Chile Tax Agency Clarifies Exceptions to Thin Capitalization Rules on Cross-Border Loans, Excessive Indebtedness

The Chilean Internal Revenue Service Aug. 14 issued Letter No. 1609, clarifying exceptions from the thin capitalization rules on cross-border loan arrangements and excessive indebtedness under the Income Tax Law. The taxpayer, a financial company, sought clarification of eligibility for the exception to the control rule. The Tax Agency clarified that: 1) the debtor domiciled, resident, constituted, or established in Chile, must be an entity the Ministry of Finance classifies as being solely engaged in financial activity; 2) for at least 330 total days determined at the end of each business year, at least 90 percent of the debtor’s total ...