The United States-Chile Income Tax Treaty Moves Closer to Ratification
March 29, 2022

The U.S.-Chile Income Tax Treaty is On the Move

On March 29, 2022, the U.S. Senate Foreign Relations Committee consented to the ratification of the Convention between the Government of the United States of America and the Government of the Republic of Chile for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital (“Treaty”). This Treaty is important as the U.S. has a limited number of income tax treaties with South American countries.


The Treaty provides a reduced withholding tax rate on dividends, interest, and royalties. The U.S. dividend withholding tax rate may be reduced to 5% in cases where a 10% ownership threshold is met and a 15% dividend withholding tax rate in other cases. Notably, the Treaty calls for a 0% withholding tax rate on certain U.S.-sourced dividend payments to pension funds. The protocol of the Treaty provides that in the case of U.S. Regulated Investment Company (e.g., U.S. mutual funds) and U.S. Real Estate Investment Trusts, the dividend withholding tax may be reduced to 15%. However, there are limitations on when the reduced rate is available.


The reduced interest withholding tax rate is generally 15% for five years after the Treaty takes effect and 10% after that. Certain exceptions apply to the reduced interest withholding tax rate. A 4% interest withholding tax rate is available for certain financial institutions and certain other creditors.

The royalty withholding tax is generally 10%. A reduced royalty withholding tax rate of 2% is available for certain royalties that constitute a rental payment for the use of industrial, commercial, or scientific equipment.


The U.S.’s right to impose branch profits tax and branch-level interest tax is preserved in the Treaty.

The Treaty includes a Limitation on Benefits article. The Limitation on Benefits article generally provides that a treaty resident is a “qualifying person” as defined in the article. It’s essential for taxpayers to self-assess if they are a qualifying person.


Overall, the U.S.-Chile income tax treaty mainly reflects the provisions of the U.S. model income tax treaty with variations to account for Chilean tax law and policy. It will be a welcome addition to U.S. tax treaties with South America.


Do you have questions regarding inbound tax planning and structuring? Contact International Capital Associates, LLC to discuss.

U.S.-Russia Tax Treaty Suspension

June 18, 2024
The U.S. Department of the Treasury announced on June 17, 2024, that the United States has formally notified the Russian Federation about the suspension of certain articles and provisions of the Convention between the United States of America and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, signed at Washington, June 17, 1992. This suspension will take effect on August 16, 2024, and will continue until otherwise decided by the two governments. This decision is in response to the Russian Federation's notification on August 8, 2023, expressing its desire to suspend specific articles and provisions of the Convention and the Protocol. The announcement can be seen at United States’ Notification of Suspension, By Mutual Agreement, of the 1992 Tax Convention with Russia | U.S. Department of the Treasury . Taxpayers who rely on the U.S.-Russia income tax treaty should plan for this suspension. Please contact International Capital Associates, LLC if you need help planning for the treaty suspension or if you need other U.S. tax services .

U.S. Internal Revenue Service Releases Updated Form W-8EXP With Updates for Qualified Foreign Pension Funds

December 11, 2023
In November 2023, the U.S. Internal Revenue Service released an updated Form W-8EXP. The Form W-8EXP is a U.S. withholding tax certificate for foreign governments or other foreign organizations. Confusingly, the words “qualified foreign pension fund” do not appear on the Form W-8EXP. However, the updates to the Form W-8EXP are intended to allow a non-U.S. pension fund (or qualifying entity) to certify its Qualified Foreign Pension Fund status. A non-U.S. pension fund may certify that it is a “Withholding Qualified Holder Under Section 1445” provided it meets the requirements of Section 897(l) and Treas. Reg. 1.897(l)-1 as a Qualified Foreign Pension Fund. A “Qualified Holder” includes certain wholly-owned entities that meet the requirements of Treas. Reg. 1.897(l)-1(d)(2) or (3). A “Withholding Qualified Holder” also consists of a non-U.S. partnership wholly owned by Qualified Holders. Unfortunately, Form W-8EXP still does not contain sections to allow the taxpayer to claim the benefits of a U.S. income tax treaty. Non-U.S. pension funds and governments will still need to complete Form W-8BEN-E to claim U.S. income tax treaty benefits with a U.S. withholding agent, such as reduced dividend and interest withholding rates. The release of the updated Form W-8EXP does not invalidate any prior Qualified Foreign Pension Funds certifications. In the future, U.S. withholding agents may request a valid Form W-8EXP instead of other Qualified Foreign Pension Fund certifications. A Withholding Qualified Holder should ensure that the Form W-8EXP is complete and valid to make a Qualified Foreign Pension Fund certification using the Form W-8EXP. Please contact International Capital Associates, LLC if you need help determining if the entity is considered a Withholding Qualified Holder, if you need assistance completing Form W-8EXP , or if you need other U.S. tax services .