Chile – Transfer Pricing (2025)

Legal framework and scope

Chile’s transfer pricing regime is primarily grounded in Article 41 E of the Chilean Income Tax Law (LIR). Article 41 E sets out the general principles, applicable methods and documentation obligations, and defines the circumstances under which transactions are treated as controlled. The Servicio de Impuestos Internos (SII) issued Circular No. 29 on 14 June 2013 to provide administrative guidance on the transfer pricing provisions contained in the LIR; Circular 29/2013 develops methodological aspects and comparability analysis. Other relevant administrative provisions referenced in the country profile include Resolución Exenta N° 101 of 2020 (forms and instructions), Circular N° 32/2021 (penalties), Resolución Exenta N°68 of 2013 (APAs), and Circular N° 40 of 2021 (guidance on permanent establishments and profit attribution).

Arm’s Length Principle and the role of the OECD Guidelines

The arm’s length principle is embedded in domestic law through Article 41 E. Circular 29/2013 explicitly refers to the OECD Transfer Pricing Guidelines (TPG) with respect to methods, comparability analysis and the use of ranges and statistical measures; nonetheless, the OECD TPG do not have administrative or legal status above domestic law. In administrative practice, Circular 29/2013 incorporates and adapts OECD recommendations, stating that the comparability factors set out in Chapter III of the OECD TPG represent international practice in transfer pricing matters.

Definition of related parties

Related party definitions are provided in Article 41 E, Number 1, of the LIR and further explained in Circular 29/2013. A Chilean resident taxpayer is considered related to its counterparty when one party participates directly or indirectly in the management, control, capital, profits or income of the other; when the same person or persons participate directly or indirectly in the management, control, capital, profits or income of both parties; when transactions are carried out between an agency, branch or any other form of permanent establishment and its parent company or other permanent establishments of the same parent company (including related parties of those); when transactions take place with residents or domiciliaries in listed countries or territories that do not exchange relevant information with Chile; and, for individuals, when there is marriage or kinship by blood or affinity up to the fourth degree. Article 41 E also includes a clause considering parties related when a party transacts with a third party that in turn transacts directly or indirectly with a related party in identical or similar transactions. These definitions should be applied in conjunction with Circular 29/2013 for determining formal obligations.

Methods and selection criteria

Article 41 E, Number 2, of the LIR enumerates the commonly accepted transfer pricing methods: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split. When the characteristics and circumstances of a case make it impossible to apply any of these methods, the taxpayer may determine prices or values using other methods that reasonably estimate market prices or normal values that independent parties would have agreed, provided the taxpayer justifies why the standard methods cannot be applied. There is no rigid statutory hierarchy of methods; instead, the taxpayer must apply the most appropriate method considering the particular facts and circumstances of the case, a criterion reinforced in Circular 29/2013.

Comparability and ranges

Chile follows the comparability guidance of Chapter III of the OECD TPG; Circular 29/2013 paragraph 3.2 explicitly cites the OECD comparability factors as representing international practice. There is no preference for domestic comparables over foreign comparables, and the tax administration does not use secret comparables for transfer pricing assessment purposes. The legislation allows the use of an arm’s length range and statistical measures to determine arm’s length remuneration, as set out in Circular 29/2013 paragraph 3.4. Comparability adjustments are not mandatory under domestic law, but their use is permitted when they improve comparability.

Documentation and reporting

Chile requires transfer pricing documentation consistent with the three-tiered approach of the OECD: a Master File, a Local File and a Country-by-Country Report (CbC), in accordance with Article 41 E, Number 6, of the LIR. Additionally, taxpayers must file a specific transfer pricing affidavit, Form 1907, pursuant to Resolución Exenta N° 101 of 2020 and its instructions. The Master File and CbC scope threshold is EUR 750 million in consolidated group revenues at the time of closing consolidated financial statements, using the exchange rate observed on 1 January 2015 as determined by the Central Bank of Chile; alternatively, the obligation applies to a Chile resident entity designated by the parent to file the CbC on behalf of the parent in its country of residence. The Local File must be filed by taxpayers who, as of 31 December of the reporting year, meet the following cumulative conditions: belong to the Large Companies segment; have a parent or controlling entity that was required to file a CbC for the relevant year; and have carried out one or more transactions with related parties not domiciled in Chile exceeding CLP 200,000,000 (two hundred million Chilean pesos) or its equivalent in foreign currency, using the exchange parity in force on the last day of December of the reporting fiscal year. The deadline to submit sworn Master/Local/CbC statements and annexes is the last business day of June each year for the operations carried out in the immediately preceding fiscal year; this deadline may be extended once for up to three months in accordance with number 6 of Article 41 E of the LIR. Documentation may be submitted in Spanish or English, but the SII may expressly require translation into Spanish when determined in a particular case, pursuant to the final part of letter e) of No. 4 of Article 8 bis of the Tax Code.

Penalties and compliance incentives

Specific penalties related to transfer pricing documentation and compliance are provided in Chilean administrative guidance; Circular N° 32/2021 contains the specific penalties applicable to transfer pricing documentation infractions. Failure to comply with Form 1907 and associated documentation requirements may trigger administrative sanctions under those rules and the general tax penalties regime.

Safe harbours and simplification measures

The Chilean profile indicates that there are no safe harbours in place for particular industries, taxpayer types or transaction types. No other simplification measures beyond the standard documentation framework are identified in the profile. Therefore, no domestic safe harbour guidance is provided in this country profile.

APAs and MAP; procedures and timing

Chile offers Advance Pricing Agreements (APAs), including unilateral, bilateral and multilateral APAs, as specified in Article 41 E, Number 7, of the LIR and in Resolución Exenta N°68 of 2013. Chile also provides access to Mutual Agreement Procedures (MAP). The country profile refers to the Chile MAP profile for programme-specific information; the country profile itself does not provide detailed operational timing or statutory time limits for APA or MAP processing.

Secondary adjustments, year-end adjustments and other considerations

Taxpayers in Chile are permitted to make year-end adjustments. The profile indicates that Chile does not apply secondary adjustments as part of its domestic regime. Regarding profit attribution to permanent establishments (PEs), Chile does not fully adopt the Authorised OECD Approach (AOA); it follows the AOA to the extent compatible with the wording of the pre-2010 Article 7 of the OECD Model Tax Convention and has reserved the right to apply the previous version of Article 7. Domestic regulation on PEs is mainly contained in Articles 2 and 38 of the LIR and in Circular N° 40 of 2021. In relation to financial transactions, while Chile follows the recommendations of Chapter 10 of the OECD TPG, there are other tax rules relevant to financial payments: the general withholding tax on interest is 35% on the gross interest payment, but Article 59 of the LIR provides a reduced withholding rate of 4% for interest paid on loans from abroad provided by foreign or international banking or financial institutions when those institutions are the final beneficiaries; Article 41 F establishes a debt-to-equity threshold of 3:1 for debt monitoring purposes.

Other items not developed in the profile

Chile does not have domestic legislation or regulations specific to cost contribution arrangements according to the country profile. With respect to intangibles, the profile states that Chile follows the recommendations of Chapter 6 of the OECD TPG, but no specific domestic guidance on intangibles or on hard-to-value intangibles (HTVI) is provided in the profile. For intra-group services, Chile follows Chapter 7 of the OECD TPG; the profile indicates there is no simplified approach for low value-adding intra-group services. When the profile reports the absence of specific domestic guidance, the principal administrative reference remains Circular 29/2013 and the application of OECD principles as incorporated by the SII.

Conclusion

Chile’s transfer pricing framework is anchored in Article 41 E of the LIR and implemented administratively via Circular 29/2013, which incorporates OECD principles though the TPG do not supersede domestic law. Chile mandates Master File, Local File and Country-by-Country reporting under specified thresholds (EUR 750 million consolidated revenues for Master/CbC; CLP 200,000,000 threshold for Local File in the Large Companies segment), requires Form 1907, allows the use of ranges and statistical measures, and provides APA and MAP mechanisms. Specific features of the domestic regime include a general 35% withholding on interest with a special 4% rate under Article 59 for loans from foreign banks/financial institutions, a debt/equity 3:1 benchmark per Article 41 F, and the option for year-end adjustments but no secondary adjustments. Where domestic law is silent or non-specific, the SII applies the OECD TPG in administrative practice.

References

For more information, see the OECD country profile page: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html