News

/ Chile Tax Reform Enacted

October 19, 2026

Tax cuts cover capital gains, corporate tax, dividend withholding tax (via making the corporate tax fully creditable), capital repatriation, and new tax incentives, such as optional tax stability (rate lock-in) for major investments by both foreign and domestic investors.

Law No. 21.850 was published on Saturday, October 17, following the override of presidential vetoes and the ruling by the Constitutional Court, which partially upheld the challenges filed against the bill approved by Congress.

Notable measures include among other tax cuts, the elimination of capital gains tax on frequently traded shares, the gradual reduction of the corporate tax (First Category Income Tax) rate, said tax to be fully creditable against the dividend withholding tax, a new capital repatriation regime, incentives for the export of services, incentives relating to investments in real estate (DFL No. 2) and other temporary benefits, including an optional tax stability (rate lock-in) regime for major investors.

Except for the amendments to the tax stability regime described below, neither the presidential vetoes nor the Constitutional Court’s ruling affected the other tax measures detailed below; therefore, the content of the bill approved by Congress remains unchanged.

The following is a summary of some of the main tax provisions:

I. REDUCTION OF THE FIRST-CATEGORY TAX

The First-Category Tax (i.e. corporate tax) rate applicable to the general regime will be gradually reduced from the current 27% to 23%, through a phased implementation between fiscal years 2027 and 2029.
The reduction will be applied progressively, with rates of 5% for fiscal year 2027, 24% for fiscal year 2028, and 23% beginning in fiscal year 2029.

II. REINTEGRATION OF THE TAX SYSTEM

A system of integration between the First-Category Tax and the final taxes levied on business owners is gradually being reestablished.
For these purposes, the requirement to refund the First-Category Tax credit applicable to profits generated during the 2027 and 2028 fiscal years is progressively reduced, until it is eliminated for profits generated beginning with the 2029 fiscal year.
Consequently, the First-Category Tax credit may be fully offset against the Global Complementary Tax or the Additional Tax (i.e. withholding tax on non-resident investors), as applicable.

III. ELIMINATION OF THE TAX ON STOCK MARKET CAPITAL GAINS

The flat tax of 10% applicable to capital gains realized on the sale of frequently traded securities covered by Article 107 of the Income Tax Law is eliminated.

IV. REPATRIATION OF CAPITAL

A transitional regime is established allowing for the declaration of assets and income acquired before January 1, 2026, that were not previously reported to the tax authority.
The declaration may be filed within 12 months from the first day of the third month following the date of publication and will be subject to a flat tax of 10%.
This tax will be reduced to 7% if 80% or more of the declared assets or income are repatriated and invested in Chile for at least five years.
Failure to comply with the conditions for qualifying for the preferential rate will result in the application of a 20%

V. SUBSTITUTE TAX ON ACCUMULATED PROFITS

A voluntary regime is established that allows for the application of a one-time tax of 10% on the accumulated balances in the Reinvested Profits Fund (FUR), the Total Balance of Taxable Profits (STUT), and any excess withdrawals pending taxation.
This tax replaces the Global Complementary Tax or Additional Tax that would otherwise apply to these items.
The option must be exercised by filing a return and making payment within eight months from the date of the law’s publication.

VI. NEW TAX CREDITS

A tax credit equivalent to 15% of the wages paid by companies exporting knowledge-based services is introduced.
The credit will have an annual limit of 75 UTM per employee and may be increased by 5 percentage points for companies located outside the Metropolitan Region, subject to compliance with the requirements established by law.
Additionally, a new tax credit is introduced, governed by Article 33-quater of the Income Tax Law, of up to 150 UTM per worker, intended to encourage the hiring of individuals with catastrophic or rare diseases.

VII. TEMPORARY VAT EXEMPTION ON THE SALE OF NEW HOMES

A temporary VAT exemption is established, applicable to the first sale of new homes subject to said tax, provided that the requirements established by law are met.
The benefit will be effective for one year beginning on the first business day of the month following the month in which the law is published and will apply in the cases and under the conditions set forth in the transitional provisions.

VIII. AMENDMENTS TO THE REAL ESTATE (DFL No. 2) REGIME

An optional flat-rate tax regime of 5% is established on income derived from the rental of affordable housing covered by DFL No. 2, applicable starting with the third residential property owned by individuals, provided that such properties do not exceed 90 m² of gross floor area.
Furthermore, this regime shall apply to legal entities whose sole business activity is the transfer of the temporary use or enjoyment of affordable housing and to individuals who have assigned such housing to their sole proprietorship, subject to compliance with the requirements established by law.
The option must be exercised with the Internal Revenue Service and entails the obligation to remain in the regime for a minimum period of five consecutive tax years.

IX. TAX STABILITY FOR INVESTORS (TAX RATE LOCK-IN)

The text originally approved by the National Congress incorporated a new tax stability statute (Article 29) for domestic and foreign investors, applicable to investment projects equal to or exceeding US$50 million, through contracts entered into with the State. The term is set in tiers based on the amount invested: 10 years for investments ranging from US$50 million to less than US$100 million; 15 years for investments ranging from US$100 million to less than US$350 million; and 20 years for investments equal to or greater than US$350 million. Companies that avail themselves of this regime will be subject to a 5% surcharge on First-Category Income Tax.
This provision was challenged before the Constitutional Court by opposition lawmakers. On August 13, 2026, the Court partially upheld the challenge: it validated the general structure of Article 29 and its fixed-term brackets, but declared two specific aspects unconstitutional—the possibility of adjusting the investment amount and the tax stability period due to the execution of related projects, and the authority of the Ministry of the Treasury to extend, under specific circumstances, the deadline for bringing in the committed capital—provisions that have consequently been published along with the rest of the law.
With this adjustment, the tax rate lock-in provision remains one of the central pillars of the law, although its scope is more limited than originally provided for in the text passed by Congress.