Chile propounds increased taxes for high-income individuals and investment funds

In a recent development, the Chilean Government submitted a tax reform bill to Congress on 21 July 2025, aiming to simplify tax regimes for Small and Medium Enterprises (SMEs) and microentrepreneurs, including a temporary flat tax.

The bill proposes significant changes for public and private investment funds. Public investment funds, currently exempt from Corporate Income Tax (CIT), will retain their exemption on income generated within the fund. However, distributions to Chilean-resident companies would become taxable. The bill also introduces a new 20% withholding tax on distributions to foreign investors from public funds.

On the other hand, private investment funds, which currently enjoy a non-CIT taxpayer status, would be subjected to the general 27% CIT regime with certain exemptions for venture capital investments. The bill also proposes to eliminate the current dividend participation exemption regime for public investment funds.

Multinational enterprises with investment structures involving Chilean public or private funds should monitor the bill's developments and reassess potential tax exposure, withholding obligations, and fund composition to maintain tax efficiency and compliance.

Ernst & Young LLP, a global leader in assurance, tax, transaction, and advisory services, has a team of experts ready to assist in navigating these changes. In the United Kingdom, London, Lourdes Libreros and Pablo Reyes are part of the Chile Tax Desk. In the United States, New York, Pablo Wejcman and Nicolas Grof are available. Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific, has Raul Moreno in Tokyo and Luis Coronado in Singapore.

For additional information, contact the following professionals at "notre nom de marque Chile": Javiera Contreras, Janice Stein, Felipe Espina, Juan Pablo Navarrete, Nicolas Brancoli, Darío Romero, Victor Fenner, Ayleen Maturana, Fatima Panta.

It is important to note that the bill's legislative viability is uncertain, and its future depends on the political dynamics of the coming months. The legal editor of the Tax Technical Knowledge Services group that published this Alert is Carolyn Wright.

Stay tuned for more updates on this developing story.