Key Benefits:
DECREE NO. 4,852, OF October 2, 2003.
Promulgates the Convention between the Government of the Federative Republic of Brazil and the Government of the Republic of the Chile Intended to Prevent Double Taxation and Prevent Tax Evasion in Relation to the Income Tax Act of April 3, 2001.
THE PRESIDENT OF THE REPUBLIC, in the use of the assignment that confers it on art. 84, inciso IV, of the Constitution, and
Considering that the Government of the Federative Republic of Brazil and the Government of the Republic of Chile celebrated, in Santiago de Chile, on April 3, 2001, a Convention Destined to Avoiding Double Taxation and Preventing Tax Evasion in Relation to the Income Tax;
Whereas the National Congress has approved this Convention through Legislative Decree No. 331 of July 22, 2003;
Considering that the Convention entered into force on July 24, 2003, pursuant to paragraph 1º of its Article 27;
DECRETA:
Art. 1º The Convention between the Government of the Federative Republic of Brazil and the Government of the Republic of Chile Destined to Prevent Double Taxation and Prevent Tax Evasion in Relation to the Income Tax, concluded in Santiago de Chile, on April 3, 2001, apensa by copy to present Decree, will be executed and fulfilled as entirely as it contains.
Art. 2º Are subject to the approval of the National Congress any acts that may result in revision of the said Convention or that carries charges or gravy commitments to the national heritage, in the terms of art. 49, inciso I, of the Federal Constitution.
Art. 3º This Decree comes into force on the date of its publication.
Brasilia, October 2, 2003; 182º of Independence and 115º of the Republic.
LUIZ INACIO LULA DA SILVA
Celso Luiz Nunes Amorim
Government of the Federative Republic of Brazil
and
The Government of the Republic of Chile,
Wishing to conclude a Convention intended to prevent double taxation and prevent tax evasion in relation to income tax,
They have agreed the following:
CHAPTER I
Scope of Application of the Convention
ARTICLE 1
Personal scope
The Convention applies to the resident persons of a or from both the Contracting States.
ARTICLE 2
Taxes Covered
1. The Convention shall apply to taxes on income demanded by each of the Contracting States.
2. They consider income taxes to be recorded on the whole of income or any part of it.
3. The taxes to which this Convention applies are:
a) in the Federative Republic of Brazil, the federal tax on income (henceforth called the "Brazilian tax"); and
b) in the Republic of Chile, the taxes set out in the Income Tax Act, Decree-Law 824, (henceforth called the "Chilean tax").
4. The Convention shall also apply to taxes of an identical or substantially analogous nature that are established after the date of the signing of the same, whether in addition to those mentioned in the preceding paragraph, be it in their replacement. The competent authorities of the Contracting States shall each year communicate the significant modifications that have occurred in their respective tax laws.
CAPITCHAPTER II
Definitions
ARTICLE 3
General definitions
1. For the purposes of the Convention, unless of its context it infuses a different interpretation:
a) the term "Brazil" means the Federative Republic of Brazil;
b) the term "Chile" means the Republic of Chile;
c) the expressions "a Contracting State" and "the other Contracting State" means, in accordance with the context, "Brazil" or "Chile";
d) the term "person" shall comprise physical or natural persons, societies and any other group of persons;
e) the term "society" means any legal person or any entity deemed to be legal person for purposes tax;
f) the expressions "company of a Contracting State" and "company of the other Contracting State" means, respectively, a company operated by a resident of a Contracting State and an explored company by a resident of the other Contracting State;
g) the expression "international traffic" means all transport effected by a ship, aircraft or land transport vehicle operated by a company of a State Contractor, except where such transport takes place exclusively between two points located in the other Contracting State;
h) the term "national" means:
i) every physical person or natural that posits the nationality of a Contracting State; or
ii) every legal person, society of persons or association constituted in accordance with the prevailing legislation of a Contracting State;
i) the expression "competent authority" means:
i) in the case of the Federative Republic of Brazil, the Minister of Finance, the Secretary of the Federal Revenue Officer or its authorized representatives;
ii) in the case of the Republic of Chile, the Minister of Finance or its authorized representative.
2. For the application of the Convention at a given point in time by a Contracting State, any term or expression that in it will not be defined will have, unless in its context it infer a different interpretation, the meaning that at that time is assigned to it by the legislation of that State concerning the taxes that are the object of the Convention, by prevailing the meaning assigned by the applicable tax legislation in that state on the meaning assigned by other laws of that state.
ARTICLE 4
Resident
1. For the purposes of the Convention, the expression "resident of a Contracting State" means every person who, by virtue of the legislation of that State, is subject to taxation in the same on the reason of their domicile, residence, seat of direction, place of constitution or any other criterion of an analogous nature, and it also applies to that state or to any of its political subdivisions.
2. When, by virtue of the provisions of paragraph 1, a physical or natural person is resident of both the Contracting States, their situation shall be determined as follows:
a) that person shall be deemed to be resident only of the Contracting State in which he / she possesses permanent dwelling; if she disposes of permanent housing in both States, he / she shall be considered resident only of the State with which he / she maintains closer personal and economic relations (center of vital interests);
b) if the state in which that person has the center of their vital interests cannot be determined, or if it does not dispose of a dwelling permanent in none of the States, shall be considered resident only of the State in which he / she habitually lives;
c) if that person habitually lives in both states or if they do not habitually live in any of them, it shall be considered resident only of the State that it is national; and
d) if that person is a national of both States or if it is not national of any of them, the competent authorities of the Contracting States shall resolve the issue of common agreement.
3. When, by virtue of the provisions of paragraph 1, a person, who is not a physical or natural person, is resident of both the Contracting States, the competent authorities of the Contracting States shall do their best to resolve the case. In the absence of a mutual agreement, dictate person shall not be entitled to any of the benefits or tax exemptions contemplated by this Convention.
ARTICLE 5
Permanent Establishment
1. For the purposes of the Convention, the expression "permanent establishment" means a fixed business installation by which a company carries out all or part of its activity.
2. The expression "permanent establishment" especially comprises:
a) a thirst for direction;
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 in relation to the exploration, extraction or exploding of natural resources;
3. The expression "permanent establishment" also includes a construction site, construction, installation or assembly whose duration exceeds six months, incorporating solely for the purposes of the time-caper the related supervision activities with spoken activities.
For purposes of the calculation of the temporal limits referred to in this paragraph, the activities exercised by a company associated with another company in the sense of Article 9 will be aggregated to the period during which are carried out the activities by the company of which it is associated, whether the activities of both companies are identical or substantially similar.
4. Notwithstanding the foregoing paragraphs of this Article, it is considered that the expression "permanent establishment" does not include:
a) the use of facilities solely for the purposes of storage, exhibition or delivery of goods or goods belonging to the company;
b) the maintenance of a deposit of goods or goods belonging to the Company solely for the purpose of their storage, exhibition or delivery;
c) the maintenance of a deposit of goods or goods belonging to the company solely for the end of its transformation by another company;
d) the maintenance of a fixed business facility solely for the purpose of purchasing goods or goods or obtaining information for the company;
and) the maintenance of a fixed business facility solely for the purpose of making advertising, providing information or carrying out scientific investigations or other similar activities that have preparatory or ancillary character for the company.
5. Notwithstanding the provisions of paragraphs 1 and 2, when a person-distinguished from an independent agent to which paragraph 6-atue is applicable on account of a company and has and habitually exercised in a Contracting State powers to conclude contracts on behalf of the company, it will be considered that such a company has a permanent establishment in that State in respect of any activity that such person develops for the Company unless such activities are limited to those mentioned in the paragraph 4, which, if exercised by means of a fixed business installation, would not permit to be considered such a fixed facility as a permanent establishment under the terms of that paragraph.
6. It does not consider that a company of a Contracting State has a permanent establishment in the other Contracting State by the mere fact of therein exerting its activities by means of a broker, a general commissioner or any other agent independent, whenever these persons act in the normal scope of their activities and that in their commercial or financial relations with so-called companies do not be accesses or impose conditions accepted or imposed that are distinct from the generally agreed by independent agents.
7. The fact that a resident society of a Contracting State controls or is controlled by a resident corporation of the other Contracting State, or develops business activities in that other State (be it through an establishment permanent or otherwise), does not, by itself, convert any of these societies into permanent establishment of the other.
CHAPTER III
Taxation of the Earnings
ARTICLE 6
Real Estate Income
1. The income that a resident of a Contracting State obtains from immovable property (inclusive of income from agricultural or forestry holdings) located in the other Contracting State may be taxed in that other State.
2. For the purposes of the Convention, the expression "immovable property" shall have the meaning ascribed to it by the legislation of the Contracting State in which the goods are situated. The expression comprises, in any case, the accessories to the immovable property of the real estate, the cattle and the equipment used in the agricultural and forestry holdings, the rights to which the provisions of the private law relating to the property of immovable property, the enjoyment of immovable property, and the rights to be granted variable or fixed payments in contraption by the holding, or concession of the holding, of mineral deposits, sources and other natural resources; the vessels, boats, aircraft and ground transport vehicles will not be considered real estate.
3. The provisions of paragraph 1 apply to income from direct use, renting or partnership, as well as any other form of exploitation of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to income from the immovable property of a company and the real estate used for the provision of independent personal services.
ARTICLE 7
Profits of Enterprises
1. The profits of a company from a Contracting State may only be taxed in that State, unless the Company exercises or has exercised its activity in the other Contracting State by means of a permanent establishment there. If the company exercises or has exercised its activity in the indicated form, its profits can be taxed in the other state, but only to the extent that they are attributable to that permanent establishment.
2. Reaping the provisions of paragraph 3, when a company of a Contracting State exercises its activity in the other Contracting State by means of a permanent establishment therein, shall be assigned, in each Contracting State, to that permanent establishment, the profits that the same would have been able to obtain if it were a separate and separate company that exerted identical or similar activities, under identical or similar conditions, and treated with absolute independence with the company of the what is a permanent establishment.
3. For the determination of the profits of a permanent establishment, the deduction of the necessary and effectively carried out expenses will be allowed for the achievement of the purposes of that permanent establishment, including the expenses of direction and charges administration general thus carried out.
4. No profit will be assigned to a permanent establishment by the mere fact that this purchase goods or merchandise for the company.
5. Where profits have understood income treated separately in other Articles of this Convention, the provisions of these Articles shall not be affected by the provisions of this Article.
ARTICLE 8
Land, Maritime and Air Transport
1. The profits of a company from a Contracting State arising from the operation of ships, aircraft or ground transport vehicles in international traffic can only be taxed in that State.
2. For the purpose of this Article:
a) the term "profits" comprises gross proceeds directly from the exploitation of ships, aircraft or ground transport vehicles in international traffic;
b) the expression "exploitation of ships, aircraft, or ground transport vehicles" by a company also comprises:
i) the afflicting or renting of aircraft, transport vehicles ground or ship without crew; and
ii) the renting of "containers" and the related equipment, where said freight or leasing is ancillary to the holding, by that company, of ships, aircraft or ground transport vehicles in international traffic.
3. The provisions of paragraph 1 apply also to profits from participation in a "pool", on an exploration in common or in an international holding body.
ARTICLE 9
Associated Companies
When:
a) a company of a Contracting State to participate, directly or indirectly, in the direction, control or capital of a company of the other Contracting State, or
b) the same persons participate, directly or indirectly, in the direction, control, or capital of a company of a Contracting State and a company of the other Contracting State, and, in one and another case, the two companies, in their trade or financial relations, are united by accepted or imposed conditions that differ from those that would be agreed by independent companies, the profits that, without these conditions, would have been obtained by one of the companies, but they were not by virtue of such conditions, they may be included in the profits of that company and, consequently, taxed.
ARTICLE 10
Dividends
1. Dividends paid by a resident corporation 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 State Contracting in which it resides with the corporation that pays them and in accordance with the legislation of that State, but, if the effective beneficiary of the dividends is a resident of the other Contracting State, the tax so required shall not exceed:
a) 10% of the gross amount of dividends, if the effective beneficiary is a society that controls, directly or indirectly, at least 25% of the shares entitled to the vote of the society that pays such dividends;
b) 15% of the gross amount of dividends in all the remaining cases.
This paragraph does not affect the taxation of the society in relation to the profits that give rise to the payment of the dividends.
3. The term "dividends" in the sense of this Article comprises income from shares or other rights, with the exception of credit rights, allowing to participate in profits, as well as the income from other rights of participation subject to the same tax treatment as the income from shares by the legislation of the Contracting State of which the society that distributes them is resident.
4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the effective beneficiary of the dividends, resident of a Contracting State, exercises, in the other Contracting State of which he is resident the society paying the dividends, an activity business by means of a permanent establishment there located or provides in that other State independent personal services by means of a fixed base there and the generating share of dividends is effectively linked to that permanent establishment or fixed base. In this hypothesis, the provisions of Article 7 or Article 14, as the case may be, apply.
5. When a resident of a Contracting State holds a permanent establishment in the other Contracting State, such permanent establishment will be able to be subject to a tax distinct from the tax that affects the profits of the establishment permanent in that other Contracting State and under the legislation of that State. However, such a tax distinct from the tax on profits shall not exceed the limit set out in subparagraph (a) of paragraph 2 of this Article.
6. Where a resident corporation of a Contracting State obtains profits or income from the other Contracting State, that other State shall not be able to demand any tax on dividends paid by the company, except to the extent that such dividends are paid to a resident of that other State or to the extent that the generating share of the dividends paid is bound effectively to a permanent establishment or to a fixed basis located in that other State, nor to submit the undistributed profits from society to a tax on the same, yet dividends paid or undistributed profits consist of, wholly or partially, profits or income from that other state.
ARTICLE 11
Juros
1. Interest arising from 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 of which originate and in accordance with the legislation of that State, but, if the effective beneficiary of the interest is a resident of the other Contracting State, the tax so required shall not exceed 15% of the gross amount of interest.
3. The term "interest" in the sense of this Article shall comprise income from claims of any nature, with or without mortgage guarantees, and in particular, the income from public debt, securities or bonds, as well as any other yield that the state tax legislation from which they come from interest assimilates to the income from borrowed importations.
4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the effective beneficiary of the interest, resident of a Contracting State, exercises, in the other Contracting State of which they provenance interest, a business activity by means of an permanent establishment there situated or provides independent personal services by means of a fixed base there and the credit that originates the interest is effectively linked to that permanent establishment. In this hypothesis, the provisions of Article 7 or Article 14, as the case may be, apply.
5. The limitation set out in paragraph 2 of this Article shall not apply to the interest arising from a Contracting State and paid to a permanent establishment of a company of the other Contracting State located in a third State.
6. Interest shall be deemed to arise from a Contracting State when the debtor is a resident of that State. However, when the debtor of the interest, whether or not a resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed basis in respect of which there is contracted the obligation which gives rise to the payment of the interest and kayba to such permanent establishment or fixed basis the payment of such interest, such interest shall be considered from the Contracting State in which the permanent establishment or the fixed base is situated.
7. When, on the grounds of special relations existing between the debtor and the effective beneficiary of the interest, or of those that one and the other hold with third parties, the amount of interest paid, considering the credit for which they are due, exceeds what they would have agreed upon the debtor and the effective beneficiary in the absence of such relationships, the provisions of this Article shall be applicable only to the latter amount. In this case, the surplus portion of the payments could be taxed in accordance with the legislation of each Contracting State, taking into account the remaining provisions of this Convention.
8. The provisions of this Article shall not apply if the main purpose or one of the principal purposes of any person bound by the creation or allocation of the credit in respect of which interest is paid is to obtain advantages of this Article upon such creation or attribution.
ARTICLE 12
Royalties
1. The "royalties" coming from a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, these "royalties" may also be taxed in the State Contractors from which they originate and in accordance with the legislation of that State, but, if the effective beneficiary of the "royalties" is a resident of the other Contracting State, the tax so required shall not exceed 15% of the gross amount of the "royalties".
3. The term "royalties" employed in this Article comprise the importances of any nature paid for by the use or by the granting of the use of copyright on literary, artistic or scientific works (including film and the films, tapes and other means of image and sound reproduction, recording of television or broadcasting programs), of patents, industry or trade marks, drawings or models, plans, secret formulas or procedures or other property intangible, as well as by the use or concession of the use of industrial, commercial or scientific equipment and for information concerning industrial, commercial or scientific experiments.
4. The provisions of paragraphs 1 and 2 of this Article do not apply when the effective beneficiary of the "royalties", resident of a Contracting State, exercises, in the other Contracting State of which originates the "royalties", a business activity by means of a permanent establishment there situated or provides independent personal services by means of a fixed base there and the good or the right in respect of which the "royalties" are paid are effectively linked to that permanent establishment or fixed base. In this hypothesis, the provisions of Article 7 or Article 14, as the case may be, apply.
5. The "royalties" are deemed to come from a Contracting State when the debtor is a resident of that State. However, where the debtor of the "royalties", resident or not of a Contracting State, has in a Contracting State a permanent establishment or a fixed basis in respect of which there is contracted the obligation to pay the "royalties", and kayba the such permanent establishment or fixed basis the payment of such "royalties", such "royalties" shall be considered from the Contracting State in which the permanent establishment or fixed base is situated.
6. When, on the grounds of special relations existing between the debtor and the effective beneficiary of royalties, or of those that one and the other hold with third parties, the amount of the royalties paid, taking into account the use, right or information by which they are paid, exceeds what would be agreed between the debtor and the effective beneficiary in the absence of such relationships, the provisions of this Article shall apply only to the latter amount. In this case, the surplus portion of the payments could be taxed in accordance with the legislation of each Contracting State, taking into account the remaining provisions of this Convention.
7. The provisions of this Article shall not apply if the main purpose or one of the principal purposes of any person relating to the creation or assignment of rights in respect of which the "royalties" are paid for is to obtain advantages of this Article upon such creation or attribution.
ARTICLE 13
Capital gains
1. The gains earned by a resident of a Contracting State from the disposal of immovable property located in the other Contracting State may be taxed in that other State.
2. The gains from the disposal of goods furniture that is part of the asset of a permanent establishment that a company of a Contracting State posits in the other Contracting State, or of movable property belonging to a fixed basis that a resident of a Contracting State has in the other State Contractor for the provision of independent personal services, including the gains from the disposal of that permanent establishment (isolated or with the company's set of which form part) or of that fixed basis may be taxed in that another state.
3. However, gains from the disposal of land transport vehicles, ships or aircraft operated in international traffic or mobile goods affections to the operation of such land transport vehicles, ships or aircraft, only may be taxed in the Contracting State that is competent to tax the profits of the Company as per Article 8.
4. The gains from the disposal of any other well distinguished from those mentioned in the preceding paragraphs may be taxed in both the Contracting States.
ARTICLE 14
Professional Services Independents
1. The income that a resident of a Contracting State obtains by the provision of professional services or other independent character activities can only be taxed in that State, unless:
a) the remuneration for such services or activities shall be paid by a resident of the other Contracting State or to fall to a permanent establishment or to a fixed basis located in that other State; or
b) referred to person, their employees or other persons designated by it shall remain or the activities proceed in the other Contracting State for a period the periods which, in total, add up to or exceed 183 days, within a period any of twelve months; in this case, may only be taxed in that other State the part of the income earned from the activities performed by that person in that other State; or
c) such services or activities are provided in the other Contracting State and the beneficiary possesses, in a customary manner, in that other state on a fixed basis for the exercise of its activities, but only to the extent that such income is attributable to that fixed basis.
2. The expression "independent professional services" comprises, in particular, the independent activities of scientific, technical, literary, artistic, educational or pedagogical character, as well as the independent activities of doctors, lawyers, engineers, architects, dentists and accountants.
ARTICLE 15
Dependent Professional Services
1. Redeeming the provisions of Articles 16, 18 and 19, the wages, salaries and other remuneration obtained by a resident of a Contracting State on the grounds of a job only may be taxed in that State, unless employment is exercised in the other Contracting State. If the employment is exercised there, the corresponding remunerations may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, the remuneration obtained by a resident of a Contracting State on the grounds of a job exercised in the other Contracting State may only be taxed in the first State if:
a) the beneficiary shall remain in that other State for a period or periods whose duration shall not exceeds, in total, 183 days in any period of twelve months that begins or ends in the considered tax year; and
b) the remunerations are paid by, or on behalf of, an employer who is not a resident of the other State; e
c) the burden of remunerations does not fit for a permanent establishment or fixed basis that the employer has in the other state.
3. Notwithstanding the foregoing provisions of this Article, remunerations obtained by a resident of a Contracting State on the grounds of a job exercised on board a land transport vehicle, ship or aircraft operated in traffic international only be able to be taxed in that Contracting State.
ARTICLE 16
Remunerations of Councillors or Directors
The shareholdings, remunerations, daily and other similar consideration that a resident of a Contracting State obtains as a member of the board or of any other board of directors or tax of a resident corporation of the other Contracting State may be taxed in that other State.
ARTICLE 17
Artists and Desportists
1. Notwithstanding the provisions of Articles 14 and 15, the income that a resident of a Contracting State obtains from his or her personal activities exercised in the other Contracting State in the quality of professional of spectacles, such as an artist of theatre, film, radio or television, or musician, or in the quality of sportsmanship, can be taxed in that other state.
2. Notwithstanding the provisions of Articles 7, 14 and 15, when the income from personal activities exerted by a spectacle practitioner or a sportsman, in that capacity, are assigned not to the spectacle or sportsman's own professional, but to the other person, these incomes can be taxed in the State Contractor in which the activities of the spectacle practitioner or the sportsman are exercised.
ARTICLE 18
Pensions
1. Pensions and other similar remunerations from a Contracting State and paid to a resident of the other Contracting State may only be taxed in the State from which they come from.
In this paragraph a expression "pensions and other similar remunerations" means periodic payments effected after retirement on the grounds of a previous job or the title of compensation for damages incurred in consequence of a previous job and the payments effected by or originated from a pension fund that integrates the social security system of a Contracting State
2. Food and other maintenance payments effected to a resident of a State Contractors will only be taxable in that state if they are deductible for who pays them. In the case where they are not deductible, they will be taxable only in the state of residence of those who pay them.
ARTICLE 19
Public Functions
1. a) The welds, wages and other remunerations, excluded from pensions, paid by a Contracting State or one of its political subdivisions or local authorities to a physical or natural person, for services provided to that State or political subdivision or authority, may only be taxed in that State.
b) However, such soles, salaries and other remunerations may only be taxed in the other Contracting State if the services are provided in that State and the physical or natural person is a resident of that state who:
i) is a national of that state; or
ii) has not acquired the condition of resident of that state solely to provide the services.
2. The provisions of Articles 15, 16, 17 and 18 apply to pay and pensions paid on the grounds of services provided in the context of a commercial or industrial activity carried out by a State Contractor or by one of its political subdivisions or local authorities.
ARTICLE 20
Students and Apprentices
1. The payments that a student or apprentice who is, or was, in period immediately prior to his visit to a Contracting State, resident of the other Contracting State and who remains in the first Contracting State with the sole purpose of study or practice, receive for their maintenance, education or training cannot be taxed in that state, whenever they come from sources situated outside of that state.
2. In relation to grants, scholarships and compensation of jobs not understood in paragraph 1, the student or apprentice that it treats the referred to paragraph 1, during the period of such studies or that training, will have, ademals, the right to benefit from the same exemptions, rebates or deductions, in relation to taxes, granted to the residents of the state you are visiting.
ARTICLE 21
Other Earnings
The incomes of a resident of a State Contracting Officer not mentioned in the preceding Articles of this Convention and coming from the other Contracting State may be taxed in that other Contracting State.
CHAPTER IV
Methods to Eliminate Double Taxation
ARTICLE 22
Credit method
1. In the case of Chile, double taxation will be avoided in the following manner:
When a resident of Chile obtains income that, in accordance with the provisions of this Convention, is taxable in Brazil, he / she will be able to credit against Chilean taxes corresponding to those income the taxes paid in Brazil, in accordance with the applicable provisions of Chilean legislation. This paragraph shall be applied to all the income referred to in the Convention.
2. In the case of Brazil, double taxation will be avoided in the following manner:
When a resident of the Brazil obtains income which, in accordance with the provisions of this Convention, are taxable in Chile, Brazil will admit the deduction, from the income tax of that resident, of an amount equal to the income tax paid in the Chile, in accordance with the applicable provisions of the Brazilian legislation.
However, such a deduction will not be able to exceed the fraction of the income tax, calculated before the deduction, corresponding to the income taxable in Chile.
3. Where in accordance with any provision of the Convention the income earned by a resident of a Contracting State shall be exempt from taxation in that State, such a State may, however, consider the income exempted for the purposes of determination of the amount of tax on the remainder of the income of such a resident.
CHAPTER V
Special provisions
ARTICLE 23
Non-Discrimination
1. Nationals of a Contracting State shall not be subject in the other Contracting State to any taxation or obligation to it corresponding that does not require or are more gravy than those to which they are or may be subject to the national of that other State who find themselves under the same conditions.
2. The permanent establishments that a company of a Contracting State has in the other Contracting State shall not be subject to taxation in that State less favorably than the companies of that other state that exercise the same activities.
3. This Article shall not be construed in the sense of obliging a Contracting State to grant the residents of the other Contracting State the personal deductions, rebates and tax reductions which, for tax purposes, grant to their own residents in function of their marital status or family charges.
4. Unless the provisions of Article 9, paragraph 7, paragraph 7 of Article 11 or paragraph 6 of Article 12, interest, "royalties" and too much expense paid by a company of a Contracting State to a resident of the other Contracting State are applicable, deductible, to determine the profits of that company subject to taxation, under the same conditions as if they had been paid to a resident of the state mentioned in the first place.
5. The companies of a Contracting State whose capital is, in whole or in part, held or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subject, in the first State, to any taxation or obligation with it related to it that is not required or that is more gravous than those to which they are or may be subject to other similar companies of the first State whose capital is, in whole or in part, held or controlled, direct or indirectly, by one or more residents of a third state.
6. In the present Article, the term "taxation" refers to the object taxes of this Convention.
ARTICLE 24
Friendly Procedure
1. Where a resident of a Contracting State considers that the measures adopted by one or both of the Contracting States imply, or may involve, in relation to you, a taxation at odds with the provisions of this Convention, may, regardless of the resources provided for by the domestic law of those States, submit their case to the competent authority of the Contracting State that it is resident or, if paragraph 1 of Article 23 shall apply, to that of the Contracting State that it is national.
2. The competent authority, if the complaint appears justified and if it is itself not in a position to give it satisfactory solution, shall endeavour to resolve the matter by amicable agreement with the competent authority of the other State Contracting, in order to avoid taxation not in accordance with the Convention.
3. The competent authorities of the Contracting States shall endeavour, by a friendly agreement, to resolve the difficulties or to address the doubts to which the interpretation or application of the Convention may take place.
4. The competent authorities of the Contracting States will be able to communicate directly in order to reach an agreement in the terms indicated in the preceding paragraphs.
ARTICLE 25
Exchange of Information
1. The competent authorities of the Contracting States shall exchange the information necessary to implement the provisions of this Convention or those of the domestic law of the Contracting States relating to the taxes covered by the Convention, to the extent that the taxation provided for it is not contrary to the Convention. The exchange of information will not be limited by Article 1. The information received by a Contracting State shall be deemed secret in the same manner as the information obtained on the basis of the domestic law of that State and shall only be communicated to persons or authorities (included the courts and administrative bodies) entrusted with the launch or collection of the taxes covered by this Convention, of the declaratory or executive actions relating to those taxes, or of the appreciation of the resources to them. Referred to persons or authorities shall only use this information for the purposes mentioned in this paragraph.
2. The provisions of paragraph 1 shall not, in any case, be construed in the sense of imposing the a Contracting State an obligation to:
a) adopt administrative measures contrary to its legislation or administrative practice, or those of the other Contracting State;
b) provide information that could not be obtained on the basis of its own legislation or in the context of its normal administrative practice or those of the other Contracting State;
c) provide revealing information of secrets commercial, industrial, or professional, commercial or industrial procedures, or information whose communication is contrary to the public order.
3. Notwithstanding the provisions of paragraph 2 of this Article, the competent authority of the requested Contracting State may, observe the constitutional and legal limitations, and on the basis of reciprocity of treatment, obtain and provide information that they possess the financial institutions, prosecutors or persons acting as representatives, agents or fiduciaries, in the same way as in relation to social shareholdings or shareholdings, including on shares to the holder.
4. When the information is requested by a Contracting State in accordance with this Article, the other Contracting State shall obtain the requested information in the same way as if it were to be treated for its own taxation, without importing the fact that that other state, at that point in time, does not require such information.
ARTICLE 26
Members of Diplomatic Missions and
of Consular Posts
The the provisions of this Convention shall not prejudice the tax privileges of which the members of the diplomatic missions or consular posts are to benefit from the general principles of International Law or by virtue of the provisions of special agreements.
ARTICLE 27
Input in Vigor
1. Each Contracting State shall notify in writing to the other, by the diplomatic channels, the fulfilment of the procedures required by its legal planning for the entry into force of this Convention. This Convention shall enter into force on the date of receipt of the last notification.
2. The provisions of the Convention will apply:
a) in Chile:
in relation to taxes on earned income and paid importances, credited, placed at the disposal or accounted for as spent, from the first day of the month of January of the calendar year immediately following the one in which the Convention enters into force; and
b) in Brazil:
i) in respect of taxes withheld at the source, the importations paid, referred to or credited to or after the first day of January of the calendar year immediately following that in which the Convention enters into force;
ii) in regard to the remaining taxes covered by the Convention, in respect of the income produced in the fiscal year beginning on or after the first day of January of the calendar year immediately following that in which the Convention between in force.
3. The Convention to Prevent Double Taxation of the Income corresponding to the Maritime and Air Transport, concluded in Santiago, by exchange of notes, on 17 and June 18, 1976, between Brazil and Chile will cease to produce effects from the date on which the this Convention shall enter into force in respect of the taxes to which it applies, in accordance with paragraph 1 of this Article.
ARTICLE 28
Denpronunciation
1. Any of the Contracting States may, in written form, at the latest on the thirtieth day of June each calendar year following the period of three years from the date of entry into force of the Convention, notify the other of the complaint of the same, by the diplomatic way.
2. In this case, the provisions of the Convention will cease to produce effect:
a) in Chile:
in relation to taxes on the income earned and the importations paid, credited, placed at the disposal or accounted for as spent, from the first day of the month of January of the calendar year immediately following;
b) in Brazil:
i) in respect of taxes withheld at the source, the importations paid, referred to or credited to or after the first day of January of the calendar year immediately following that in which the complaint occurred;
ii) in regard to the remaining taxes of which it treats this Convention, in respect of the income produced in the fiscal year beginning on or after the first day of January of the calendar year immediately following that in that the complaint has occurred.
In testimony to what, the signatories, for this duly authorized, sign the present Convention.
Done in Santiago on April 3, 2001, in two original copies, in the Portuguese and Spanish languages, being both texts being equally authentic.
BY THE GOVERNMENT OF THE FEDERATIVE REPUBLIC OF THE BRASIL
Everardo de Almeida Maciel
Secretary of the Federal Revenue
By The Government Of The Republic Of Chile
Nicolás Eyzaguirre Guzmán
Minister of Finance
At the time of the signing of the Convention between the Federative Republic of Brazil and the Republic of Chile to avoid double taxation and prevent tax evasion in relation to income tax, the signatories, for this duly authorized, have come up with the following provisions that constitute an integral part of this Convention.
1. With reference to Article 1
a) Any question arising in relation to the interpretation or application of this Convention and, in particular, whether a tax measure is understood under this Convention, shall be resolved exclusively 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 to a tax measure less that the competent authorities accrue that such a measure is not understood in the context 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 be applicable both if the spending is made in the State in which the permanent establishment is found to be in another part.
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 always that:
i) the First Category Tax is completely creditworthy against the Additional Tax payable, and
ii) the aliquot of the Additional Tax does not exceed 42%.
In addition, when one of the conditions of the letters (i) or (ii) cede is complied with, the provisions of paragraphs 2 and 5 of Article 10 shall not limit taxation in any of the Contracting States. In this case the Contracting States shall consult each other with respect to amending this Convention for the purpose of restoring the balance of the benefits of it.
b) Similarly, the provisions of paragraphs 2 and 5 of Article 10 of this Convention shall not limit the application of the Additional Tax in the case of withdrawals or remittances from profits or dividends paid by a company when the investment is subject to a foreign investment contract hosted by the Status of Foreign Investment (Decree-Law 600) whenever the total effective tax burden on the income does not exceed 42%.
4. With reference to Article 11, paragraph 4
The importances paid for the title of "remuneration on equity" in accordance with article 9 of the Law in 9.249/ 95 of Brazil will be considered as interest for the purposes of the Article 11, paragraph 3, always and when they are deductible for the determination of the income of the legal person.
5. With reference to Article 12, paragraph 3
The provisions of paragraph 3 of Article 12 apply to income from the provision of technical services and technical assistance.
6. With reference to Article 14
If, on a date subsequent to that of the signing of this Convention, Brazil concludes a Convention with another State in which to agree a norm that signifies, in any way, renount the application of the principle set out in the letter to) of paragraph 1 of Article 14 of this Convention for the determination of the right of taxation of a Contracting State in relation to the income earned by the provision of professional services or other independent character activities, as of the date of entry into force of the Convention with the other State shall cease to be applicable to the standard set out in the letter to) of paragraph 1 of Article 14 of this Convention.
7. With reference to Article 23
a) The provisions of paragraph 5 of Article 10 of the Convention and paragraph 3 of the Protocol are not considered to be discriminatory in accordance with paragraph 2 of Article 23.
b) The provisions of the laws of the Contracting States that do not allow the "royalties", as defined in paragraph 3 of Article 12, paid for by a permanent establishment located in a Contracting State to a resident of the other Contracting State carrying out business activities in the Contracting State mentioned first by means of such permanent establishment, be deductible at the time of determination of the taxable income of the said permanent establishment, are not discriminatory under Article 23.
c) Nothing of Article 23 of this Convention will affect the application of the current provision of article 31, number 12, contained in the "Income Act" of Chile, even if eventually modified without changing its general principle. However, the aliquot of 30% to which it refers dictates standard will be replaced by the 15% aliquot for the effective beneficiaries of the payments concerning "royalty" residents in Brazil.
d) For greater certainty, it is signed that the provisions of Article 23 of this Convention do not prevent the application, by a Contracting State, of the respective internal standards relating to subcapitalization or excessive borrowing.
8. General Provisions
a) The distributions of a Foreign Investment Fund, constituted or arranged to operate as such in a Contracting State, shall be subject to taxation in accordance with the legislation of that Contracting State;
(b) Whereas the primary purpose of this Convention is to prevent international double taxation and prevent tax evasion, the Contracting States agree that, in the case where the provisions of the Convention are used in such a way that they accord benefits not contemplated by it or intended by it, the competent authorities of the Contracting States shall, in accordance with the friendly procedure of Article 24, recommend specific modifications of the Convention. The Contracting States shall, further, agree that any of the said recommendations shall be considered and discussed in an expeditious manner with a view to modifying the Convention to the extent that is necessary.
(c) In the case where at a later date if it implements itself in one of the Contracting States a tax on the estate, the Contracting States shall consult with the purpose of negotiating provisions relating to their Treatment.
In testimony to what, the signatories, for this duly authorized, sign the present Protocol.
Made in Santiago, on April 3, 2001, in two copies originals, in the Portuguese and Spanish languages, being both texts being equally authentic.
BY THE GOVERNMENT OF THE FEDERATIVE REPUBLIC OF BRAZIL
Everardo de Almeida Maciel
Secretary of the Federal revenue
BY THE GOVERNMENT OF THE REPUBLIC OF CHILE
Nicolás Eyzaguirre Guzmán
Minister of Finance
