Our team of professionals has extensive experience in providing highly qualified services in international taxation, which distinguishes us to advise our clients in their cross-border operations.
What does international taxation imply?
The opening of the markets and the insertion of Chile in this business logic has pushed the dynamism of the national economy. At the same time, local and international regulations have been adapted to the new business models in order to regularize and, of course, protect the interests of the countries both for the businesses that occur within their borders and outside them.
It is increasingly common for Chile to receive foreign investors from Latin America, North America and Europe as well as for companies with residence in Chile to do business outside the national borders. It is here where it is very important to be clear about international taxation and how to take advantage of all the tax benefits that exist so that the business is truly a profitable one.
Why does international tax matter?
Global companies require global tax planning. It is not enough for a multinational company to adapt separately to each of its local operating environments. Consider local, regional and national factors and to prosper a successful multinational company needs to adapt to all its environments. Tax is one of the most important variables because it helps determine what type of corporate structure is appropriate, where intellectual property should be located and how global supply chains should be configured to help mitigate global effective tax rates.
Basic principles of international taxation
There are two basic principles. These are the principle of residence (defended by the rich countries of the world or capital exporters) and the principle of source (defended by developing or capital importing countries). Both are negotiated in the agreements to avoid double taxation:
- Residence principle .- It states that “income tax must be paid in the country where the companies operate, where they have been incorporated or where they reside”, the specialist points out. In addition, companies located in a territory receive the services of the State: internal security, legal security, among others.
- Source principle .-“Organizations that do not reside in a certain territory must pay income tax in that country. This occurs in the specific case that their wealth is generated in the same place where they operate”.
On the other hand, we can mention some basic principles with which the State and companies must be consistent. This is in order to improve international business or operations in markets in different parts of the world. Among the main ones are:
- Equity among governments .-States have an ethical and fair management regarding the distribution of the tax. The objective is that most of it remains in the country where the income is generated.
- The principle of neutrality.-Taxation does not have to function as an absolute criterion for the company or investor when defining where they will finally invest. States must promote investments that bring positive results for their territories and not hinder them. On the other hand, there should be no favors or differences for one or another organization.
- Mechanisms for preventing tax evasion .- This is one of the most important, as it dictates the specific rules to avoid the use of legal loopholes used by some companies to avoid taxes. There are rules and measures for governments and regulatory institutions to work together.
- Promotion of mutually beneficial trade relations.- A country’s policies, norms, practices and communication models must be oriented to favor investment. Above all, that which is capable of creating jobs, infrastructure and generating development.
Finally, it is worth mentioning that the principles of international taxation can change, although not constantly, and adapt to new government or business trends. Countries adjust their rules to help companies invest fairly and profitably, but without neglecting local development.