Chile–U.S. tax treaty and remote work: what remote professionals should review

The tax treaty between Chile and the United States opened a new stage for individuals and companies operating between both countries.

Its entry into force provides coordination rules that did not previously exist between Chile and the United States, and that are especially relevant for executives, professionals, investors and remote workers with ties to both countries.

In the context of remote work, the first point to review is tax residence. A person may work for a U.S. company, receive payments from the United States or maintain economic ties with that country, but if the person lives and physically works from Chile, Chilean tax obligations may arise.

The second question is where the income is generated. In the case of personal services, the place where the services are physically performed is often a key element in determining whether income may be considered Chilean-source or foreign-source income.

For that reason, it is not enough to look at where the employer is located or from which bank account the salary is paid. It also matters where the person actually works, how many days they spend in each country, who economically bears the cost of the compensation and whether there is a local structure or economic employer in Chile.

The Chile–U.S. tax treaty may help avoid or relieve double taxation, but it does not eliminate the need to analyze the facts of the case. Tax treaties do not replace domestic rules: they coordinate them and allocate taxing rights between countries.

In remote work cases, very different scenarios may arise.

A person who lives in Chile and works remotely for a U.S. company may become subject to Chilean tax on work physically performed from Chile. If the United States also applies withholding or tax for other reasons, it will be necessary to review whether the treaty provides relief from double taxation.

A person who lives in the United States and provides services to a Chilean company from outside Chile may have a different treatment, depending on whether the services are considered performed outside the country, whether there is physical presence in Chile and which rules apply to the payment.

There are also hybrid cases: professionals who spend part of the year in Chile and part in the United States, executives with frequent travel, workers with stock options, bonuses or deferred compensation, and individuals who maintain investments or financial ties in both countries.

In all these cases, the analysis should consider tax residence, days of presence, source of income, payroll, withholding, social security, benefits, tax treaties and possible foreign tax credits.

A frequent mistake is assuming that working “for a foreign company” automatically means the income is foreign-source income or does not need to be reported in Chile. Another mistake is assuming that the treaty eliminates all taxes by itself.

In practice, the treaty can be very useful, but it must be correctly applied and supported with proper documentation of the facts.

The conclusion is simple: international remote work does not eliminate local taxation. On the contrary, it makes it even more important to understand where the person lives, where the work is performed, who pays, who bears the cost and which country may tax the income.