Oficio N°1613 SII: Credits for Taxes Paid Abroad

On 14 August 2025, in Official Letter No. 1613, the Chilean Internal Revenue Service ruled on the appropriateness of crediting, as a credit against final taxes in Chile, taxes paid abroad on profits received by a Chilean company from foreign subsidiaries, when such taxes are paid after 31 December of the business year in which such profits were received.

The concern arises because the foreign tax on such profits is usually paid after 31 December of the year in which the profits were received in Chile, which generates a time lag for credit recognition purposes, since the taxes that can be used as a credit would not have been paid at the time the income is computed in Chile.

Thus, for example, if a Chilean company receives dividends in October 2024 and the foreign tax is paid in July 2025, in circumstances where the income must be declared in Chile in April 2025, when the foreign taxes have not yet been paid in Chile, the question arises as to whether, since they have not been paid by 31 December 2024, the right to the credit is lost in Chile.

This dilemma was previously resolved by Circular No. 31 of 2021, which establishes a recalculation mechanism for the credit under article 41 A of the Income Tax Law ("LIR"), stating that only foreign corporate taxes effectively paid as of 31 December may be imputed in the same year. Taxes paid thereafter are incorporated via recalculation and imputed in the following tax year, so that the credit is not lost.

By virtue of this, Official Letter No. 1613 clarifies the previous criterion in the following ways:

(i) It extends the treatment to indirect credits (letters b) and c) of N° 2 of art. 41 A of the LIR;

(ii) With respect to withholding taxes, it is sufficient to prove that the withholding was made and that it was deducted from the income remitted to Chile in order to be entitled to the corresponding credit;

(iii) Points out that the original return is not rectified, since the difference is imputed in the following TA, respecting the ceilings of N° 3 of Article 41A;

(iv) It establishes that both income and the respective taxes are converted into Chilean pesos at the exchange rate of the day on which the income is received;

(v) The recalculation shall be carried out every time tax payments are made abroad, and the new credit differences to which they are entitled in the tax return may be invoked in the income tax return for the month of April following such payment, regardless of the fact that no new foreign source income is obtained in the years in question or no tax loss is determined in Chile.

Consequently, the taxpayer shall, in the following year, recalculate the credit, charging the tax effectively paid to the year in which the income was received, and the resulting difference (in favour or against) is adjusted in the following year's tax return. This will not involve rectifying your F22, although the calculations will be the same.

In accordance with the above, once the credit differential for taxes paid abroad attributable to the IDPC is determined in the following year, such credit shall be deducted from the First Category Tax of the respective year, regardless of whether it is determined on Chilean or foreign source income. If there is a surplus, it shall be charged to subsequent years until its total extinction.