The SII (Servicio de Impuestos Internos – Internal Revenue Service) provides the modification of the Voluntary Registration of foreign and international financial institutions, form, and registration procedure to withhold interest under the Income Tax Law.
Primarily, the SII finds the need to provide certainty to taxpayers who must withhold the tax established in Article 59, fourth paragraph N°1, letter b) of the LIR (Ley sobre Impuesto a la Renta – Income Tax Law) for the interest they pay on account, make available or pay abroad to foreign or international financial institutions (hereinafter also “financial institutions”).
Secondly, the convenience of establishing an online procedure to verify the lending institution meets the requirements to qualify as a foreign or international financial institution.
Thirdly, Law No. 21,210 amended the aforementioned article to avoid the credit granted is delivered through any type of agreement structured in such a way the foreign or international banking or financial institution receiving the interest transfers it to another person or entity that is domiciled or resident abroad, and that would not be entitled to the reduced rate if it had received the interest directly from the debtor.
Finally, the aforementioned Law states that the SII will establish through resolution a voluntary registration of foreign or international financial institutions, in addition to establishing the concepts of a financial institution, and the respective registration procedure to the bank or financial institution verify compliance with these requirements if needed.
2. Registration Requirements
The institutions that copulatively comply with the following requirements may access to a special registration to be kept for these purposes by the Internal Revenue Service, called hereinafter RVIFEI (“Registro Voluntario de Instituciones Financieras Extranjeras o Internacionales” – “Voluntary Registry of Foreign or International Financial Institutions”) or Registry, indistinctly:
- Being domiciled, resident, or incorporated abroad.
- Having as main target the granting of credit, financing, or other operations for such purposes.
- The majority of its income comes from the main target mentioned in the preceding paragraph.
- Performing the financing operations regularly.
- Having a paid-in capital and reserves equal to or greater than half of the minimum required for the incorporation of foreign banks in Chile by the General Banking Law, contained in Decree with the force of law No. 3 of 1997, of the Ministry of Finance.
For this purpose, they must file the corresponding request through a duly accredited proxy with sufficient power of attorney to carry out the procedures related to this Registry, RUT (Registro Único Tributario – Single Tax Registration), and password to access the processing of administrative petitions through the Service’s website, SII.
3. Form No. 3700 – “Registration Request in the Voluntary Registry of Foreign and International Financial Institutions or Update of Information”
The aforementioned request must be submitted through Form No. 3700 through the attorney-in-fact, after being authenticated with RUT and Password, and completing the background of such request.
For instructions on how to fill out the form, please access the SII website.
It should be noted that the Service will certify the receipt of all the necessary background information for its resolution by means of the “request admitted” status registered in the administrative request system.
The maximum term to resolve the registration request is 2 months counted from the pertinent certification. Requests for updates will be resolved within 1 month.
First, the registered foreign financial institutions keeping the conditions defined in article 59, fourth paragraph N°1 letter b) of the LIR, may update or renew their registration annually, filing form N°3700 until May 31 of the year its validity expires, having only to prove the representation of the attorney-in-fact of the institution requesting the update.
Second, registration will be applied regarding taxpayers not domiciled or resident or incorporated in the country, for credits contracted as from the effective date of Law No. 21,210, as well as those contracted prior to that date, being the obligations arising from these credits novated, assigned, or the amount of the credit or the interest rate is modified after the date indicated.
If payments are made, credited, or available to taxpayers who have not voluntarily inscribed in the registry, the reduced withholding rate of 4% established in letter b) of number 1) of the fourth paragraph of Article 59 of the LIR will also be applicable, but it will be up to the payer of such interest, or the person who credited or made it available to prove the additional taxpayer is a financial institution complying with the requirements established by law.
For annexes and further details of this resolution click here.