28 July 2025 Chile proposes tax reform bill increasing taxation on high-income earners and investment funds
On 21 July 2025, the Chilean Government submitted a tax reform bill to Congress aimed at supporting small and medium-sized enterprises (SMEs) and low-income individuals while increasing the tax burden on high-income earners and investment funds The bill proposes that public investment funds retain their current exemption from Corporate Income Tax (CIT) on income generated within the fund. However, distributions that these funds make to Chilean-resident companies would become taxable and the investors' current dividend participation exemption regime would be eliminated. Additionally, the bill proposes to increase from 10% to 20% the withholding tax rate applicable to foreign investors receiving distributions from public funds. For private investment funds, the bill proposes to eliminate their current status as non-CIT taxpayers. Instead, they would become subject to the general 27% CIT regime with certain exemptions for venture capital investments. Despite the scope and aim of the proposed reforms, there is significant uncertainty regarding the bill's legislative viability. As a result, the future of the bill remains unclear and will largely depend on the political dynamics of the coming months. Multinational enterprises with investment structures involving Chilean public or private funds should monitor developments on this tax bill and reassess potential tax exposure, withholding obligations and fund composition to maintain tax efficiency and compliance.
Document ID: 2025-1601 | ||||||
