The double taxation convention which was recently concluded between the Netherlands and Chile comes with a comprehensive anti-abuse provision aimed at preventing the treaty being used for tax avoidance purposes. The provision in question enables other countries to deny treaty benefits to businesses that channel funds via the Netherlands or Chile in order to dodge taxes. The Dutch-Chilean treaty meets the minimum standards as per the OECD/G20’s anti-tax avoidance BEPS (Base Erosion and Profit Shifting) action plan.
The Dutch-Chilean treaty has borrowed from the OECD’s Model Tax Convention and that of the United Nations where it concerns particular aspects of how corporate income tax levying should be distributed, thus ensuring the retention in Chile itself, of a relatively greater amount in taxes. The Dutch-Chilean tax treaty provides for a withholding tax on interest and royalties that is capped at 10 percent or less and leaves room for the taxation of pension entitlements in the country of their accrual. The Netherlands has the right to levy tax on income from substantial interest in the event that the holder thereof emigrates. Information exchange and tax collection assistance arrangements have moreover been arrived at between the Netherlands and Chile.
The double taxation convention is awaiting ratification in both countries. This calls for the designated approval procedure being completed. As far as the Netherlands is concerned this will involve the treaty being submitted for the scrutiny and advice of the Council of State, following which it will be presented the Lower and Upper Houses of the Dutch Parliament for their consecutive approval.
Dutch version: Nederland sluit belastingverdrag met Chili