France-Chile tax treaty: rates have decreased since 2004, the MLI (Minimum Taxpayer Identification Number) has been in effect since 2021

The convention between France and Chile was signed in Paris on June 7, 2004. It covers income and wealth taxes, but not inheritance taxes. Its original text has undergone two changes: the multilateral convention (MLI), which took effect in 2021 and 2022, and a most-favored-nation clause, which lowered withholding taxes on interest and royalties. A consolidated text from the tax authorities incorporates both. The current rates are 4, 5, or 10 for interest, 2 or 10 for royalties, and 15 for dividends.

From the 2004 text to the consolidated text: three dates

The convention entered into force on July 10, 2006 (Law of May 29, 2006, Decree of September 1, 2006). The administrative list of conventions (BOI-ANNX-000306, version of April 29, 2026) classifies it as follows: signed on June 7, 2004, published in the Official Journal on September 3, 2006, taxes covered "IR" and "IF". No column for inheritance or gift tax.

The list of conventions amended by the MLI (BOI-ANNX-000511, same date) gives the following for Chile:

Note 13 of the consolidated text specifies, for other taxes, September 1, 2021 for France and January 1, 2022 for Chile. The consolidated text, which serves as a reading aid, incorporates the MLI and the most-favored-nation clause. It includes a preamble and a clause on the right to benefits: a benefit is not granted in respect of an item of income or capital if one of the principal objects of an arrangement was to obtain it, unless the granting is consistent with the object and purpose of the convention.

Maximum deductions and key rules

Interest rates: from 5 % and 15 % to 4 %, 5 % and 10 %

The 2004 text capped interest rates at 5% for certain loans granted by banks and insurance companies, regularly traded listed securities, and certain credit sales of equipment, and at 15% in all other cases. The most-favored-nation clause (point 6 of the protocol) came into effect after the 2016 agreement between Chile and Japan. According to the French Official Tax Bulletin (BOFiP) and the consolidated text, current rates are 4% for banks, insurers, and certain lending companies; 5% for interest on listed bonds; and 10% in all other cases, the latter rate applying to interest paid from January 1, 2019. The consolidated text dates the application of the rates resulting from the clause to December 28, 2016.

A lender who does not fall into any of the categories at 4 % or 5 % falls under "other cases": 10 % since 2019, instead of 15 % in the 2004 text. The detailed conditions of the category at 4 % can be found in the text.

Chilean interests: a numerical example (fictitious profile)

Situation. Claire, a fictitious French resident, holds a loan from a Chilean company, which pays her €12,000 in interest annually, and listed bonds from another Chilean company, which pay her €8,000 in interest annually. She is neither a bank nor an insurer, and it is assumed that her loan does not fall into either category 4 % or 5 %.

Issue. She wants to compare the maximum tax that Chile can collect at source according to the 2004 text and according to the consolidated text.

Strategy. It applies to each flow the ceiling of its category in both texts.

Result. According to the 2004 text, the loan is valued at 15 % (€1,800) and the bonds at 5 % (€400), totaling €2,200. According to the consolidated text, the loan is valued at 10 % (€1,200) and the bonds at 5 % (€400), totaling €1,600. The difference is €600. These amounts are conventional ceilings, not the actual Chilean tax levied, the domestic law of which has not been reviewed.

Royalties: 2 % for the equipment, 10 % for the rest

The 2004 text stipulated 5 % for the use of industrial, commercial or scientific equipment and 10 % in other cases. After the most-favored-nation clause, the consolidated text provides 2 % for royalties for the use of industrial, commercial or scientific equipment (Article 12 § 2 a)) and 10 % in all other cases (b).

Dividends: 15 %

Article 10 § 2 caps the tax of the State of the distributing company at 15 % of the gross if the beneficial owner is a resident of the other State.

Capital gains: a threshold of 20 % over twelve months and a ceiling of 16 %

Article 13 is the most distinctive part of the convention.

• Buildings are taxable in the State where they are located (§ 1).
• Capital gains on shares are taxable in the other State if the transferor held at least 20 % of the capital of the company at any time during the twelve months preceding the transfer (§ 2 a)), or if, at any time during the 365 days preceding the transfer, more than 50 % of the value of the securities is derived directly or indirectly from real estate situated in that State (§ 2 b), text amended by the MLI).
• Other capital gains from securities of a company resident in the other state are also taxable there, but the tax cannot exceed 16% of the amount of the gains. Pension fund gains are taxable only in the state of residence of the fund.
• Ships and aircraft in international traffic are taxable only in the State of residence of the transferor (§ 4).
• All other gains "are taxable only in the Contracting State of which the transferor is a resident" (§ 5).

Employees: 183 days over "any twelve-month period"«

Article 14 concerns wages; Article 15 deals with attendance fees. The exception in Article 14, paragraph 2, applies if three conditions are met: the stay in the other State does not exceed 183 days in total during any twelve-month period; the employer is not a resident of the other State; and the expense is not borne by a permanent establishment of the employer in that State. The window is sliding, not the calendar year. Our page on the 183-day rule details the method.

Pensions: the country of origin imposes

According to Article 17, pensions originating in one State and paid to a resident of the other "are taxable in the first State," that is, the State from which they originate. The text does not use the word "only." In French law, Article 17 is not included in the list in paragraph 22(1)(a): pensions fall under case (i) described below. Social security and civil service pensions are not addressed here.

Other income and wealth

Elements of income not treated elsewhere are taxable only in the State of residence (Article 20 § 1), subject to paragraphs 2 and 3. For capital, real estate is taxable where it is located, ships and aircraft in the State of the operator, and all other elements only in the State of residence (Article 21).

Who is a resident?

A resident is a person liable to tax in the State by reason of their domicile, residence, place of management, or a similar criterion, excluding persons taxed only on locally sourced income (Article 4, paragraph 1). For an individual resident in both States, paragraph 2 applies, in order, permanent home, center of vital interests, habitual abode, nationality, and then mutual agreement of the authorities.

Eliminating double taxation: a tax credit on the French side

From the French perspective, income taxable in Chile is included in the French tax base. Chilean tax is not deductible, but France grants a tax credit (Article 22 § 1 a)). The text distinguishes between two cases. Case i): for income not mentioned in ii), the credit is equal to the French tax corresponding to this income, provided that the beneficiary is subject to Chilean tax (exact wording to be found in the text); pensions under Article 17 fall under this case. Case ii): for income referred to in Articles 10, 11, 12, 13 §§ 1 and 2, 14 § 3, 15, 16, and 20, the credit is equal to the tax paid in Chile. From the Chilean perspective, a resident of Chile can offset the tax paid in France against the Chilean tax paid on this same income (§ 2). The specific rules regarding dividends are not detailed here.

Disputes and duration

The case of an incorrectly taxed taxpayer must be submitted "within three years of the first notification" (Article 24, paragraph 1). The authorities exchange the necessary information (Article 25, paragraph 1). The convention remains in force indefinitely; denunciation must be notified by June 30 inclusive of any calendar year beginning after a period of five calendar years (Article 29).

France-Chile Convention: What changes depending on your situation

• The exact category of interest: bank, listed bond or other case.
• Your share of the capital and the date of the transfer, for capital gains on securities.
• The nature of a property held directly or by a company.
• The count of your days over a rolling twelve-month period.
• The effects of MLI, including the entitlement to benefits clause.

An article is read in light of the facts in your case; no result is guaranteed.

What this page does not cover

Inheritance and gifts, application to the IFI, the Chilean tax itself, the rules of dividend credit, details of the conditions of category 4 % and back-to-back loans, articles 5, 7, 8, 9, 16, 18, 19, 26 and 27, and the protocol except for point 6.