The Department of State refers the Embassy of Chile to the Convention and 

Protocol signed today between the Government ofthe United States of America 

and the Government ofthe 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 subparagraphf) of paragraph 1 of Article 3 (General 

Definitions), the terms "enterprise of a Contracting State" and "enterprise ofthe 

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 ofthe 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 ofthe 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 ofthe mutual agreement procedure. For 

guidance in developing such bilateral implementation, the competent authorities 

will refer to the Best Practices identified in the GECD 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 and 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.