Chile Adopts Tax Stability and Arbitration Regime for Foreign Investment
A new law allows foreign investors in major projects to lock in their income tax burden through contracts with the state, though key details await implementing regulations.
Chile's Congress has approved a law, largely upheld by its Constitutional Court, creating a tax stability regime to attract foreign direct investment. The law permits foreign investors committing at least $50 million to projects in specified sectors—including mining, energy, infrastructure, and technology—to enter into investment contracts with the state. These contracts can guarantee the investor's total effective income tax burden for a period of 10 to 20 years, depending on the size of the investment, providing significant fiscal certainty for large-scale, long-term projects.
Sophisticated counsel for international clients should note that many operational details are not yet defined and will be addressed in future administrative regulations. These include specific qualification criteria, reporting on the origin of funds, and the precise terms of the investment contracts. The law also establishes a mandatory dispute resolution process, beginning with mediation and followed by arbitration for investment contract disputes. However, the scope of arbitration is explicitly limited and does not extend to the exercise of public powers by state administrative bodies. Investors should monitor the law's final publication and the subsequent issuance of implementing regulations.