Last Tuesday — July 22nd, 2025 — the Government submitted to the Chamber of Deputies a final Tax Reform Bill, which “postpones the revaluation of residential properties, grants concrete tax deduction benefits for middle-class taxpayers related to rent and education expenses, and improves the property tax system for senior citizens; in addition to redesigning the SME tax regime to facilitate their formalization and growth through an ‘Entrepreneurship Path,’” according to the Executive.
The initiatives include:
- Postponement of property reassessment originally scheduled for 2026, which will now take place in 2027.
- Benefits for the elderly (Law No. 20.732): For individuals in the most vulnerable 60% of the population, a maximum contribution payment cap is established, equivalent to 5% of their annual income, even if their property’s appraisal exceeds the current limits.
- Increased contribution to the Municipal Common Fund: The municipality of Lo Barnechea is added to those required to contribute 65% of the revenue collected from property taxes.
- Rental expenses: Individuals may deduct up to 8 monthly tax units (approx. CLP 6.6 million annually) from their income tax for rent actually paid on residential properties, as long as the taxpayer themselves uses the property. The benefit applies in full to individuals with annual income up to 90 annual tax units (approx. CLP 74 million), gradually decreasing beyond that level and not available for those earning over 150 annual tax units (approx. CLP 123 million).
- Education expenses: For the purpose of calculating the family income threshold to access this benefit (annual income under 792 UF / approx. CLP 31 million), it will be possible to consider only the income of the parent who has sole custody of the child.
- Transparent regime: Small and medium-sized enterprises (SMEs) whose owners withdraw all profits will be exempt from the First Category Tax. They will only be taxed through the Global Complementary Tax applicable to their owners.
- Alternative regime: For companies that do not opt into the transparent regime, the current integrated system will remain, but with a change in the First Category Tax rate, which will gradually return to 20% starting in 2028, depending on economic growth.
- Initial transitional regime for new ventures (item 10 of letter D) of Article 14 of the Income Tax Law): Companies with annual income not exceeding 2,400 UF may access a simplified preferential regime where, during the first two years, they will pay a monthly fixed amount of one UTM, replacing income and value-added taxes. Investment and professional services companies are excluded from this regime.
- VAT reduction for new ventures: A new Article 64 bis is introduced in the VAT Law, establishing a tax benefit consisting of a reduction in VAT payable (after deducting input tax credits). The reduction will be 100% for the first 12 months, 50% for the following 6 months, and 25% for the next 6 months. For taxpayers under the initial transitional regime, the 24-month period will begin in January of the year following their exit from that regime.
- Monotax: A permanent special regime for micro-entrepreneurs who are natural persons belonging to the lowest 80% in the social registry, with an average income (over the past three years) not exceeding 310 UF. Taxpayers under this regime must pay a monthly ½ UTM as a single substitute tax for both income tax and VAT. They must also formally register their business activity, accept electronic payments, and be enrolled in an entrepreneurship support program.
- Presumed income (Article 34): The sales limit for accessing the presumed income regime is reduced to those whose annual sales do not exceed 2,400 UF, regardless of whether the activity is agricultural, mining, or transportation. The reduction will be gradual: in 2027, the limits will be 4,500 UF, 9,000 UF, and 3,500 UF respectively. Starting in 2028, the unified limit of 2,400 UF will apply across all three sectors.
- High-income personal taxes: The top two brackets of the Global Complementary Tax will be modified, returning to the structure in place before 2014. Individuals earning between 120 and 150 UTA (approx. CLP 8.2 to 10.2 million per month) will see their rate increase from 35% to 38%, while those earning more than CLP 10.2 million monthly will be taxed at a 40% rate.
- Reduction of exemptions: Limitations are introduced to the First Category Tax (IDPC) exemption currently available to investment funds. Public investment funds will retain the IDPC exemption at the fund level, but if they distribute profits to a Chilean-resident company, that company must include the received profits in its taxable income, being allowed to credit the associated IDPC. For private investment funds (FIP), the exemptions are eliminated—except for those investing in venture capital, thus reinforcing the goal of fostering investment in strategic sectors.
- Inheritance and gift tax: Exemptions for revocable donations (those made during life but confirmed upon death) and donations to heirs or related parties are eliminated. Asset valuation rules will be updated, and payment of inheritance tax may be made in up to three annual installments without interest.
- Professional partnerships: A definition is included, stating that these are partnerships that meet the following cumulative requirements:
a) They must always consist of natural persons who actively work in the partnership, without capitalist partners.
b) They must provide professional services or advice through their partners or employees supporting such services.
c) No more than 20% of their gross income may come from the holding or ownership (under any title) of equity interests, shares, or investment/mutual fund units.
The bill will begin its discussion in August, first in the Economic Committee, and then in the Finance Committee. Given the public statements from various parliamentary groups, the legislative process is expected to move slowly, especially regarding the reduction of exemptions for public and private investment funds, the one-year deferral of the property revaluation, and the increased tax rates for high-income individuals.