{"id":9629,"date":"2026-11-13T11:29:03","date_gmt":"2026-11-13T09:29:03","guid":{"rendered":"https:\/\/www.feliu.biz\/?p=9629"},"modified":"2026-11-13T11:30:47","modified_gmt":"2026-11-13T09:30:47","slug":"chile-enacts-law-21-850","status":"publish","type":"post","link":"https:\/\/www.feliu.biz\/en\/chile-enacts-law-21-850","title":{"rendered":"CHILE ENACTS LAW 21.850: FIRST-CATEGORY TAX TO DECREASE TO 23%, WITH NEW INVESTMENT INCENTIVES INTRODUCED"},"content":{"rendered":"

In July, we reported that Chile had introduced a reform bill with significant fiscal and regulatory implications for businesses. Following the parliamentary process, the bill has now been enacted into law: on October 17, 2026, Law No. 21,850, concerning National Reconstruction and Economic and Social Development, was published in the Official Gazette. This is a comprehensive reform, with measures taking effect in stages between November 2026 and 2029; it impacts the taxation of both corporations and their shareholders or investors, including non-residents.<\/p>\n

The core measure is a gradual reduction of the First Category Tax (IDPC) applicable to medium-sized and large enterprises. The tax rate will remain at 27% for 2026 income, decreasing to 25.5% in 2027, 24% in 2028, and 23% from 2029 onwards, with exceptions for certain special tax regimes. Concurrently, the monthly provisional tax payments (PPM)\u2014applicable from January to March\u2014will be reduced (by 5.56% in 2027, 5.88% in 2028, and 4.17% in 2029) to align these advance payments with the new tax rates.<\/p>\n

The law also moves toward an integrated tax system. Starting January 1, 2027, the requirement to “repay” 35% of the IDPC credit\u2014which shareholders currently apply against their final taxes (the Global Complementary Tax or the Additional Tax)\u2014will be progressively phased out. By the end of this transition period, shareholders will be able to claim the full amount of the tax paid by the corporation. Furthermore, this reform eliminates the distinction between investors residing in countries that have a double taxation avoidance agreement with Chile and those residing in countries that do not. Spain maintains an agreement of this nature with Chile; therefore, Spanish investors should review how the new framework affects the distribution of dividends from their Chilean subsidiaries.<\/p>\n

Regarding foreign investment, a notable feature is the creation of a tax stability regime. As of January 1, 2027, investment projects valued at $50 million or more may secure the stability of their tax regime through a contract with the State. This mechanism is particularly relevant for industrial, energy, mining, or infrastructure projects with long investment recovery periods. Furthermore, from that same date, gains derived from the sale of shares and fund units that are traded on a stock exchange will no longer be subject to the 10% flat tax; instead, they will once again be classified as income that does not constitute taxable income.<\/p>\n

The reform also introduces new tax credits linked to employment. Starting November 1, 2026, companies that export knowledge-based services may deduct from their corporate income tax (IDPC) a credit equivalent to 15% of the remuneration paid to employees residing in Chile who are engaged in such activities. This percentage increases by 5 percentage points if the parent company or its branches are located outside the Metropolitan Region or in its rural communes, subject to an annual limit of 75 UTM (monthly tax units) per employee. While the credit is non-refundable, any remaining balance may be applied in subsequent fiscal years, adjusted for the Consumer Price Index (CPI). Additionally, as of January 1, 2027, employers who finance the treatment of catastrophic illnesses for their employees and immediate family members may apply a credit against their corporate income tax (IDPC) of up to 150 UTM per employee over the course of the entire employment relationship\u2014provided that the employee has at least two years of tenure and payments are made directly to accredited healthcare providers. Conversely, the cap on the tax incentive for employee training (SENCE) is being reduced from 1% to 0.7% of the total payroll.<\/p>\n

There are other temporary measures worth noting:<\/p>\n