Convention Norway - Chile

Convention between the Kingdom of Norway and the Republic of Chile for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital.

• Convention of 2001

Pursuant to the Most Favour Nation Clause in paragraph 4 of the Protocol to the Convention between Norway and Chile the withholding tax rate provisions of Article 11 (Interest) and 12 (Royalties) has been modified with effect as of 1 January 2017. Note that the rate in subparagraph c of paragraph 2 of Article 11 has been reduced to 10 per cent with effect as of 1 January 2019.

Following the amendments paragraph 2 of Article 11 shall read as follows:

“2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed:

(a) 4 per cent of the gross amount of the interest if the beneficial owner of the interest is either:

(i) a bank;

(ii) an insurance company;

(iii) an enterprise substantially deriving its gross income from the active and regular conduct of a lending or finance business involving transactions with unrelated persons, where the enterprise is unrelated to the payer of the interest. For the purposes of this clause, the term '7ending or finance business" includes the business of issuing letters of credit, providing guarantees or providing credit card services;

(iv) an enterprise that sold machinery or equipment, where the interest is paid with respect to indebtedness arising as part of the sale on credit of such machinery or equipment; or

(v) any other enterprise, provided that in the three taxable years preceding the taxable year in which the interest is paid, the enterprise derives more than 50 per cent of its liabilities from the issuance of bonds in the financial markets or from taking deposits at interest, and more than 50 per cent of the assets of the enterprise consist of debt-claims against unrelated persons;

(b) 5 per cent of the gross amount of the interest derived from bonds or securities that are regularly and substantially traded on a recognized securities market;

(c) 15 per cent* of the gross amount of the interest in all other cases.

For the purposes of subparagraph ( a), an enterprise is unrelated to a person if the enterprise does not have with the person a relationship described in subparagraph ( a) or (b) of paragraph 1 of Article 9.

Notwithstanding the provisions of subparagraph ( a), if interest referred to in that subparagraph is paid as part of an arrangement involving back-to-back loans or other arrangement that is economically equivalent and intended to have a similar effect to an arrangement involving back-to-back loans, such interest may be taxed in the Contracting State in which it arises, but the tax so charged shall not exceed 10 per cent of the gross amount of the interest in cases provided in subparagraphs (iii) and (v) of the aforementioned subparagraph; and it shall not exceed 5 per cent of the gross amount of the interest in cases provided in subparagraphs (i), (ii) and (iv) of the same subparagraph.

It is understood that the term "arrangement involving back-to-back loans" would cover, inter alia, any kind of arrangement structured in such a way that a financial institution which is a resident of a Contracting State receives interest arising in the

other Contracting State and the financial institution pays an equivalent interest to another person which, if the person received the interest directly from the other Contracting State, would not be entitled to limitation of tax under subparagraph ( a) with respect to that interest in that other Contracting State.”

Paragraph 2 of Article 12 shall read a as follows:

“2.  However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the beneficia} owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed:

1.   2 per cent of the gross amount of the royalties for the use of, or the right to use, industrial, commercial or scientific equipment;
2.   10 per cent of the gross amount of the royalties in all other cases.

* Note that the rate in subparagraph c of paragraph 2 of Article 11 has been reduced to 10 per cent with effect as of 1 January 2019.