Double Tax Treaty Brazil X Chile

Date of Conclusion: 3 April 2001.

Effective Date: 1 January 2004.

 

C O N V E N T I O N BETWEEN THE FEDERATIVE REPUBLIC OF BRAZIL AND THE REPUBLIC OF CHILE FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO THE TAXE ON INCOME.

 

The Government of the Federative Republic of Brazil

and
The Government of the Republic of Chile

Desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to the taxe on income,

Have agreed as follows:

CHAPTER I
Scope of the Convention

Article 1
PERSONS COVERED

The Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 2
TAXES COVERED

1. The Convention shall apply to taxes on income imposed on behalf of each Contracting State.

2. There shall be regarded as taxes on income the taxes imposed on total income or on any portion of it.

3. The taxes to which this Convention shall apply are:

a) in the Federative Republic of Brazil:

– the federal income tax

(hereinafter referred to as “Brazilian tax”);

b) in the Republic of Chile:

– the taxes levied under the Income Tax Law (“Ley sobre el Impuesto a la renta”, Decree-Law nr. 824)

(hereinafter referred to as “Chilean Tax”).

4.The Convention shall also apply to any identical or substantially similar taxes that are imposed after the date of its signature in addition to, or in place of, the taxes mentioned in the previous paragraph. The competent authorities of the Contracting States shall notify each other yearly of any significant changes that have been made in their respective taxation laws.

Article 3
GENERAL DEFINITIONS

1. For the purposes of the Convention, unless the context otherwise requires:

a)the term “Brazil” means the Federative Republic of Brazil;

b) the term “Chile” means the Republic of Chile:

c) the terms “a Contracting State” and “the other Contracting State” mean Brazil or Chile, as the context requires;

d)the term “person” includes an individual, a company and any other body of persons;

e) the term “company” means any legal person or any entity that is treated as a legal person for tax purposes;

f) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

g) the term “international traffic” means any transport by a ship, aircraft or land transport vehicle operated by an enterprise of a Contracting State, except when such transport is carried on solely between places in the other Contracting State;

h) the term “national” means:

I – any individual possessing the nationality of a Contracting State; or

II – any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;

i) the term “competent authority” means:

I – in the Federative Republic of Brazil: the Minister of Finance, the Secretary of Federal Revenue or their authorized representatives;

II – in the republic of Chile, the Minister of Finance or his authorized representative;

2. As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Convention applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4
RESIDENT

1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation or any other criterion of a similar nature, and also includes that State and any political subdivision thereof.

2. Where by reason of the provisions of paragraph l an individual is a resident of both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident only of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (center of vital interests);

b) if the State in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;

c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national; and

d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph l a person other than an individual is a resident of both Contracting States, then the competent authorities of the Contracting States shall endeavour to resolve the case. In the absence of a mutual agreement, such a person will not be entitled to any tax benefits or exemptions provided for in this Convention.

Article 5
PERMANENT ESTABLISHMENT

1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop;

f) a mine, an oil or gas well, a quarry or any other place of extraction or exploration or exploitation of natural resources.

3. The term “permanent establishment” also includes a building site or construction, installation or assembly project which exists for more than six months, including supervisory activities in connection therewith only for the purposes of calculating the period.

For the purposes of calculating the time-limits referred to in this paragraph, the activities carried on by an enterprise associated with another enterprise within the meaning of Article 9 shall be aggregated with the period during which activities are carried on by the enterprise to which it is associated if the activities of both enterprises are identical or substantially similar.

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;

e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other than an agent of an independent status to whom paragraph 6 applies – is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

6. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business and that the conditions that are made or imposed in their commercial or financial relations with such enterprise do not differ from those which would be generally made by independent agents

7. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

Article 6
INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

2. For the purposes of this Convention, the term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats, aircraft and land transport vehicles shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting or sharecropping, or use in any other form of immovable property.

4.The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and from immovable property used for rendering independent personal services.

Article 7
BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the enterprise may be taxed in the other State, but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on or has carried on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions necessary expenses which are effectively incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred.

4. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

5. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8
SHIPPING AND AIR TRANSPORT

1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that Contracting State.

2. For the purposes of this Article:

a.       the term “profits” includes gross income derived directly from the operation of ships, aircraft or land transport vehicles in international traffic;

b.      the expression “operation of ships, aircraft or land transport vehicles” by an enterprise also includes:

i) the charter or rental of aircraft, land transport vehicles or chips on a bareboat basis; and

ii) the rental of containers and related equipment, provided that such charter or rental is incidental to the operation, by that enterprise, of ships, aircraft or land transport vehicles is international traffic.

3. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

Article 9
ASSOCIATED ENTERPRISES

Where

a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State; or

c) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State;

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Article 10
DIVIDENDS

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a.10 per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly or indirectly at least 25 per cent of the voting rights of the company paying the dividends;

b.     15 per cent of the gross amount of the dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

3. The term “dividends” as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other Corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the Contracting State of which the company making the distribution is a resident.

4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding by virtue of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Where a resident of a Contracting State has a permanent establishment in the other Contracting State, such a permanent establishment may be subject in that Contracting State to a tax other than the tax on the profits of the permanent establishment in that other Contracting State and in accordance with the law of that other State. However, this tax other than the tax on the profits shall not exceed the limit provided for in subparagraph “a”

of paragraph 2 of this Article.

6. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State.

Article 11
INTEREST

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but, if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the interest.

3. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and, in particular, income from government securities, bonds or debentures, as well as other income assimilated to income from money lent by the tax law of the Contracting State in which the income arises.

4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. The tax rate limitation provided for in paragraph 2 of this Article shall not apply to interest arising in a Contracting State and paid to a permanent establishment of an enterprise of the other Contracting State which is situated in a third State.

6. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or the fixed base is situated.

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a case, the excess part of the payments may be taxed according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

8. The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.

Article 12
ROYALTIES

1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but, if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the royalties.

3. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films and films, tapes or other means of image and sound reproduction, for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process or other intangible property, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience.

4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such a case, the excess part of the payments may be taxed according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

7. The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties are paid to take advantage of this Article by means of that creation or assignment.

Article 13
CAPITAL GAINS

1. Gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise), or of such fixed base, may be taxed in that other State.

3. However, gains from the alienation of land transport vehicles, ships or aircraft operated in international traffic or movable property pertaining to the operation of such land transport vehicles, ships or aircraft shall be taxable only in the Contracting State in which, according to Article 8, is entitled to tax the profits of the enterprise.

4. Gains from the alienation of any property or right other than that referred to in the foregoing paragraphs may be taxed in both Contracting States.

Article 14
INDEPENDENT PERSONAL SERVICES

1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State, unless:

a.       the remuneration for such services or activities is paid by a resident of the other Contracting State or is borne by a permanent establishment or a fixed base situated in that other State; or

b.      such individual, his employees or any other person on his behalf are present or the activities continue in the other Contracting State for a period or periods exceeding in the aggregate 183 days in any twelve month period; in such a case, only so much of the income as is derived from the activities performed in that other State may be taxed in that other State; or

c.       the services or activities are performed in the other Contracting State through a fixed base regularly available to the recipient in that other State for the purpose of performing his activities, but only so much of the income as is attributable to that fixed base.

2. The expression “professional services” includes especially independent scientific, technical, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15
DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles 16, 18, and 19, salaries, wages and other remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and

b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised aboard a land transport vehicle, ship or aircraft operated in international traffic shall be taxed only in that Contracting State.

Article 16
DIRECTORS’ FEES

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or any other management or auditing board of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17
ARTISTES AND SPORTSMEN

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxable in that other State.

2. Where income in respect of personal activities exercised by an entertainer or a sportsman in his capacity as such accrues not to the entertainer or sportsman himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsman are exercised.

Article 18
PENSIONS

1. Pensions and other similar remuneration arising in a Contracting State and paid to a resident of the other Contracting State shall be taxed only in the State in which they arise.

In this paragraph the term “pensions and other similar remuneration” means periodic payments made after retirement in consideration of past employment or by way of compensation for injuries received in connection with past employment and payments made by, or out of, a pension fund which is part of the social security system of a Contracting State.

2. Alimony and other support payments made to a resident of a Contracting State shall be taxable only in that State if they are deductible for the payer. If they are not deductible, such payments shall be taxable only in the State of residence of the payer.

Article 19
GOVERNMENT SERVICE

1. a) Salaries, wages and other remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or political subdivision or local authority shall be taxable only in that State.

b) However, such salaries, wages and other remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

I – is a national of that State; or

II – did not become a resident of that State solely for the purpose of rendering the services.

2. The provisions of Articles 15, 16, 17 and 18 shall apply to the remuneration and the pensions paid in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 20
STUDENTS AND APPRENTICES

1. Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

2. In respect of grants, scholarships and remuneration from employment not covered by paragraph 1, a student or business apprentice referred to in paragraph 1 shall, in addition, be entitled during the period of such education or training to the same exemptions, reductions or allowances in respect of taxes which are available to residents of the State which he is visiting.

Article 21
OTHER INCOME

Items of income of a resident of a Contracting State, arising in the other Contracting State and not dealt with in the foregoing Articles of this Convention, may be taxed in that other Contracting State.

CHAPTER IV
METHODS FOR THE ELIMINATION OF
DOUBLE TAXATION

Article 22
CREDIT METHOD

1. In the case of Chile, double taxation shall be avoided as follows:

Where a resident of Chile derives income which, in accordance with the provisions of this Convention, may be taxed in Brazil, he may credit the tax paid in Brazil against any Chilean tax payable in respect of such income, according to applicable provisions of the Chilean legislation. This paragraph shall apply to any income referred to in the Convention.

2. In the case of Brazil, double taxation shall be avoided as follows:

Where a resident of Brazil derives income which, in accordance with the provisions of this Convention, may be taxed in Chile, Brazil shall allow, as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Chile, according to the applicable provisions of the Brazilian legislation. Such deduction shall not, however, exceed that part of the income tax as computed before the deduction is given, which is attributable to the income which may be taxed in Chile.

3. Where in accordance with any provision of the Convention, income derived by a resident of a Contracting State is exempt from tax in that State, such State may, nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

CHAPTER V
Special Provisions

Article 23
Non-discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connnected requirements to which nationals of that other State in the same circumstances are or may be subjected.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities.

3. This Article shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, relieves and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

4. Except where the provisions of Article 9, of paragraph 7 of Article 11, or of paragraph 6 of Article 12 apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

5. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of a third State, are or may be subjected.

6. In this Article, the term “taxation” means taxes to which this Convention applies.

Article 24
MUTUAL AGREEMENT PROCEDURE

1. Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 23, to that of the Contracting State of which he is a national.

2. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with this Convention.

3. The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

Article 25
EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. 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, or the prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Convention. Such persons or authorities shall use the information only for such purposes.

2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

c) to supply 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 (public order).

Article 27
MEMBERS OF DIPLOMATIC MISSIONS
AND CONSULAR POSTS

Nothing in this Convention shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

Article 28
ENTRY INTO FORCE

1. Each Contracting State may notify the other in writing, through diplomatic channels, of the completion of the procedures required by its law for the bringing into force of this Convention. This Convention shall enter into force on the date of the receipt of the later notification.

2. The provisions of this Convention shall apply:

a) in Brazil:

I) in respect of taxes withheld at source, to amounts paid, remitted or credited on or after the first day of January of the calendar year immediately following that in which the Convention enters into force;

II) in respect of other taxes covered by the Convention, to income arising in the taxable year beginning on or after the first day of January of the calendar year immediately following that in which the Convention enters into force.

b) in Chile:

– in respect of taxes on income derived and amounts paid, credited to an account, made available or computed as an expense, as from the first day of January in the calendar year next following that in which the Convention enters into force.

3. The agreement between Brazil and Chile for the avoidance of double taxation of income from shipping and air transport, concluded through an exchange of notes at Santiago on 17 and 18 June 1976, shall cease to have effect as from the date on which this Convention enters into force in respect of taxes which are the subject of the Convention, in accordance with paragraph 1 of this Article.

Article 29
TERMINATION

1. Either Contracting State may terminate this Convention after a period of three years from the date on which the Convention enters into force by giving to the other Contracting State, through diplomatic channels, a written notice of termination, not later than the thirtieth day of June in any calendar year.

2. In such a case the Convention shall cease to have effect:

a) in Brazil :

I) in respect of taxes withheld at source, to amounts paid, remitted or credited on or after the first day of January of the calendar year immediately following that in which the notice of termination is given;

II) in respect of other taxes covered by the Convention, as to income arising in the taxable year beginning on or after the first day of January of the calendar year immediately following that in which the notice of termination is given.

b) in Chile:

in respect of taxes on income derived and amounts paid, credited to an account, made available or computed as an expense, as from the first day of January in next following the calendar year.

In witness whereof the undersigned, duly authorized thereto, have signed this Convention.

Done at Santiago on 3 April 2001, in duplicate, in the Portuguese and in the Spanish languages, both texts being equally authentic.

 

For the Government of

For the Government of

the Federative Republic of Brazil

the Republic of Chile

 

P R O T O C O L

 

At the moment of signing of the Convention between the Federative Republic of Brazil and the Republic of Chile for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to the Tax on Income, the undersigned, duly authorized thereto, have agreed upon the following provisions which constitute an integral part of the Convention.

1. With reference to Article 1

a) Any question arising as to the interpretation or application of this Convention and, in particular, whether a tax measure is included in the scope of this Convention, shall be exclusively resolved in accordance with the provisions of Article 24 of this Convention; and

b) The provisions of Article II and Article XVII of the General Agreement on Trade in Services shall not apply in respect of a tax measure unless the competent authorities agree that such a measure that such a measure is not within the scope of Article 23 of this Convention.

2. With reference to Article 7

It is understood that the provisions of paragraph 3 of Article 7 shall apply to expenses incurred in the State in which the permanent establishment is situated or elsewhere.

3. With reference to Article 10, paragraphs 2 and 5

In the case of Chile:

a.       The provisions of paragraphs 2 and 5 of Article 10 of this Convention shall not limit the application of the Additional Tax (“Impuesto Adicional”) whenever:

I) the First Category Tax is fully creditable against the Additional Tax to be paid, and

II) the Additional Tax rate does not exceed 42%.

In addition, where any of the conditions under (I) or (II) is not met, the provisions of paragraphs 2 and 5 of Article 10 shall not limit the taxation in either of the Contracting States. In such a case the Contracting States shall consult each other for the amendment of the present Convention with a view to restoring the benefits of the Convention.

b) Likewise the provisions of paragraphs 2 and 5 of Article 10 of this Convention shall not limit the application of the Additional Tax in case of withdrawals or remittances of profits or dividends paid by an enterprise where the investment is subject to a foreign investment contract covered by the Foreign Investment Statute (Decree-Law 600) whenever the overall effective tax burden on the income does not exceed 42%.

4. With reference to Article 11, paragraph 4

Interest paid as “remuneration on the company’s equity” (“remuneração sobre o capital próprio”) in accordance with Article 9 of Law 9.249/95 of Brazil shall, for the purposes of paragraph 3 of Article 11, be regarded as interest as long as they are deductible in determining the income of the legal person.

It is also understood that the term “interest”, as defined for the purposes of paragraph 4 of Article 11, includes commissions and similar fees paid by a resident of a Contracting State for services rendered by a bank or other financial institution.

5. With reference to Article 12, paragraph 3

The provisions of paragraph 3 of Article 12 shall apply to payments of any kind received as a consideration for the rendering of technical assistance and technical services.

6. With reference to Article 14

In the event that Brazil, after the date of signature of this Convention, concludes with a third state a convention including a rule which in any way means a renouncement of the application of the principle laid down in subparagraph “a” of paragraph 1 of Article 14 of this Convention, for the determination of the right to tax of a Contracting State with respect to income derived in respect of the rendering of professional services or other activities of an independent character, then the rule laid down in subparagraph “a” of paragraph 1 of Article 14 of this Convention shall cease to have effect from the date of the entry into force of the convention with the third state.

With reference to Article 23

a) The provisions of paragraph 5 of Article 10 of this Convention and paragraph 3 of the Protocol are not considered discriminatory as to the provisions of paragraph 2 of Article 23.

b) The provisions of the laws of the Contracting States that do not allow that royalties as defined in paragraph 3 of Article 12, paid by a permanent establishment situated in a Contracting State to a resident of the other Contracting State that carries on business in the first-mentioned Contracting State through a permanent establishment, be deductible at the moment of the determination of the taxable income of the above referred permanent establishment, are not considered discriminatory as to the provisions of Article 23.

c) Nothing in Article 23 of this Convention shall affect the application of the existing provisions of paragraph 12 of Article 31 of the Income Tax Law of Chile, even if it is eventually amended without changing the general principle thereof. However, the 30% rate referred to in such rule shall be replaced by the rate of 15% for the beneficial owners of royalty payments who are residents of Brazil.

d) For more certainty, it is understood that the provisions of Article 23 of this Convention shall not prevent the application by a Contracting State of its domestic rules dealing with thin capitalization.

8. General provisions

a.       Distributions by a foreign investment fund, set up or organized in order to operate as such in a Contracting State, shall be subject to taxation according to the laws of that Contracting State.

b.      Whereas the main aim of this Convention is the avoidance of international double taxation and the prevention of fiscal evasion, the Contracting States agree that, in the event that the provisions of the Convention are used in such a manner as to provide benefits not referred to or intended therein, the competent authorities of the Contracting States shall recommend, in accordance with the mutual agreement procedure of Article 24, specific amendments to the Convention. The Contracting States further agree that any such recommendations will be taken into consideration and discussed in an expeditious manner with a view to the amendment of the Convention, where necessary,.

c.       In the event that a Contracting State introduces at a later date a tax on capital, the Contracting States shall consult each other with a view to negotiating provisions concerning the treatment thereof.

In witness whereof the undersigned, duly authorized thereto, have signed this Protocol.

Done at Santiago on 3 April 2001 in the Portuguese and Spanish languages, both texts being equally authentic.

 

For the Government of

For the Government of

the Federative Republic of Brazil

the Republic of Chile

 

 


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