On December 3, 2025, the Chilean Internal Revenue Service (“SII”) issued Circular No. 65/2025, which provides instructions for applying the Most Favoured Nation (“MFN”) clause contained in certain Double Taxation Agreements (“DTAs”) concluded by Chile with Norway, Switzerland, Uruguay, New Zealand, and Belgium. This circular arises from the fact that the condition for applying the MFN clause was met with the entry into force of the treaties concluded with Japan, India, and Italy.
Chile has entered into DTAs with several countries that include the MFN clause, which establishes that, under certain conditions, if Chile agrees in a subsequent treaty with a third country to a lower withholding tax rate or exemption for certain categories of income, that lower rate or exemption applies automatically in earlier treaties that contain the MFN clause. In this circular, the SII provides instructions on how this rule should be applied to DTAs with Norway, Switzerland, Uruguay, New Zealand, and Belgium.
In accordance with Circular No. 65/2025, when the MFN clause is applicable to a treaty, the lower withholding tax rates or exemptions agreed in later treaties — such as those with Japan, India, and Italy — must be applied to the earlier treaties with the specified countries, as if those reduced rates or exemptions had been originally included in those earlier agreements. The circular also confirms that taxpayers may have the right to request refunds if higher withholding taxes were applied in prior periods due to the non‑application of the MFN clause, provided that all treaty conditions are met and valid documentation is provided.
The SII’s guidance aims to ensure a consistent and uniform interpretation of the MFN clause across applicable treaties and to provide greater certainty on how reduced rates under the MFN clause affect withholding tax obligations on interest, royalties, and other relevant categories of income. Taxpayers and withholding agents should consider this circular when determining applicable withholding tax rates under the relevant DTAs and when assessing any refund claims for amounts withheld in excess of the rates that should have applied under the MFN clause.
For advice, please contact:
Claudia Valdés Muñoz +56 9 8139 3599 cvaldes@bbsc.cl
