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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: Chile: Royalties

Chilean tax on royalties paid to a UK resident recipient who is the beneficial owner of the royalties is reduced to:

1. 5 per cent of the gross amount of the royalties for the use of, or the right to use, industrial, commercial or scientific equipment,
2. 10 per cent of the gross amount of the royalties, in all other cases.

except where the right or property in respect of which the royalties are paid is effectively connected with a permanent establishment which the UK resident recipient has in Chile. In the latter circumstances, the provisions of the Business profits Article (Article 7) will apply.

Changes from 1 January 2017

The UK-Chile Double Taxation Convention (DTC) contains a ‘Most Favoured Nation’ (MFN) clause in relation to paragraph (2) of Article 11 (interest) and paragraph (2) of Article 12 (royalties). The MFN can be found in the Exchange of Notes. The MFN was triggered following entry into force of the Chile-Japan DTC. That DTC entered into force on 1 January 2017.

The effect on the UK-Chile DTC is as follows:

Royalties for the use of, or the right to use, any industrial, commercial or scientific equipment may only be taxed at 2 per cent of the gross amount in the Contracting State in which they arise from 1 January 2017.

The rate applicable to other royalties remains 10 per cent.