Chile Tax Agency Clarifies Tax Treatment of Pension Fund Withdrawals by Nonresidents

The Chilean Internal Revenue Service March 21 issued Letter No. 898, clarifying the tax treatment of pension fund withdrawals by nonresidents. A nonresident taxpayer accumulated pension savings for 28 years with a pension fund administrator (AFP) in Chile. The taxpayer sought to clarify the tax consequences of withdrawing his pension savings from the Chilean AFP upon returning to his country of origin. The Tax Agency clarified that: 1) nonresidents’ withdrawals of pension savings from AFPs are taxable under the single second category tax (IUSC); and 2) AFPs must withhold IUSC when nonresident taxpayers seek to withdraw their funds. [Chile, Internal ...