The Forestal Aurora Case: Insights from the First Case Application of the Chilean GAAR

This article examines the first application of Chile’s General Anti-Avoidance Rule (“GAAR”) in the Forestal Aurora case. The tax authority challenged a cross-border financing structure aimed at benefiting from a reduced 4% withholding tax rate on interests. The courts’ decisions mirror the EU GAAR’s subjective test under ATAD I, particularly regarding intent, artificiality and economic substance, revealing doctrinal inconsistencies in the application of Chile’s GAAR.