Note PDF

The Department of State refers the Embassy of Chile to the Convention and
Protocol signed today between the Government of the United States of America
and the Government of the Republic of Chile for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income
and Capital (the "Convention") and confirms on behalf of the Government of the
United States the following understandings reached between our two
Governments:

1. With respect to subparagraph d) of paragraph 1 of Article 3 (General
Definitions), the term "person" includes an estate, trust or partnership.

2. With respect to subparagraph f) of paragraph 1 of Article 3 (General
Definitions), the terms "enterprise of a Contracting State" and "enterprise of the
other Contracting State" include an enterprise carried on by a resident of a
Contracting State through an entity that is treated as fiscally transparent in that
Contracting State.

3. With respect to paragraph 1 of Article 4 (Residence), the term "resident of a
Contracting State" does not include a person who is liable to tax in a Contracting
State only on profits attributable to a permanent establishment in that State.

4. With respect to Article 10 (Dividends) and Article 13 (Capital Gains),
Chile has an integrated tax system pursuant to which it collects a total 35 percent
tax on business profits imposed at two levels as follows: companies resident in
Chile are subject to the First Category Tax at a rate of 17 percent on business
profits, and non-resident shareholders are subject to the Additional Tax at a rate of
35 percent with a credit for the First Category Tax paid. Furthermore, Chile has
retained its taxing right through the application of the Additional Tax on
non-residents in all of its bilateral tax treaties.

DIPLOMATIC NOTE

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The provisions of paragraphs 5 and 7 of Article 13 and subparagraph a) of
paragraph 12 of the Protocol (regarding Article 10) reflect the unique operation of
Chile's integrated tax system and are intended to prevent the avoidance of the
Additional Tax. Accordingly, if in the future Chile's integrated tax system is
modified as described in either subparagraph b) of paragraph 12 or in paragraph 16
of the Protocol, the provisions of paragraphs 5 and 7 of Article 13 or subparagraph
a) of paragraph 12 of the Protocol (as the case may be) shall not apply, and the
right of the source country to tax will be limited by subparagraph b) of paragraph
12 of the Protocol in the case of dividends, and paragraph 16 of the Protocol in the
case of capital gains.

5. With respect to Article 14 (Independent Personal Services), the term
"performed in that other State" does not mean "received in that other State."

6. With respect to Article 26 (Mutual Agreement Procedure), the competent
authorities of the Contracting States, through consultations, shall develop
appropriate bilateral procedures, conditions, methods, and techniques for the
implementation of the mutual agreement procedure provided for in this Article.
Each competent authority may, in addition, develop unilateral procedures to
facilitate such bilateral implementation of the mutual agreement procedure. For
guidance in developing such bilateral implementation, the competent authorities
will refer to the Best Practices identified in the OECD Manual on Effective Mutual
Agreement Procedures.

7. The competent authority of a Contracting State shall be notified by the
competent authority of the other Contracting State when that other Contracting
State has obtained the consent of the persons to be interviewed by officials of that
other Contracting State or for such officials to examine books and records in the
possession or control of such consenting persons. Following such interview or
examination of books and records, the other Contracting State may make a request
under Article 27 (Exchange of Information) for information or documents related
to such interview or examination.

If the above confirmation is acceptable to the Government of the Republic of
Chile, the Department of State proposes that this Note a nd the Embassy's Note in

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reply reflecting such acceptance shall constitute an agreement between the two
Governments that shall enter into force on the date of entry into force of the
Convention and Protocol.
Department of State,
Washington, February 4, 2010.