The Chilean Congress has approved President José Antonio Kast's flagship economic and tax reform package, which aims to boost growth by cutting corporate tax rates from 27% to 23% by 2029 and offering investment incentives. However, the law faces immediate delays as the government plans executive vetoes to remove opposition amendments, and the Constitutional Court reviews challenges against key provisions. Analysts warn the narrow legislative margin raises concerns over Chile's long-term regulatory certainty.
Kast economic mega-reform passage
- ▪The approved final article requires the National Treasury to transfer 190 million dollars to compensate municipalities for property tax reductions for individuals over 65.
- ▪The Chilean Senate approved the final outstanding article of President José Antonio Kast's economic and tax reform package on August 4, 2026.
- ▪The final article of the reform package passed the Chilean Senate with 27 votes in favor, 22 against, and one abstention.
Corporate tax rate reduction
- ▪The economic reform package includes a gradual reduction of the corporate tax rate for companies from 27% to 23% by 2029.
- ▪Opponents of the reform argue there are no guarantees that the corporate tax rate reduction will deliver the investment boost expected by the government.
Investment incentive provisions
- ▪The reform package includes Value Added Tax exemptions on new home purchases, tax benefits for capital repatriation, and tax stability clauses for large investments.
- ▪The Fiscal Council stated the reform project will generate a net negative fiscal impact, while the International Monetary Fund warned it requires significant effort to meet deficit and debt targets.
Government veto plans
- ▪The planned executive vetoes will compel the Chilean Congress to review the President's observations, which is expected to delay the implementation of the reform.
- ▪The Chilean government plans to submit executive vetoes to eliminate opposition-added amendments regarding a financial right to be forgotten, compound interest, and 30-day payment terms for small businesses.
Constitutional Court review challenges
- ▪The opposition challenges argue that the tax stability clauses and other contested provisions of the reform package violate the Chilean Constitution.
- ▪Chile's Constitutional Court is reviewing opposition challenges against reform provisions on aquaculture concessions, environmental permitting procedures, and tax stability.
Investment policy credibility concerns
- ▪Mariano Machado of Verisk Maplecroft stated the narrow legislative margin turns the bill into a credibility test for Chile's ability to offer long-term policy certainty.
- ▪Experts suggest the Chilean government could apply a partial enactment of the bill to allow unchallenged provisions to take effect during ongoing reviews.
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