ES
ENAnyone who spends more than 183 days in Chile within any 12-month period becomes a Chilean tax resident (art. 8 No. 8 of the Tax Code) and, once past the first 3 years, is taxed in Chile on worldwide income (art. 3 of the Income Tax Law, LIR). If the country where that income originates has no tax treaty with Chile, the same income can be taxed twice — but Chilean law offers a credit, not an exemption.
The problem: two countries, one income stream
Without a tax treaty, nothing stops Chile and the other country from each taxing the same income under their own rules. Chile addresses this unilaterally through a credit against Chilean tax for tax already paid abroad, set out in article 41 A of the LIR and detailed in SII Circular No. 31 of 2021.
How the article 41 A credit works
- It credits the income tax actually paid or withheld abroad on that same income.
- The credit has an individual cap (the lesser of the tax actually borne abroad and 35% of the gross income of each income type) and, where applicable, a global cap. As a general rule, any remaining foreign credit is not refunded or carried forward for income under article 42 Nos. 1 and 2 — distinct from any excess Chilean withholding tax (IUSC) paid, which has its own treatment.
- It must be substantiated with proof of foreign payment or withholding and meet the SII's documentation requirements.
- It applies to both employment and independent-work income, as well as other income types (dividends, interest), each with its own crediting rules within the same article.
SII Circular No. 31 of 2021 is the current instruction for auditing this credit, with the individual and global caps described above. Foreign tax is normally substantiated with the corresponding payment proof, return, or official certificate; the law also allows any other legal means of proof when those documents are unavailable.
Why being "paid abroad" is not enough on its own
Income being Chilean-source does not, by itself, rule out any article 41 A credit: the law includes specific categories — including certain income under article 42 Nos. 1 and 2 and Additional Tax cases on income that is Chilean-source in origin — where a credit can still apply. So if the activity is physically carried out in Chile (for example, a service delivered from Santiago even if payment lands in a foreign account), the right move is not to dismiss the credit outright, but to check the exact income category and whether it falls within one of those cases.
Related articles
- Start with the central guide to Chile's 183-day tax residency rule.
- Continue with a related article in this series.
Frequently asked questions
There is nothing to credit: Chile still taxes it as part of the resident's worldwide income, with no discount, because the article 41 A credit only applies to tax actually paid or withheld abroad.
Only up to the individual cap (the lesser of the tax actually borne abroad and 35% of the gross income of that type) and, where applicable, the global cap; the remainder is generally not refunded or carried forward for income under article 42 Nos. 1 and 2.
No. Article 41 A operates unilaterally, with or without a treaty in force with the country of origin of the income; a treaty, where one exists, adds its own allocation rules that can be more favorable.
Do you need an assessment of your situation?
Each case depends on the dates, income types, country of origin and any applicable treaty. Izquierdo Deramond Consultores prepares tax opinions for foreigners who work or settle in Chile.
- Book a meeting: calendly.com/izquierdoconsultores
- WhatsApp: +56 9 8892 5401
- Email: gregorio@consultoresid.cl
This article is for informational purposes only and does not constitute tax advice. Applying the credit depends on the facts of each case, available documentation, and the law in force at the time of the transaction. For an assessment of your situation, request a tax opinion with IDC.
OFFICIAL SOURCES CONSULTED
- Articles 3, 10 and 41 A of the Chilean Income Tax Law (BCN)
- SII Circular No. 31 of 2021.