S.I. No. 815/2005 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Chile) Order 2005

1. This Convention shall continue in effect indefinitely but either Contracting State may on or before the thirtieth day of June in any calendar year beginning after the year in which the Convention enters into force, give to the other Contracting State a notice of termination in writing through diplomatic channels.

2. The provisions of this Convention shall cease to have effect

a) in Chile,

in respect of taxes on income obtained and amounts paid, credited to an account, put at the disposal or accounted as an expense, on or after the first day of January in the calendar year next following that in which the notice is given; and

b) in Ireland,

(i) as respects income tax and capital gains tax, for any year of assessment beginning on or after the first day of January in the calendar year next following that in which the notice is given; and

(ii) as respects corporation tax, for any financial year beginning on or after the first day of January in the calendar year next following that in which the notice is given.

IN WITNESS WHEREOF the signatories, duly authorised to that effect, have signed this Convention.

DONE in duplicate at Dublin, this 2nd day of June 2005,

in the English and Spanish languages, both texts being equally authentic.

FOR THE GOVERNMENT OF IRELAND

FOR THE GOVERNMENT OF THE REPUBLIC OF CHILE

Frank M. Daly

Juan Toro Rivera

PROTOCOL TO THE CONVENTION BETWEEN IRELAND AND THE REPUBLIC OF CHILE FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS

On signing the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between the Government of Ireland and the Government of the Republic of Chile, the signatories have agreed that the following provisions shall form an integral part of the Convention.

In general

Either Government may at any time request consultations, to be conducted by the competent authorities in an expeditious manner on matters relating to the terms, operation and application of the Convention which it considers require urgent resolution.

It is agreed that if, after the date on which the Convention enters into force, either Contracting State introduces a tax on capital under its domestic law, the Contracting States will enter into negotiations with a view to concluding a Protocol to amend the Convention by extending its scope to include any tax on capital so introduced. The terms of any such Protocol shall have regard to any arrangements between either Contracting State and a third state for the relief of double taxation on capital.

With reference to paragraph 1 of Article 3

It is agreed that the term “enterprise” applies to the carrying on of any business and that the term “business” includes the performance of professional services and of other activities of an independent character.

With reference to Article 5

A person carrying on activities in a Contracting State in connection with the exploration or exploitation of natural resources situated in that Contracting State (including offshore activities) shall be deemed to be carrying on a business through a permanent establishment in that Contracting State.

With reference to paragraph 3 of Article 5

For the purposes of preventing misuse of Articles 5 and 7, in determining the duration of activities under this paragraph, the period during which activities are carried on in a Contracting State by an enterprise associated with another enterprise (other than enterprises of that Contracting State) may be aggregated with the period during which activities are carried on by the enterprise with which it is associated if the first-mentioned activities are connected with the activities carried on in that State by the last-mentioned enterprise provided that any period during which two or more associated enterprises are carrying on concurrent activities is counted only once. An enterprise shall be deemed to be associated with another enterprise if one is controlled directly or indirectly by the other, or if both are controlled directly or indirectly by a third person or persons.

With reference to paragraph 3 of Article 7

Without prejudice to paragraph 2 of Article 22, it is understood that the provisions of paragraph 3 of Article 7 shall apply only if the expenses can be attributed to the permanent establishment in accordance with the provisions of the tax legislation of the Contracting State in which the permanent establishment is situated.

With reference to paragraph 2 of Article 10 and paragraph 7 of Article 26

In relation to the application of the Additional Tax under the laws of Chile, it is agreed that if the First Category Tax should cease to be fully creditable in computing the amount of Additional Tax to be paid, the Contracting States shall consult with each other with a view to amending the Convention to re-establish the balance of benefits under the Convention.

With reference to Articles 10, 11 and 12

A trustee subject to tax in a Contracting State in respect of dividends, interest or royalties shall be deemed to be the beneficial owner of those dividends, that interest or those royalties.

With reference to Article 12

It is understood that payments received in connection with the granting of rights in relation to the copyright of a non-customised software programme (for example, so called ‘shrink-wrapped’ software) that are limited to those that are necessary to enable the user to operate the programme shall be treated as business profits covered by Article 7.

With reference to paragraph 2 of Article 11 and paragraph 2 of Article 12

It is agreed that if any agreement or convention between Chile and a member state of the Organisation for Economic Co-operation and Development entering into force after the date of entry into force of the Convention provides that Chile shall exempt from tax interest or royalties (either generally or in respect of specific categories of interest or royalties) arising in Chile, or limit the tax charged in Chile on such interest or royalties (either generally or in respect of specific categories of interest or royalties) to a rate lower than that provided for in paragraph 2 of Article 11 or paragraph 2 of Article 12, such exemption or lower rate shall automatically apply to interest or royalties (either generally or in respect of those specific categories of interest or royalties) arising in Chile and beneficially owned by a resident of Ireland and interest or royalties arising in Ireland and beneficially owned by a resident of Chile under the same conditions as if such exemption or lower rate had been specified in those paragraphs. The competent authority of Chile shall inform the competent authority of Ireland without delay that the conditions for the application of this paragraph have been met.

With reference Article 13

For the purposes of this Article

(i) the National Pensions Reserve Fund of Ireland is a pension fund; and

(ii) pension funds created under the social security legislation of Chile are pension funds.

With reference to paragraph 1 of Article 16

It is understood that the income referred to in paragraph 1 of Article 16 shall include any income derived from any personal activity exercised in the other State related with that person's renown as an artiste or sportsman.

With reference to paragraph 1 of Article 17

It is understood that the term “pensions” includes any payments made to a scheme member or beneficiary in accordance with the rules of a scheme that is recognised for tax purposes as a pension scheme by the Contracting State in which the payments arise.

IN WITNESS WHEREOF the signatories, duly authorised to that effect, have signed this Protocol.

DONE in duplicate at Dublin, this 2nd day of June 2005,

in the English and Spanish languages, both texts being equally authentic.

FOR THE GOVERNMENT OF IRELAND

FOR THE GOVERNMENT OF THE REPUBLIC OF CHILE

Frank M. Daly

Juan Toro Rivera

Given under the Official Seal of the Government, this 13

th

day of December, 2005.

BERTIE AHERN,

Taoiseach.

EXPLANATORY NOTE.

(This note is not part of the Instrument and does not purport to be a legal interpretation.)

This Order gives the force of law to the Convention between Ireland and Chile for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, which is set out in the Schedule to the Order. The effect of the Convention is summarised below.

This Convention with Chile, which was signed in Dublin on 2 June 2005, is comprehensive in scope and is based on the OECD Model Double Taxation Convention.

The taxes covered by the Convention are, for Ireland, Income Tax, Corporation Tax and Capital Gains Tax; for Chile, the taxes imposed under the Income Tax Act.

The Convention provides for the allocation of taxing rights between Ireland and Chile and for the granting of relief from double taxation with regard to items of income and capital gains which, under the laws of Ireland and the laws of Chile, may under the terms of the Convention be taxed in both countries.

Where both countries continue to have taxing rights, for example in the case of dividend interest and royalty income, business profits arising through a permanent establishment which a person resident in one country has in the other country, or in the case of capital gains arising from the disposal of immovable property or shares linked with immovable property the Convention provides that the country of residence of the recipient of the income or gains will give credit against its tax on the income or gains for the tax paid in the other country on the same income or gains. Irish direct investors (i.e. Irish companies holding 10% or more of the shares of the paying company) in receipt of dividends from a Chilean company are granted credit for the tax paid by the Chilean company on the profits out of which the dividends are paid (known as credit for underlying tax).

Reduced rates of withholding tax are provided for in the case of dividend, interest and royalty income. With respect to dividend income, the Convention provides for a reduced rate of 5% of the gross dividend where the recipient is a company that owns 20% of the company paying the dividends; and 15% otherwise. However Chile retains the right to charge the Additional Tax without limitation, provided that credit is given against it for the First Category Tax. Source country taxation of interest is limited to 5% of the gross payment in the case of interest payments on loans granted by a bank or insurance company, on bonds or securities regularly traded on a recognised stock market or on a sale on credit paid by a purchaser of machinery; otherwise, the rate is limited to 10%. In the case of royalties the rate may not exceed 5% for the use of or the right to use any industrial, commercial or scientific equipment; a rate of 10% applies in all other cases.

The Convention also provides for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities of the two countries for the purpose of resolving any doubts or difficulties arising as to the interpretation or application of the Convention and for the exchange of such information between these authorities as is necessary for carrying out the provisions of the Convention or of the domestic law of either country in relation to the taxes covered by the Convention.

The Convention will enter into force when each country notifies the other of the completion of its procedures for bringing the Convention into force. It will thereupon have effect in both countries for tax periods beginning in the following year.

3. Where, under any provision of this Convention, income or gains is or are wholly or partly relieved from tax in a Contracting State and, under the laws in force in the other Contracting State, an individual, in respect of the said income or gains, is subject to tax by reference to the amount thereof which is remitted to or received in that other State, and not by reference to the full amount thereof, then the relief to be allowed under this Convention in the first-mentioned State shall apply only to so much of the income or gains as is remitted to or received in that other State.

4. With respect to pooled investment accounts or funds (as for instance the existing Foreign Capital Investment Fund, Law N°18.657), that are subject to a remittance tax and are required to be administered by a resident in Chile, the provisions of this Convention shall not be interpreted to restrict imposition by Chile of the tax on remittances from such accounts or funds in respect of investment in assets situated in Chile.

5. Nothing in this Convention shall affect the application of the existing provisions of the Chilean legislation DL 600 (Foreign Investment Statute) as they are in force at the time of signature of this Convention and as they may be amended from time to time without changing the general principle thereof.

6. Contributions paid in respect of employment or self-employment by, or on behalf of, an individual who is a resident of a Contracting State, or who is temporarily present in that State to a pension plan that is recognised for tax purposes in the other Contracting State shall be treated for tax purposes in the first-mentioned State in the same way and subject to the same conditions and limitations as contributions paid to a pension plan that is recognised for tax purposes in that first-mentioned State, to the extent that they are not so treated by the other State, if

a) such individual was contributing on a regular basis to the pension plan for a period ending immediately before that individual became a resident of or temporarily present in the first-mentioned State; and

b) payments made to the scheme by the individual's employer would not be deemed in the other State to be taxable income of the individual; and

c) the competent authority of the first-mentioned State agrees that the pension plan generally corresponds to a pension plan recognised for tax purposes by that State.

7. Nothing in this Convention shall affect the taxation in Chile of a resident in Ireland in respect of profits attributable to a permanent establishment situated in Chile, under both the First Category Tax and the Additional Tax, but only as long as the First Category Tax is deductible in computing the Additional Tax.

CHAPTER VI

FINAL PROVISIONS

Article 27

ENTRY INTO FORCE

8. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

CHAPTER III

TAXATION OF INCOME

Article 6

INCOME FROM IMMOVABLE PROPERTY

STATUTORY INSTRUMENTS

S.I. No. 815 of 2005

Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Chile) Order 2005

WHEREAS it is enacted by sections 826(1) and 828 of the

Taxes Consolidation Act 1997

(No. 39 of 1997) that if the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax in respect of income and chargeable gains and any taxes of a similar character imposed by the laws of the State or by the laws of that territory, and that it is expedient that those arrangements should have the force of law, then subject to section 826 of that Act, the arrangements shall notwithstanding anything in any enactment, have the force of law

AND WHEREAS it is further enacted by section 826(6) of the

Taxes Consolidation Act 1997

that where such an order is proposed to be made, a draft of the order shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann

AND WHEREAS a draft of the following Order has been laid before Dáil Éireann and a resolution approving of the draft has been passed by Dáil Éireann

NOW, the Government, in exercise of the powers conferred on them by sections 826(1) and 828 of the

Taxes Consolidation Act 1997

(No. 39 of 1997) hereby order as follows