How the U.S. and Chile tax treaty affects your property in Chile

For years, Americans with property in Chile had no income tax treaty to rely on. That changed on December 19, 2023, when the treaty between the United States and Chile to avoid double taxation entered into force. It was reasonable to assume it would lower the Chilean tax on rent or on the sale of a property. For real estate, it mostly does not. What it does is set which country taxes first, give the U.S. a framework to credit the Chilean tax, and change the numbers in one specific situation: when the property is held through a Chilean company. This guide explains what the treaty means for a U.S. owner, whether the property is held personally or through a company.

Short answer: under the treaty, Chile keeps the full right to tax rent from Chilean real estate and the gain on its sale, with no cap, and the same applies to the sale of shares in a company whose value comes mostly from Chilean real estate. The U.S. then credits the Chilean tax under its own rules. Where the treaty does make a difference is with a Chilean company: a U.S. resident shareholder gets the full credit for the company's first category tax, without the partial repayment that applies to shareholders in countries without a treaty. The treaty does not cover Chile's inheritance and gift tax or the annual property tax.

The table summarizes the effect of the treaty in each situation; the sections below explain each one.

When the treaty applies

The treaty entered into force on December 19, 2023. Its rules on taxes withheld at source apply to amounts paid or credited from February 1, 2024, and its rules on other taxes apply to tax periods beginning on or after January 1, 2024. It covers residents of either country, which for practical purposes means people and companies that are taxed as residents in the U.S. or in Chile.

One point shapes everything else. The U.S. taxes its citizens on their worldwide income, wherever they live. For a U.S. owner, then, the question is rarely whether Chilean rent or a Chilean gain will be taxed in the U.S. It will. The real question is how much tax Chile collects first and how much of it the U.S. allows as a credit.

Rent from property you own personally

Article 6 of the treaty allows Chile to tax income from real estate located in Chile, with no limit. Chilean domestic law therefore applies in full. For an owner who does not live in Chile, rent is subject to the Additional Tax (impuesto adicional) at 35%. The tax is generally withheld by whoever pays the rent, and the owner also has an annual filing obligation in Chile.

The treaty's protocol adds an option that matters for rentals: a U.S. resident can elect to be taxed in Chile on rental income on a net basis, the way a business would be. Whether that election makes sense depends on the property's expenses and on how the rent is collected, so it is worth deciding before the first lease is signed, not after the first withholding. We cover the basics of rental income for foreign owners in our guide to property taxes for foreign owners, and withholding, VAT and short-term rentals in our guide to renting out property in Chile from abroad.

Selling property you own personally

Article 13 allows Chile to tax the gain on the sale of real estate located in Chile, again with no cap. Here, the Chilean rules for individuals are more favorable than many owners expect. The allowance under which the first 8,000 UF of lifetime gain on real estate is not taxed applies to individuals wherever they live, as long as its conditions are met, among them holding the property for more than a year and selling to an unrelated buyer.

What a non-resident does not have is the option to pay a flat 10% on the gain above that allowance, which is reserved for people domiciled or resident in Chile. The excess is taxed under the Additional Tax, and the buyer must withhold part of the payment: 10% of the price, or 35% of the gain when the gain can be determined. To avoid an excessive withholding, the seller can ask the SII beforehand to determine the gain. We explain how a sale works for someone living abroad in our guide to selling property in Chile as a non-resident.

Holding the property through a Chilean company

This is where the treaty changes the numbers. A Chilean company pays first category tax on its profits: 27% in 2026 under the general regime. Law 21,850, published on October 17, 2026, lowers that rate to 25.5% in 2027, 24% in 2028 and 23% from 2029. When the company distributes profits to a shareholder who lives abroad, the 35% Additional Tax applies, and the shareholder can credit against it the first category tax the company paid.

Under Chile's general regime, that credit is not always complete. Shareholders resident in countries without a tax treaty must give back part of it: 35% of the credit through 2026, 30% in 2027 and 20% in 2028, and nothing from 2029 under Law 21,850. Shareholders resident in a country with a treaty in force are exempt from that repayment, and since December 2023 that includes the United States. The practical result is that, for a U.S. resident shareholder, the total Chilean tax on profits that are distributed ends up at 35%: the first category tax paid by the company plus the difference paid on distribution.

Article 10 of the treaty sets lower caps on dividends, of 5% and 15%, but its protocol keeps Chile's Additional Tax in place as long as the first category tax remains fully creditable against it. That is why the treaty's main benefit for a U.S. shareholder of a Chilean company is the full credit, not a lower dividend rate.

Selling the company instead of the property

Some owners expect that selling the shares of the company, instead of the property itself, will keep the gain out of Chile. Under the treaty it does not. Article 13 allows Chile to tax, with no cap, the gain on shares of a company that derives more than 50% of its value from real estate located in Chile, which is exactly the case of a company formed to hold a property. For other shares, the treaty caps the Chilean tax at 16%, unless the seller held 50% or more of the company at some point in the twelve months before the sale.

If instead the company sells the property, the gain is part of its profits and pays first category tax, and the shareholders are taxed again when the proceeds are distributed to them. Unlike an individual, a company has no 8,000 UF allowance.

What happens on the U.S. side

Article 23 of the treaty provides that the U.S. will allow its residents and citizens a credit for the income tax paid to Chile, in accordance with U.S. law and its limitations. In other words, the treaty does not create a new credit; it confirms that the Chilean tax counts under the U.S. foreign tax credit rules. How much of it can actually be used each year depends on your overall U.S. tax situation, and owning shares of a foreign company may bring U.S. reporting obligations of its own. That side belongs with your U.S. tax adviser, and it is worth coordinating with them before you choose how to hold the property.

What the treaty does not change

• Inheritance and gift tax. The treaty covers taxes on income. Chile's inheritance and gift tax on Chilean property is not covered, and it can apply in addition to whatever applies in the U.S. We explain the Chilean side in our guide to handling a Chilean inheritance from the United States.
• The annual property tax. The contribuciones are not an income tax, so the treaty does not touch them.
• DFL 2 benefits. They remain available only to individuals and never to companies.
• The 10% rate on gains. It is still reserved for people domiciled or resident in Chile.
• Withholding on sales. A buyer paying a non-resident seller still has to withhold.

Personally or through a company, from the tax side

For a single property that you plan to keep and eventually sell, owning it personally usually leaves you better placed: you keep the 8,000 UF allowance, and a company adds a second layer of tax on distribution plus the cost of keeping it up to date every year. The treaty improves the company route by securing the full credit, but it does not make it cheaper than owning personally for a typical single property. A company makes sense for other reasons, such as several owners, several properties or estate planning, and when it does, the treaty makes it more predictable for a U.S. shareholder. We compare both routes in our guide to holding Chilean property personally or through a company, and explain how a company is formed in forming a company in Chile as a U.S. citizen.

Frequently asked questions

Does the treaty lower the Chilean tax on my rent?

Not directly. Chile keeps the right to tax rent from Chilean real estate with no cap. The treaty's protocol does allow a U.S. resident to elect to be taxed in Chile on a net basis, which can matter for a property with significant expenses.

If I live in the U.S. and sell my property in Chile, do I pay tax in Chile?

On the gain above the 8,000 UF lifetime allowance, yes, under the Additional Tax, and the buyer must withhold part of the price. The U.S. then credits the Chilean tax under its own rules.

Is a Chilean company better for a U.S. owner now that the treaty is in force?

It is better than it was, because a U.S. shareholder now gets the full credit for the company's tax. For a single property, though, owning it personally usually remains simpler and keeps the 8,000 UF allowance.

Does the treaty cover Chilean inheritance tax?

No. It covers income taxes only. Chilean property that passes to heirs remains subject to Chile's inheritance tax rules regardless of the treaty.

How we can help

At Terreno en Regla we help you decide whether to buy personally or through a company, we form and maintain the company, we can act as its representative in Chile, and we take care of the legal side of selling the property while you stay in the U.S. You can see how we work on our page for property holding companies and on our page for clients in the United States. Property tax does not change under the treaty; if you want it reviewed or the appraisal challenged, see our property tax service. And if the property came to you by inheritance, our inheritance team handles the probate and the registration.