Chile’s tax authority issued Ruling No. 578/2026 on March 6, 2026, confirming that payments from Chilean distributors to U.S. software providers are not subject to Chilean withholding tax (WHT), consistent with prior guidance. This treatment applies regardless of where the end customer is located.
These payments are generally characterized as business profits rather than royalties, yet the value added tax (VAT) exemption does not generally apply. Note, however, that onward distribution to nonresident customers may qualify as an export of services and allow for VAT credits.
U.S. Income Tax Implications
U.S. residents should exercise caution and consider the application of articles 7 (Business Profits) and 12 (Royalties) of the Chile-U.S. tax treaty. If the payments are characterized as royalties under other relevant tax treaties, Chilean WHT may apply.
