On December 12, 2017 the Irish Tax and Customs released eBrief No. 114/17 in which it announces a revised (more favourable) treatment of interest and royalties under the Irish–Chilean DTA. The reason for this revised treatment is that with reference to paragraph 2 of Article 11 and paragraph 2 of Article 12 in the Protocol to this DTA it is arranged that hat, if subsequent to the entering into force of the DTA, Chile agrees better terms for interest or for royalties in a treaty with an OECD member, those better terms automatically apply to the Ireland-Chilean DTC, if the same conditions are met.

Revised tax treatment for Interest

With effect from January 1, 2017

Article 11, Paragraph 2 of the Irish-Chilean DTA provides for interest withholding tax rates of 5% and 15%. Effective from January 1, 2017, Article 11 and Protocol 6 of the Chilean-Japanese DTA provides that interest payments are subject to withholding tax at rates of 4% (if certain conditions are met) and 15% in other cases. As a result of the aforementioned paragraph of the Protocol to the Irish-Chilean DTA the 5% and 15% tax rates of Article 11, Paragraph 2 of the Irish-Chilean DTA will be replaced by a 4% rate where the same conditions apply as those specified in the Chilean-Japanese DTA.

With effect from January 1, 2019

A further change will apply from January 1, 2019, when the 15% withholding tax rate in the Chilean-Japanese DTA is reduced to 10%. The 15% rate in the Irish-Chilean DTA will automatically also reduce to 10% on January 1, 2019, in accordance with the provisions of the DTA.

Revised tax treatment for royalties with effect from 1 January 2017

Article 12, Paragraph 2 of the Irish-Chilean DTA provides for royalty withholding tax rates of rates of 5% (for the use of, or the right to use any industrial, commercial or scientific equipment) and 10% in other cases. Effective from January 1, 2017, Article 12, Paragraph 2 of the Chilean-Japanese DTA provides for withholding taxes on royalty payments of 2% for the use of, or the right to use, industrial, commercial or scientific equipment and 10% in other cases. As a result of the abovementioned paragraph of the Protocol of the Irish-Chilean DTA the 5% tax rate of Article 12, Paragraph 2 of the Irish-Chilean DTA in respect of payments for the use of, or the right to use, industrial, commercial or scientific equipment is replaced by a 2% rate from January 1, 2017.

For more information click here to be forwarded to eBrief No. 114/17 as available on the website of the Irish Tax and Customs.

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