Chile's Congress approves Kast-backed economic overhaul, cutting corporate tax to 23%

Corporate tax rate to fall to 23% under Kast reform

Chile’s Congress approved most of President José Antonio Kast’s flagship economic and tax reform package on Tuesday, advancing a bill that cuts the corporate tax rate to 23% from 27% and includes incentives for capital repatriation and investment.

The Chamber of Deputies passed the National Reconstruction and Economic and Social Development bill, which also eliminates the tax on a first home for older adults and creates compensation mechanisms for companies when courts overturn projects that have already received environmental approval.

Finance Minister Jorge Quiroz said the initiative seeks to “restore tax competitiveness” and provide greater certainty for investment. “We have approved measures to restore certainty for investment in Chile, remove permitting barriers that have kept investment projects and economic activity stalled, and provide security for those who decide to invest,” Quiroz said.

Jorge Berríos, academic director of the Graduate Diploma in Finance at the University of Chile’s Faculty of Economics and Business, told UPI that the reform is intended to restore investor confidence and create conditions for the country to return to growth above 3%. “A reduction of several percentage points in the corporate tax rate has positive effects on companies and the economy, although those results are generally seen over the long term,” Berríos said. He added that some effects could be felt sooner in the labor market because of the subsidies included in the initiative, as well as through an improved perception of Chile among domestic and foreign investors.

Berríos said the Chilean economy experienced several years of uncertainty marked by increased regulation and higher taxes — factors that he believes damaged the country’s standing among investors. “The Chilean market is returning to a structure similar to that of the 1990s, with market-oriented reforms that allowed the country to achieve strong growth and stand out in Latin America,” he said.

The Confederation of Production and Commerce, the country’s leading business organization, welcomed the bill. President Susana Jiménez said the initiative represents “an important step toward restoring the economy’s dynamism and returning to growth.”

The only provision still awaiting approval is the compensation mechanism for municipalities, which will lose part of the revenue generated by the tax on residential properties.

The approval represents one of Kast’s main legislative victories since taking office in March, allowing him to advance a pillar of his economic agenda — reducing the tax burden to stimulate private investment and accelerate growth.