2026/05/21 | Andrés Pérez M., Vittorio Peretti, Andrea Tellechea & Ignacio Martínez
The Lower House approved the government’s National Reconstruction bill, with minor adjustments from the originally proposed reform. The bill has the objective of boosting Chile’s potential growth, primarily through policies that strengthen private investment via tax cuts and regulatory streamlining. The Lower House’s swift approval, relative to previous tax reforms, was facilitated by the governing coalition’s presence in key positions at the committee level and in the broader chamber, despite not having a formal majority.
The core of the government’s proposal on the tax-side was maintained, including the following:
• 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.
• Full reintegration of the tax system, gradually eliminating the requirement to repay the corporate tax credit and simplifying the corporate tax regime.
• A 25-year tax stability statute for domestic and foreign investments exceeding USD 50 million, including protection against future tax changes and, in the case of mining, against changes in royalties and mining licenses.
• 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, equivalent to up to 15% of wages for lower-income workers (up to 7.8 UTM, slightly above the minimum wage), gradually decreasing to zero at 12 UTM, focused on SMEs and formal job creation.
• A one-year VAT exemption on sales of new homes.
The main change in the lower house was the rejection of the elimination of the SENCE tax credit, which is likely to be presented again and modified in the Senate.
Our take:
• Even though the governing coalition also secured key positions in Senate committees and the broader chamber, it remains slightly short of a majority and will therefore need to negotiate to secure legislative approval. Government officials have emphasized the importance of passing the bill ahead of the 2027 budget discussion (September 30), which seems challenging, as changes during the Senate’s legislative process would likely end up dragging the bill to a Mixed Committee.
• The Autonomous Fiscal Council is likely to play an important role in the Senate’s discussion, highlighting the importance of mitigating the net deficit impact of the bill in the short-term.
• As we’ve mentioned previously, demonstrating swift progress on this year’s spending cuts will be critical for restoring fiscal credibility. Upon taking office the administration instructed ministries to reduce expenditure by 3% (approximately USD3 billion), alongside an additional USD1 billion in cross-ministry cuts. Together, these measures would amount to spending reductions of roughly 1.2% of GDP this year. Delivering on these cuts would help offset the bill’s projected revenue losses and facilitate legislative approval. The Budget Office has reported cuts of roughly USD2 billion to date.
• The proposal has the potential to further support the ongoing investment cycle and raise Chile’s potential GDP. In fact, the recent CBC survey revealed another sequential uptick in the five-year private investment pipeline, as imports of capital goods in the rolling quarter ending in April increase close to 10% YoY.
• In our view, the Bill will not alter this year’s USD17.4 billion gross government’s financing plan.
• The president will deliver the “State of the Union” address on June 1. The MoF and Budget Office are scheduled to present the 1Q26 Public Finance Report on May 25, and the decree setting the medium-term fiscal plan by June 9th.