Chile’s Reconstruction Law: Key Business Implications of the Proposed Tax & Regulatory Reform

Chile’s Reconstruction Law: Key Business Implications of the Proposed Tax & Regulatory Reform

April 28, 2026

On April 22, 2026, President José Antonio Kast formally submitted to Congress the Reforma Tributaria para la Reconstrucción Nacional y el Desarrollo Económico y Social del País — commonly referred to as the Reconstruction Law. This is a concrete legislative bill with specific articles and provisions that will be debated in Congress.

The purpose of this reform is to make it easier to do business in Chile by providing tax incentives, cutting red tape, expediting permit processes, and removing bottlenecks — with a stated target of reaching approximately 4% annual GDP growth and a 6.5% unemployment rate by 2030. Stagnant growth has been one of the country’s key challenges over the last decade, even as Chile has attracted record investment flows in recent years — suggesting that structural barriers, rather than lack of capital alone, may have been limiting economic expansion.

From a business perspective, the bill can be organized around four key areas:

1. Tax changes designed to encourage investment
2. Faster permits and regulatory simplification
3. Infrastructure, housing, and sector activation
4. Public security, labor control, and state efficiency

Below, we outline the specific measures contained in the bill.

1. Tax Changes Designed to Encourage Investment

The tax chapter of the bill is the most detailed and arguably the most consequential for businesses. Key measures include:

Gradual Reduction of the Corporate Tax Rate (IDPC)

Article 10 proposes a reduction of the corporate income tax (IDPC) from 27% to 23%, to be phased in over the presidential term. The current regime for SMEs (Pymes) would be maintained during the transition. In addition, the provisional monthly payment (PPM) rate for SMEs would be reduced to 0.23%, easing short-term cash flow pressures.

Full Tax Integration

Article 11 moves Chile toward a fully integrated tax system, replacing the current semi-integrated regime. Today, only 65% of the corporate tax (IDPC) paid by a company can be credited against the final taxes owed by its shareholders, requiring a 35% repayment. The reform eliminates this repayment obligation gradually:

• Tax year 2028: repayment reduced to 30%
• Tax year 2029: repayment reduced to 20%
• Tax year 2030: full integration — 100% of the IDPC is creditable

This simplifies the tax structure and improves after-tax returns for all investors, eliminating the current distinction between domestic and foreign shareholders or between jurisdictions with and without double taxation treaties.

Capital Gains Tax Elimination on Publicly Traded Securities

Article 10 also eliminates the 10% unique tax on capital gains from the sale of securities with stock market presence, restoring the regime that existed prior to Law No. 21.420. This is a direct incentive for portfolio investment and capital market activity in Chile.

Capital Repatriation Regime

The bill establishes a voluntary, one-time regime lasting 12 months that allows taxpayers domiciled or resident in Chile prior to January 1, 2025, to declare previously undeclared or untaxed assets and income held abroad, subject to a flat substitute tax of 10%.

A reduced rate of 7% applies if the assets are repatriated within the first 3 years of the law’s publication and remain invested in Chile for at least 5 years — in qualifying instruments such as real estate, bonds or securities with market presence, or other public or private debt or equity instruments with underlying assets located in Chile.

This regime covers assets acquired before January 1, 2025, and income derived from them through December 31, 2025. It represents the third iteration of such programs in Chile, following similar initiatives in 2015 and 2024.

Tax Invariability for Large Investments

The bill creates a 25-year tax invariability regime for national and foreign investors undertaking projects in mining, industrial, forestry, energy, infrastructure, telecommunications, R&D, medical, or scientific sectors, provided the investment equals or exceeds USD 50 million. These investors are guaranteed an effective total tax burden of 35% on income, along with stability in all essential elements of the tax system as of the contract signing date. This is formalized through contracts with the Chilean State.

Employment Tax Credit

Article 9 introduces a progressive tax credit aimed at promoting formal employment. The credit is set at 15% for workers earning a gross salary of 7.8 UTM (approximately CLP $545,000 / USD $565 per month), decreasing gradually to 0% when remuneration reaches 12 UTM (approximately CLP $839,000 / USD $870 per month). This targets lower-income formal employment and is designed to reduce informality in the labor market.

* The UTM (Unidad Tributaria Mensual) is a monthly tax unit used in Chile, regularly adjusted for inflation. As of April 2026, 1 UTM = CLP $69,889. All UTM-based figures above are approximate and will vary as the UTM is updated.

Temporary Reduction of the Gift Tax (Impuesto a las Donaciones)

The bill proposes a transitional 50% reduction of the gift tax for a 12-month window following publication of the law, in order to incentivize early estate planning and inter-generational wealth transfers. Currently, the gift tax applies progressive rates ranging from 1% to 25%. Under this regime:

• The full amount of gift tax paid (even at the reduced rate) may be credited against future inheritance tax.
• Donations between spouses are permitted on an irrevocable basis.
• The judicial approval requirement (insinuación) is eliminated, replaced by execution via public deed and a sworn declaration of assets.
• Donors may not donate more than 75% of their total estate.

This measure is particularly relevant for business owners and high-net-worth individuals considering succession planning or restructuring family assets.

10% Substitute Tax on Retained Earnings (FUR/STUT) and Excess Withdrawals (FUT)

The bill introduces two voluntary substitute tax mechanisms at a flat 10% rate:

On FUR/STUT balances: Companies with positive balances in the Fondo de Utilidades Tributables (FUR) and/or the Saldo Total de Utilidades Tributables (STUT) as of December 31, 2025, may opt to apply a 10% substitute tax in lieu of final taxes. The option must be exercised within 8 months of the law’s publication. Credits for IDPC associated with the amounts subject to this regime are extinguished, and the tax paid is not deductible as an expense. Once taxed, amounts may be withdrawn, remitted, or distributed without being subject to the standard allocation rules of the Income Tax Law.

On excess FUT withdrawals: Companies with excess withdrawals from the FUT as of December 31, 2025 or 2026 may also opt for the 10% substitute tax, under similar conditions and within the same 8-month window. Associated SAC credits are extinguished upon election.

These mechanisms provide an opportunity to regularize historical retained earnings at a significantly reduced rate, which may be attractive for companies looking to simplify their tax position or distribute accumulated profits.

Regularization of Municipal Debts

The bill establishes an extraordinary procedure to regularize municipal debts (business licenses, vehicle permits, sanitation fees, and other municipal charges) accrued in the three years prior to January 1, 2026. Municipalities may waive 100% of interest and penalties, and may also waive collection actions on debts subject to statute of limitations defenses.

Payment Facilities for Debts with the Treasury (Tesorería General de la República)

The Treasury is authorized, for 180 days following publication of the law, to grant payment facilities for debts overdue as of December 31, 2025:

• Lump-sum payment: waiver of up to 100% of interest and 80% of penalties.
• Installment plan (up to 24 monthly payments): waiver of up to 95% of interest and 75% of penalties, with a minimum down payment of 10% of the original principal.

Enhanced Tax Enforcement Through Data Cross-Referencing

Article 85 quater of the Tax Code authorizes the SII (Internal Revenue Service) to cross-reference taxpayer data with any government agency, including the Ministry of Social Development, to verify whether recipients of state benefits meet eligibility requirements. Businesses should be aware that this signals a broader trend toward tighter fiscal oversight.

2. Faster Permits and Regulatory Simplification

Chile’s challenge has not been a lack of legal structure, but rather the speed, coordination, and predictability of permitting processes. The bill addresses this directly.

Streamlining the Environmental Impact Assessment System (SEIA)

Articles 14–18 introduce several changes to the environmental review process:

• The number of admissible addenda (rounds of supplementary questions) is reduced, shortening review cycles.
• The technical role of the SEA (Environmental Assessment Service) is strengthened, giving it greater authority to drive evaluations forward.
• Certain entry requirements for the SEIA are eliminated, narrowing which projects require full environmental review.
• Avenues for challenging an approved RCA (Environmental Qualification Resolution) are limited, and precautionary measures against projects with a favorable RCA are restricted.
• A new reparation mechanism is created for cases where a favorable RCA is judicially annulled, providing greater certainty for project sponsors.

Archaeological and Heritage Permits

Article 21 streamlines archaeological excavation authorizations and the management of findings by introducing mandatory response deadlines and automatic approval for minor interventions.

Aquaculture Concession Relocation

Article 6 simplifies the relocation of aquaculture concessions by eliminating the requirement to submit all relocations to the SEIA when the change involves only cartographic adjustments.

Fisheries Regulation Adjustments

Article 7 modifies the General Fisheries Law to optimize administrative management. Notably, it replaces the automatic concession forfeiture for inactivity beyond two years with an economic surcharge of 6 UTM per hectare, increasing to 16 UTM after 54 months.

3. Infrastructure, Housing, and Sector Activation

The bill includes provisions designed to accelerate activity in construction, housing, and related sectors.

Housing and Construction Incentives

The broader government plan includes a temporary elimination of VAT on new home sales (for a one-year period), increased subsidies for middle-class home buyers, and the elimination of property taxes for first-time homeowners aged 65 or older. These measures, combined with the VAT reduction for construction, aim to reactivate the housing market.

Fire Reconstruction

The government has increased maximum funding to CLP 400 billion for the FET-Incendios program, targeting reconstruction in areas affected by wildfires in Ñuble, Biobío, and Viña del Mar.

Broader Multiplier Effects

When infrastructure and housing pipelines move faster, they typically generate spillover effects across suppliers, engineering and design services, transport and logistics, employment, and local commercial activity. For many businesses, the value lies not only in direct demand but in the broader multiplier effect that comes from higher project execution rates.

4. Public Security, Labor Control, and State Efficiency

The bill includes measures to tighten controls where the government identifies inefficiencies or abuses that increase costs for the economy.

Fraudulent Medical Leave in the Public Sector

Article 30 establishes mandatory dismissal for public servants who falsify medical leave, use it fraudulently, or fail to observe the prescribed rest period. This is framed as a tool to improve labor discipline and reduce absenteeism costs in the public sector.

Fiscal Spending Containment

Article 25 introduces a two-year suspension on the entry of new higher education institutions into the free-tuition financing system (regulated under Law 21.091), in order to limit the growth of public spending on university gratuity.

Article 24 modifies the criteria for access to social benefits, replacing income-decile-based eligibility with a framework centered on the fiscal sustainability of the benefit system.

Article 26 proposes the elimination of the SENCE tax franchise, which currently allows companies to deduct worker training expenses from their tax obligations. Businesses that currently use this benefit should assess the impact on their training budgets.

Expanded Early Retirement Incentive

Article 28 expands the maximum number of beneficiaries eligible for the public-sector early retirement incentive program under Law 20.948 (Article 5), signaling a push toward reducing the size of the public workforce.

Modernization of Public Procurement

Article 4 modifies the public procurement framework (Law 19.886) in two significant ways:

• It eliminates the prohibition on contracting with individuals linked to officials of the Ministry of Public Works.
• It removes the requirement that all pre-tender communications go exclusively through the Mercado Público platform, facilitating technical dialogues prior to formal bid processes.

Coin Transport Regulation

Article 32 grants the Undersecretary for Crime Prevention the authority to exempt coin transport from general security requirements applicable to value transport, streamlining this specific operation.

Why this matters for businesses: A more efficient and disciplined public sector can reduce delays, compliance friction, and uncertainty. The elimination of the SENCE franchise, however, is a cost consideration for companies that rely on it for workforce development. Public procurement changes may open new opportunities for firms engaged in infrastructure and public works.

What Happens Next

It is important to note that while this bill is now a formal legislative proposal, it has not yet been enacted into law. The most significant changes — particularly on taxes, environmental regulation, labor controls, and institutional reforms — will require:

• Full congressional debate
• Approval in both chambers (the Chamber of Deputies and the Senate)
• Regulatory implementation after passage

The government’s ability to build political support, the extent to which the agenda survives congressional negotiations, and the speed of ministerial implementation will all determine the real-world impact of these proposals.

For businesses, the practical takeaway is straightforward: this bill has the potential to significantly impact Chile’s investment and operating landscape, but its ultimate impact will depend on what is approved, in what form, and on what timeline.

At BC&MC, we are actively monitoring the legislative process and analyzing the implications of each provision for our clients. Whether you are evaluating new investments in Chile, assessing the impact on your current operations, or exploring opportunities arising from the proposed changes — such as the capital repatriation regime, tax integration benefits, or infrastructure incentives — our team is ready to help you navigate the evolving regulatory environment.

We will continue to publish updates as the bill progresses through Congress. If you would like a personalized assessment of how these measures may affect your business, please don’t hesitate to reach out to us.

This article is for informational purposes only and does not constitute legal or tax advice. Businesses should consult with qualified professionals regarding the potential impact of these measures on their specific circumstances.