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Consolidated returns are not accepted for tax purposes. Losses cannot be transferred between companies in a group except when they are effectively transferred by arm's-length bona fide intercompany transactions. In some cases, however, if an unprofitable entity absorbs a profitable entity, the former entity's accumulated losses may be set off against future profits.
All transfers of assets within a group of companies must be at arm's-length prices. If profits arise as a result, they are taxable in the normal way. The tax authorities have broad powers to adjust the prices of transactions, whether they involve goods or services, when these prices are evidently lower than fair market value considering the circumstances in which the transactions take place. The Chilean central bank and the customs authorities also have broad powers to revise the transfer prices of imports and exports.
The information in this article was correct as of 9 July 1996.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Anthony Cook, Deloitte & Touche, Santiago, Chile on Tel: +56 2 638 4186, Fax: +56 2 639 1522.
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