Treasury Secretary Tim Geithner and Chilean Finance Minister Andrés Velasco signed a new income tax treaty between the United States and Chile to provide certainty and stability of tax treatment for U.S. and Chilean cross-border investors. 

If approved by the U.S. Senate, the treaty would be the first bilateral income tax treaty between the U.S. and Chile, and would be only the second U.S. tax treaty with a South American country.

“As the global economy emerges from a deep recession, governments should work to create the conditions for their private sectors to grow, led by private investment,” said Geithner. “This treaty will provide certainty to the tax treatment of U.S. and Chilean investors and reduce tax-related barriers so that the flow of cross-border investment between our two countries can grow.”

Provisions of the new tax treaty with Chile include reductions in source-country withholding taxes on certain cross-border payments of dividends, interest and royalties; rules to determine when an enterprise or an individual of one country is subject to tax on business activities in the other country; and rules to enhance the mobility of labor by coordinating the tax aspects of the U.S. and Chilean pension systems.

The new tax treaty also contains other significant provisions, including mechanisms through which the U.S. and Chilean tax authorities may collaborate to resolve tax disputes and relieve double taxation; provisions to ensure the full exchange between the U.S. and Chilean tax authorities of information for tax purposes; protections against discriminatory tax treatment; and provisions to ensure that only residents of the two countries enjoy the benefits of the treaty.

The U.S. also announced an updated tax treaty with Hungary on Thursday (see U.S. Signs Income tax Treaty with Hungary).

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