Overview

Chile’s Congress has approved a draft Law for National Reconstruction and Economic and Social Development (the “Law”),¹ which introduces a tax stability regime allowing foreign investors to enter into contracts with the Chilean State that fix the applicable tax burden of qualifying investments for a defined period. Chile’s Constitutional Court has struck discrete parts of the Law’s tax stability provisions but has approved the overall tax stability regime through the casting vote of the Court’s president.² The stability regime will apply from the later of 1 January 2027 or the date of official publication of the Law. Although intended to provide fiscal certainty for large-scale projects, several aspects—such as qualification criteria and investment contract terms—remain subject to future administrative regulations. This alert outlines the regime’s expected features and the issues that international investors will want to consider as the relevant authorities complete the regulatory framework.

Foreign Investment Contracts and Tax Invariability

Article 29 of the Law allows foreign investors committing at least USD 50 million to mining, industrial, forestry, energy, infrastructure, telecommunications, research, technological development, medical, or scientific projects to access a tax stability regime by signing an investment contract with the Chilean State. Investments in mining projects must be made no later than 10 years from signature, and 5 years in all other cases. Beyond the terms of Article 29, future implementing regulations will define important aspects of this regime. These include details for reporting on the origin of invested funds and the investor’s financial capacity, and the criteria and procedures for reporting on business restructuring.

The Law requires ongoing financial reporting and auditing, and reporting on ownership, in the periods and terms to be defined by the Comisión para el Mercado Financiero (Financial Market Commission).³ Failure to comply with these duties will forfeit the investors’ rights.

Scope and Duration of Tax Invariability

The Law guarantees stability of an investor’s total effective income tax burden, including certain administrative rulings and interpretations in force when the contract is signed. The Law also provides stability of the export regime and enhanced stability for mining investments.

The guarantee applies for 10, 15 or 20 years for investment commitment thresholds USD 50, 100, and 350 million, respectively. These periods run from the tax year in which the project first earns or accrues gross income from its principal business activity. The term “principal business activity” may require a specific regulatory definition under this regime for greater certainty. The Law allows an adjustment of the guarantee period for “substantial” variations in the amount of investment due to supervening circumstances. Future regulations should also address this adjustment process.

Investors may waive their right to stability. Waiver by a joint investor in a project will apply to all other joint investors unless they stipulate a participation percentage threshold for such a waiver in the contract. Tax stability is lost (in all or part) if the investor is sentenced for a tax offence or incurs in tax abuse or evasion as governed by the Chilean tax code.

Non-Discrimination Protections for Foreign Investment

The Law subjects foreign investment to the general laws applicable to domestic investment and defines discrimination by reference to whether foreign investment is excluded from a measure applying to all or the greater part of a productive activity. The application of this quantitative threshold, including the meaning of “productive activity,” should merit further detail in future regulation. Investors may request corrective action from the Ministry of Finance within one year of the enactment of an offending rule. Failing an administrative remedy, foreign investors may seek a judicial remedy from the ordinary courts. Future regulations should likewise provide details for these remedies. There is no indication in the Law that arbitration under investment treaties is affected by its provisions on non-discrimination.

Mandatory Mediation

Disputes regarding the interpretation, application, performance, validity, or termination of an investment contract must first be submitted to mediation conducted by the Agencia de Promoción de la Inversión Extranjera (Chile’s Foreign Investment Promotion Agency).⁴ This provision on mandatory mediation may require further clarification in at least three respects.

• First, the Agency’s status as a governmental body may prompt questions regarding its role as mediator where another State entity is a disputing party. Further guidance should clarify whether mediation under the Law will be subject to a structured voluntary procedure or instead be limited to a final attempt at amicable settlement.


• Second, the Law does not indicate the full scope of an investment contract and therefore the full scope of mandatory mediation under the Law.


• Third, the future mediation procedure should at least define at which point mediation is deemed to have failed, allowing recourse to judicial or arbitral procedures.

Arbitration of Investment Contract Disputes

If mediation is unsuccessful, the investor may demand submission of the dispute to arbitration. Regulations issued by the Ministry of Finance will define the “minimum conditions” of the arbitration clause and arbitration submission. The Law limits the scope of arbitration “exclusively” to the interpretation, application, performance, validity, or termination of the investment contract. Arbitration shall “in no event” extend to the exercise of the public powers of administrative organs, including the audit and enforcement powers of the tax authority. Those public powers are governed by applicable legislation and are subject to the jurisdiction of the competent courts.

The Law’s delimitation of the scope of arbitration under an investment contract raises the question of whether an arbitral tribunal may nevertheless rule on the consequences or effectiveness of the exercise of administrative powers to determine issues concerning the interpretation, application, performance, validity, or termination of the investment contract. It also raises questions as to the remedies available to an investor in arbitration under the Law (presumably, the Law precludes specific performance of the investment contract).

As with the Law’s section on non-discrimination, the Law does not mention the availability of arbitration to eligible investors under applicable treaties for the protection of investment. To the extent applicable, investors and the Chilean State will need to consider each investment protection treaty on its own terms and its relevance to tax stability under the Law.

Key Takeaways and Looking Ahead

The Law’s tax stability regime is aimed at attracting sustained foreign investment in large-scale projects into Chile, with specific, enhanced provisions for the mining industry. The Law’s stability provisions have (with limited exceptions) survived scrutiny before Chile’s Constitutional Tribunal. For the tax stability regime to serve its purpose, implementing regulations will need to develop and clarify several aspects that are central to the regime’s operation.

International investors in future or ongoing projects in Chile will therefore wish to monitor:

1. The publication of the Law, as finally approved, in Chile’s Official Gazette;


2. The enactment of a resolution by the Chilean tax authority on compliance with the Law’s provision on separate accounting for investments subject to stabilization;


3. The enactment of a resolution by the CMF on ongoing reporting requirements regarding financials and reporting of ownership; and


4. The enactment of regulations by the Ministry of Finance regarding origin of funds, financial capacity, corporate restructuring, scope of the investment contract, commencement and requests for extension of the stability period, mediation rules, and the content of arbitration clauses (among other potential details).

Pending completion of this regulatory framework, international investors may wish to consider various possible scenarios and strategies that combine the foreseeable operation of tax stability and non-discrimination under the Law, with the Chilean and other applicable laws on international arbitration, and with the treaties for the protection of foreign investment in force for Chile. Baker Botts’ International Disputes Group, Mining and Metal Group, and Latin America Practice Group have extensive experience and can provide guidance on these issues.

This client alert was prepared with the invaluable assistance of Javier Salgado and Roberto Gassmann.

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¹ Oficio No. 21.498 [to the Constitutional Court], Proyecto de Ley para la Reconstrucción Nacional y el Desarrollo Económico y Social, 13 August 2026.
²Constitutional Court of Chile, Judgment, 26 August 2026.
³See article 5 and 20, Law No. 21.000, February 2017, which creates the Chilean Financial Market Commission.
⁴See Law No. 20.848, June 2015, establishing the framework for foreign direct investment in Chile.

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