International Remote Working: Implications of the New Chile-USA Double Taxation Treaty

With the recent enactment of the double taxation treaty between Chile and the United States, a new era opens for Chilean professionals opting for remote work from the U.S. This article explores the implications of this treaty, referencing the SII’s Official Document No. 2139 from August 3, 2023, regarding the Chile-Spain treaty, to illustrate how these regulations affect the taxation of remote work income for workers moving outside Chile while maintaining a contract with a Chilean employer.

1- The Impact of Double Taxation Treaties Double taxation treaties play a crucial role in eliminating or reducing international double taxation. Regarding the taxation of incomes earned from remote work by workers moving to a country with an active treaty with Chile, two articles need careful analysis: the «Article 4º Resident», setting the rules for determining a person’s tax residence, and the «Income from Dependent Work» article, usually Article 14º, defining in which country the income from dependent work should be taxed.

In «simple terms», Article 14 establishes that income from dependent work must be taxed in the employee’s country of residence unless the employee works in a different country. In such a case, both countries can tax. For example, if a Chilean resident employee is sent by their employer to work remotely from Spain, both Spain and Chile could levy taxes.

However, the article itself establishes certain exceptions to the rule, summarized as «you should only pay taxes» in the country where you work if:

• You stay in that country less than 183 days a year (e.g., if you are in Spain for less than 183 days).
• Your income is not paid by a company from that country (e.g., the salary is still paid by Chile).
• Your income is not part of the expenses of a company in that country (e.g., no Spanish company pays or supports this salary). If these exceptions are met, only Spain would be authorized to tax.

2- What the Internal Revenue Service Has Said (Official Document 2139 03/08/2023 Chile-Spain) Consistent with the above analysis, according to Official Document No. 2139, a Chilean worker residing in Spain, receiving income from a Chilean company, faces a specific tax scenario. If considered a resident in Spain for treaty purposes, they will only be taxed in Spain. Chile will not tax these incomes, except if part of the work is physically performed in Chile. This case illustrates an important general rule: when working remotely from a country with a double taxation treaty, you are likely to only be taxed in your country of residence. This avoids double taxation and simplifies your fiscal obligations.

3- Remote Working from the U.S. The activation of the double taxation treaty between Chile and the United States marks an important milestone. As with the Chile-Spain treaty, this agreement establishes clear rules for taxing the incomes of Chilean workers in the U.S., potentially simplifying and clarifying their fiscal obligations. For Chileans working remotely from the U.S. for Chilean companies or employers, the new treaty could mean that they will only need to pay taxes in the U.S., their country of residence. This represents a significant opportunity for those looking to explore cross-border telework without the complications of double taxation. This opportunity not only opens a range of new alternatives for talent attraction and professional development but will undoubtedly be highly valued by executives wishing to work remotely while maintaining their Chilean employer. However, this must be analyzed and accompanied by tax experts to ensure correct tax and payroll implementation. Are you considering teleworking from the U.S. or have questions about your fiscal obligations in this new scenario? Contact us for specialized advice and keep your fiscal responsibilities up to date in this exciting international context.

Rodrigo Herrera Ávila

Tax Director

rodrigoh@ptcompliance.cl

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