On February 4, 2026, the Chilean Internal Revenue Service (hereinafter “SII”) issued Official Ruling No. 286 regarding foreign tax credits in the event that the net foreign‑source income, as defined in Article 41 A of the Chilean Income Tax Law (Ley sobre Impuesto a la Renta, “LIR”), is negative.
Taxpayer Query:
According to the taxpayer’s submission, presented to the Regional Office XXXX, the taxpayer asked about the applicability of the foreign tax credit when net foreign‑source income under Article 41 A of the LIR is negative. The taxpayer requested reconsideration of a prior internal ruling which concluded that there is no right to a foreign tax credit when the net foreign‑source income is equal to zero or results in a tax loss from foreign operations on the grounds that no legal provision expressly authorizes such a credit. The taxpayer also asked that the excess taxes paid abroad be refundable if the credit could not be claimed.
SII Response:
In accordance with Section B, No. 1 of Article 6 of the Chilean Tax Code, the Regional Office XXXX addressed the taxpayer’s inquiry on the application and interpretation of the tax rules, relying on the interpretation contained in Circular No. 31 of 2021, based on the Director of the SII’s legal authority under Section A, No. 1 of Article 6 of the Tax Code.
That guidance states that the foreign tax credit system contained in Article 41 A has the purpose of preventing double international taxation — that is, taxation both in the source country of such income and in the country of residence of the taxpayer. Accordingly, the foreign tax credit under Article 41 A applies only when the income that bore foreign taxes is also subject to taxation in Chile. This means that the foreign tax credit may only be applied against Chilean taxes such as First Category Tax, Unique Second Category Tax, Global Complementary Tax, or Additional Tax, as applicable, under the rules provided by the law.
The fundamental assumption of the foreign tax credit system is worldwide taxation under Article 3 of the LIR, which establishes that, unless otherwise provided, all persons domiciled or resident in Chile are subject to tax on income from all sources, whether within the country or abroad. Accordingly, double international taxation may arise if income taxed abroad is also taxable in Chile under Article 3.
For purposes of claiming the foreign tax credit, such income must be subject to double taxation. When calculating the credit for taxes paid abroad, under No. 3 of Article 41 A of the LIR, among other requirements, the determination of net income subject to tax in Chile must be performed, and the law contemplates both an individual and a global limit. These limits must correspond to a positive result abroad; otherwise, a negative credit would result.
Therefore, the original ruling that is the subject of reconsideration is based on current guidance. Consequently, given the purpose of Article 41 A — to avoid or mitigate international double taxation — there is no right to a foreign tax credit when the net foreign‑source income is zero or results in a tax loss. Likewise, no refund of taxes paid abroad is permitted solely because the foreign tax credit could not be applied.
