2026/07/21 | Andrés Pérez M., Vittorio Peretti, Andrea Tellechea & Ignacio Martínez
The cornerstone of the administration’s economic agenda was swiftly approved by Congress, after only three months of legislative discussion. The reform includes several measures aimed at boosting investment, job creation, and financing of reconstruction efforts in areas affected by wildfires earlier in the year. In the third constitutional debate held today, only one norm was sent for discussion to a Mixed Committee; the norm to be discussed is the one related to revenue compensation for Municipalities due to revenue losses from the reduction of property taxes.
The main tax measures include:
- A gradual reduction of the corporate income tax rate from 27% to 23% by 2029 for large companies. The corporate tax rate is scheduled to decline from 27% to 25.5% in 2027, 24% in 2028, and 23% thereafter. In doing so, Chile’s corporate tax rate falls back to the OECD mean.
- Full reintegration of the tax system, gradually eliminating the requirement to repay the corporate tax credit and simplifying the corporate tax regime.
- Tax stability statutes for domestic and foreign investments, including protection against future tax changes and, in the case of mining, against changes in royalties and mining licenses. The bill originally included a 25-year statute for investments of at least USD50 million; the approved version considers a 10-year statute for investments of USD50 million, 15-years for those between USD50 million and USD350 million, and 20-years for those above USD350 million. Firms that wish to benefit from this regime will pay an additional 1.5 pp corporate tax rate.
- Elimination of the 10% flat tax on capital gains from listed securities, restoring their treatment as non-taxable income to boost liquidity and depth in financial markets.
- A tax credit for formal employment focused on digital services.
- A one-year VAT exemption on sales of new homes.
- A voluntary, extraordinary 12-month regime that allows taxpayers in Chile to declare foreign assets and income abroad, subject to a one-time substitute 10% tax; other conditions apply, as well.
On streamlining investment, the bill proposed:
- Reduction of the validity period for sectoral permits from two years to six months.
- Comprehensive reform of the Environmental Impact Assessment System (SEIA), including fewer review stages, limits on administrative challenges, binding deadlines for appeals, and a voluntary special environmental assessment regime.
- Compensation mechanism for project developers when a favorable permit (RCA) is overturned by the courts.
- Streamlining of infrastructure, energy, mining, and aquaculture projects, including measures related to micro-relocations and non-use patent rules.
The bill’s fiscal concerns were addressed. The Senate significantly reduced the near-term net deficit impact of the reform, mainly by focusing the formal employment tax credit (from an original fiscal cost of USD1.5bn to USD150mn, per year). As such, official forecasts point to a net deficit effect that peaks at roughly 0.5% of GDP by 2030. Considering the reform’s effects on growth, the MoF forecasts a net deficit of 0.13% of GDP in 2030. Importantly, the MoF is also implementing administrative spending cuts of roughly 0.5% of GDP per year.
Our Take: In our view, the reform’s approval is positive for Chile’s growth story, enhancing productivity, and boosting investment. Importantly, while the reform does not change this year’s fiscal impulse, it is clearly expansionary via private investment. The bill’s approval takes place as economic activity has largely underwhelmed, in the context of sector-specific shocks and persistent labor market weakness, leading to successive GDP growth forecast downgrades for 2026. However, lower costs of capital associated to the bill’s approval and swift administrative progress in project approvals, should pave the way for an investment-led recovery, already hinted by medium-term surveys. The focus will now shift to the reform’s implementation.
Next steps.
- The opposition plans on presenting several appeals to the Constitutional Tribunal, questioning the time horizons of the tax-stability regime for large-scale investment projects as well as the compensation mechanisms for investors affected by annulled environmental permits (RCA, Spanish acronym). Assuming the Constitutional Tribunal will admit these requests for discussion, history suggests it could deliver their decision during the second half of August.
- The press reports that the government plans on vetoing certain norms of the bill, that were originally included and approved by Congress, that would ultimately damage households, the financial sector, and the economy ; these include the prohibition of anatocism and a norm that mandates the elimination of negative credit records after several years. The Central Bank and the Financial Market Regulator (CMF) have highlighted the negative effects of these measures. The press claims these vetoes would be presented this week and discussed by Congress between August 4-5. According to Chile’s constitutional framework, Congress may override a presidential veto if it reaches 2/3 approval by both houses.
- The Government will present the 2027 budget bill to Congress by the end of September and the 3Q26 Public Finance Report on October 1.
- The administration is expected to maintain reform momentum with bills to the capital market and the labor market, among others.