Chile’s Capital Markets Reform Bill (MK4) proposes VAT exemptions for fund management fees, a preferential tax regime for holding companies and new incentives for venture capital and start-ups.
Chile’s Chamber of Deputies has approved the Capital Markets Reform Bill (MK4, Boletín No 18,643-05) in its first constitutional stage on 27 October 2026. The legislation was then moved to its second constitutional stage before the Senate Finance Committee on 28 October 2026.
The bill seeks to revitalise the Chilean financial ecosystem by deepening market liquidity, enhancing competitiveness, and attracting long-term foreign investment.
During the Finance Committee’s review in the Chamber of Deputies, key amendments proposed by the Executive introduced significant tax incentives for investment funds, holding structures, venture capital and start-ups.
These are summarised below:
VAT exemption for fund management fees & input VAT recovery
The amendments exempt investment and mutual fund management fees charged by fund managers (AGFs) from VAT, regardless of whether the fees are paid by the funds or their unitholders. Fund managers can also recover input VAT on goods and services used for fund management.
Special tax regime for Chilean holding companies
The bill creates a special tax framework to position Chile as a regional hub for corporate headquarters:
- Corporate tax (IDPC) exemption: Dividends received and capital gains derived from qualifying foreign shareholdings in non-resident entities are fully exempt from First Category Tax (IDPC).
- Withholding tax exemption: Dividend distributions made by the Chilean holding company to non-resident shareholders out of the Foreign-Source Income Register (RRFE) are exempt from additional (withholding) tax.
- Qualifying shareholding criteria: Qualifying Shareholding Criteria: To qualify, foreign investments must represent at least 5% of voting capital and be held continuously for at least one year. The foreign entity must be subject to a minimum nominal corporate tax rate of 10% in its home jurisdiction, earn primarily active rather than passive income, and not be resident in a jurisdiction classified as a tax haven under Article 41 H of Chile’s Income Tax Law. The minimum taxation requirement is presumed to be met for entities in countries with an active double taxation treaty with Chile.
- Economic substance requirements: The holding company must demonstrate effective economic substance in Chile, including local management, effective decision-making, and sufficient personnel/material resources.
- Municipal license relief: The capital invested in qualified foreign shareholdings is deducted from the calculation base of the municipal license fee.
Modernisation of non-resident fund taxation & removal of “80/20” rules
- Foreign-source income distributions: Non-resident investors in Chilean funds are exempt from withholding tax on distributions from foreign-source investments registered in the RRFE.
- Elimination of the 80/20 requirement: The amendments repeal the 80/20 fund regime, removing the previous foreign and domestic asset allocation requirements and related withholding taxes.
- Non-taxable capital gains: Capital gains earned by non-residents from selling or redeeming fund units remain non-taxable, provided statutory distribution requirements are met.
Innovation promotion statute & venture capital framework
The amended bill introduces the Statute for the Promotion of Innovation and Investment in Venture Capital (Estatuto de Promoción de la Innovación y la Inversión en Capital de Riesgo) to encourage investment in innovative companies and venture capital funds through several tax incentives.
- Scope and eligibility: The incentives cover direct investments in CORFO-certified innovative companies (EICs) and indirect investments through venture capital funds (FCRs) that allocate at least 80% of their assets to EICs or Junior Segment companies.
- A 35% tax credit: Individual taxpayers subject to the Global Complementary Tax (IGC) can claim a 35% tax credit on amounts invested in newly issued EIC shares or FCR units. The credit is capped at 50 UTA per tax year, with unused credits carried forward indefinitely.
- Non-taxable capital gains: Capital gains from the sale of shares or fund units held for at least three years will be treated as non-taxable income.
- Indirect transfer tax exclusion: Indirect transfers of shares in certified companies or units in venture capital funds will be excluded from indirect transfer tax under Articles 10 and 58 No. 3 of the Income Tax Law.
- SAFE contracts and convertible notes: The bill provides stamp tax exemptions for SAFE contracts and convertible notes, establishes tax cost basis rules and allows corporate taxpayers to fully deduct losses arising from these investments.
Effective dates & transitional timeline
The Holding Company Regime will take effect on 1 January 2027.
The Innovation Promotion Statute will take effect on the first day of the month following publication of the CORFO resolution regulating the certification procedure, which must be issued within six months of enactment.
The Single Funds Law amendments covering VAT exemptions and fund regimes will take effect on 1 January of the year following publication of the law in the Official Gazette or the issuance of the relevant CMF general rules.
