Chile’s Constitutional Court Trims the Kast Tax Reform, Striking an Environmental Compensation Clause

Chile · Politics

The reform survives, yet two of its boldest promises to big investors just got smaller. Here is what the judges left standing, and what they took away.

Chile’s Constitutional Court has trimmed President Jose Antonio Kast’s flagship tax reform, striking one clause outright and narrowing another. The reform still survives, but two of its biggest guarantees to investors came out smaller.

What the Constitutional Court Decided

On Thursday, 13 August 2026, the Constitutional Court ruled on the challenges to the government’s tax overhaul. It sided partly with the opposition.

The judges did not throw out the whole package. Most of the reform, known as the Reconstruccion Nacional plan, stays in force.

But they removed one provision entirely and cut back a second. Both changes touch the promises the reform made to investors.

What Survived the Ruling

The core of the reform is intact. The corporate tax cut and the return to an integrated tax system were not among the struck provisions.

The consumer-facing measures also stand. That includes the VAT relief for buyers of new homes reported when the reform cleared Congress.

For most households and businesses, then, the reform still looks much as it did. The Court’s edits were targeted, not sweeping.

The Environmental Clause That Fell

The biggest single change is a full strike-down. The Court declared Articles 12 and 13 of the reform unconstitutional in their entirety.

Those articles created a right to compensation for investors. It applied when a court annulled a project’s environmental permit.

With the articles gone, that guarantee disappears from the law. Investors would no longer be paid if such a permit is later cancelled.

What an Environmental Permit Is

In Chile, most large projects need an environmental sign-off. It is called a Resolucion de Calificacion Ambiental, or RCA.

The RCA is the ruling that approves a project’s environmental impact study. Without it, a mine, plant or dam cannot legally operate.

Courts can later annul an RCA if it was flawed. The struck clause would have compensated the investor when that happened.

The Investor Guarantee That Got Trimmed

The second change was a narrowing, not a strike-down. The Court partly accepted the challenge to the tax-invariability rule in Article 29.

It removed several parts of that article. Among them were open-ended wording and cover for related or derivative projects.

The government read the ruling as keeping the rule in general terms. But it now applies only to large real-investment projects.

What Invariabilidad Tributaria Means

Invariabilidad tributaria means tax stability. The state promises not to change a project’s tax rules for a set period.

For a big investor, that certainty matters. It lets them plan a long project without fearing a sudden tax change.

Reporting before the ruling described it as a 25-year guarantee. It was aimed at projects worth more than US$50 million.

The Opposition’s Three Challenges

The reform reached the Court through three separate challenges. All came from the left-wing and center-left opposition.

The Court had accepted the three requerimientos for review earlier in August. On 13 August it ruled on them together.

It accepted them only in part. The opposition won on the environmental clause and on narrowing the investor guarantee.

What It Means for Investors

For large investors, the ruling is a mixed result. The tax-stability guarantee survives, but in a narrower form.

The clearer loss is the environmental compensation. That backstop, paying out when a permit was cancelled, is now gone.

Business groups had backed both measures. How much the changes deter investment is not yet clear, and views differ.

What It Means for Homebuyers and Households

For ordinary buyers, little appears to change. The Court’s edits fell on investor and environmental clauses, not consumer relief.

The reform’s measures for new-home buyers were not among those struck. Rio Times reported on those when the bill cleared Congress.

So the everyday parts of the overhaul remain in place. The dispute at the Court was about business guarantees, not household costs.

What Happens Next

With the Court’s review done, the path clears for promulgation. The government can now enact the surviving text of the reform.

No formal date for that step was confirmed right after the ruling. Officials had weighed promulgating even before the decision landed.

The full written ruling is expected in the coming weeks. It should spell out exactly which words the judges removed.

More: Chile news in English, every day from The Rio Times.

What did Chile’s Constitutional Court decide?

It partly accepted the opposition’s challenges to the Kast government’s tax reform. The reform survives, but one clause was struck and another narrowed.

What did the Court strike down?

It struck Articles 12 and 13 entirely. They had promised investors compensation when a court annuls a project’s environmental permit.

What happened to the tax-stability guarantee?

The invariabilidad tributaria rule was narrowed, not removed. It now applies only to large real-investment projects.

Does the ruling affect the VAT break for homebuyers?

No. The consumer measures, including the VAT relief for new-home buyers, were not among the provisions the Court struck.

Sources: Chile’s Tribunal Constitucional ruling coverage: La Tercera; 24 Horas; ADN Radio; BioBioChile; Cooperativa; Infobae; El Pais; AP; DW.

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