit
www.oecd.org/tax/transparency and www.eoi-tax.org.
CHILE
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Consult this publication on line at http://dx.doi.org/10.1787/9789264217676-en.
This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and
statistical databases.
Visit www.oecd-ilibrary.org for more information.
ISBN 978-92-64-21761-4
23 2014 18 1 P
9HSTCQE*cbhgbe+

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