Column written by Carlos Peña, Director of International Taxation for The Legal Industry Reviews – Brazil.

Read the article here: The Legal Industry Reviews

The close commercial relations existing between Brazil and Chile have deep historical roots, and they only reflect a fraternal treatment and strong ties that both nations have maintained for decades, and even centuries.

In that sense, and according to the information that the Chilean Tax Authority (Servicio de Impuestos Internos or SII) has recently provided, Brazil is the second destination that receives the most investments from taxpayers domiciled or residents in Chile (individuals and companies) and is the largest recipient of investments from Chilean Business Groups, so the impact and importance of Brazil for Chile, is evident.

These numbers should improve even more, considering the tax changes that were approved in Brazil at the end of 2023, whose specific regulations were recently enacted in January 2025, so it is expected that foreign investment and business development of Chilean capital in that country will progressively increase.

As in the case of Brazil, Chile had an important tax reform in 2024, which aimed at adjusting tax control and compliance measures, but without introducing relevant changes in VAT and Income Tax. However, the Chilean government announced the presentation in the coming weeks of a bill that will seek to introduce important changes, aiming to raise more funds for domestic needs.

Although the next Income Tax reform would seek a reduction in the Corporate Tax rate, from the current 27% to 24% (and in the case of small and medium enterprises “SME”, from the current 25% to 20%) as the Ministry of Finance has preliminarily informed, existing alternatives have been analyzed to compensate for this drop in tax collection, one of them being, for example, the disintegration of the Corporate Tax and Final Taxes (Personal Income Tax and Withholding Tax), which means that the Corporate burden would no longer be a credit against Final Taxes, becoming completely independent.

As if that were not enough, the year 2025 in Chile is an election year, in which the new president of Chile will be chosen in December 2025, as well as a majority renewal of the Parliament, so that the proposals on economic and, in particular, tax matters will be a key focus and essential reference for those who wish to assume public office from 2026 onwards.

The proposals from the leading presidential candidates to “La Moneda” (Government House) aim precisely at a sustained lowering of taxes and to strengthen the legislation that exists to promote and increase foreign investment in Chile, such as special regimes of tax invariability, so that these measures would only improve the good conditions that currently exist between Chile and Brazil to do business, and thus strengthen an indispensable economic relationship, especially in times of international commotion, such as the tariffs announced by the United States Government to both Brazil and Chile.

It is in this context of tax reforms and global economic turbulence in economic matters, we can only augur new winds to enhance and strengthen the relationship between Brazil and Chile. It is crucial to stay vigilant and capitalize on these adjustments, taking full advantage of the promising changes that the new times promise.