Double Taxation Deal Improves Ease of Doing Business in Chile and India

On November 27, India’s Union Cabinet passed a Double Taxation Avoidance Agreement (DTAA) with Chile. This agreement removes the issue of people living in either country being taxed twice on any incomes they earn in the partner country. This is helpful for expatriate taxpayers and international business owners, who can enjoy an improved ease of doing business in Chile and India.

Chile and India share close economic relations, and this is another step in the direction of strengthening the bilateral connection between two regional powers. We explore the details of the double taxation agreement, and potential for international commercial activity in Chile and India as a result.

Tax relief for people doing business in Chile and India

Chile and India have been negotiating a double taxation pact for some time now. The Indian government had expected to sign this deal in 2014. It’s unclear in public records as to why this didn’t go ahead.

The DTAA signed in 2019 now provides relief to those living and working across the two countries, which is a confidence booster for business in Chile and India. Living and commercial operational costs can now be reduced, offering a viable destination for people and businesses to operate.

This DTAA adheres to minimum requirements and standards of the G-20 OECD Base Erosion Profit Shifting (BEPS) project. This means that the DTAA between India and Chile will not protect those using tax evasion methods or exploiting loopholes in local and foreign tax regulations.

In an official statement from the Indian Union Cabinet, chaired by Prime Minister Narendra Modi, the DTAA was heralded as a mechanism to instil “clear allocation of taxing rights between contracting states.” This will provide greater “tax certainty to investors and businesses of both countries while augmenting the flow of investment through fixing of tax rates in source state on interest, royalties and fees for technical services.”

What does this mean for me?

As an employee working abroad in either India or Chile, you will only get taxed on your income by the corresponding government.

As a business owner, you won’t be taxed twice on income generated from abroad in Chile or India.

Connectivity and mutual cooperation

Chile and India share a longstanding, mutually beneficial bilateral relationship. Chile was the first South American nation to sign a trade agreement with India, which dates back to 1956. In 2005, the two countries moved to enhance their relationship by signing and implementing a Preferential Trade Agreement (PTA). The PTA provided preferential access for Chilean and Indian exports.

During 2008-09, the countries made an aggressive push to expand mutual cooperation. Their respective governments signed a number of Memoranda of Understanding (MoUs) and other agreements for greater cooperation in the following areas:

• Science and technology
• Sports
• Air Services
• Antarctica
• Agriculture
• New and renewable energy
• Exploration and utilization of outer space for peaceful purposes
• Sanitary and phytosanitary matters
• Geology and mineral resources
• Education.

Increasing opportunities to do business in Chile and India

Both India and Chile are gateway hubs for businesses wishing to access the Asian and Latin American markets. They’re considered key regional players who play a prominent role in the economic development of their respective region. Additionally, India and Chile both hold prominent positions in regional trade blocs and fora. This includes the BRICS (Brazil, Russia, India, China and South Africa) and Pacific Alliance trade blocs.

Chile is also a signatory to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which is set to open many doors for Chilean traders among the 10 other members across the Asia-Pacific.

India’s myriad agreements with regional partners (including with ASEAN), and further abroad make it the perfect facilitator of international trade to and from its borders. The active country boasts 42 trade agreements in total.

Characteristics of India-Chile international trade

Chile and India have a diverse bilateral trade portfolio. The two countries exchange a range of goods, including:

Main Indian imports from Chile

Iodine

Copper ore, anodes and cathodes

Molybdenum ores and concentrates

Lithium carbonates and oxide

Scrap metals

Fruit and nuts

Fertilizer and machinery

Inorganic chemicals

Pulp and waste paper

Main Chilean imports from India

Metals

Textiles

Transport equipment

Tyres

Drugs and pharmaceuticals

Yarn

Agrochemicals

Plastic products

Leather

As a result of this level of engagement, Chilean and Indian brands hold high value in their partner country. The collective population of these two nations sits around 1.5 billion, making for a large consumer market shared by these booming economies.

What does the future hold?

The future for these two regional powerhouses looks bright. India and Chile are both actively seeking diversified trade relations, and their influence and business-savvy governments make these countries ideal springboards for businesses into their wider regions.

Though starting a business in Chile or India means navigating somewhat complex bureaucratic measures, investors and entrepreneurs are nevertheless enticed by a number of cooperation agreements and preferential deals between the two countries. Import and export activity in Chile and India is supported by these bilateral frameworks and high demand for varied goods.

Work with Biz Latin Hub to do business in Chile

If you’re looking to invest in Chile’s dynamic business environment, you’ll need to seek guidance from local legal and accounting experts on company formation, and accounting and taxation procedures. Making sure you’re compliant every step of the way secures your investment, and protects your business from complications with local authorities.

At Biz Latin Hub, our team of local and expatriate professionals provide high quality, highly responsive services to facilitate foreign business and investment in Chile. Our range of customizable market entry and back-office services make us a market leader for enabling new businesses to begin commercial operations in the region.

Get in touch with our local team today here at Biz Latin Hub and find out how we can personalize our services to your business needs.

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