Abstract: This paper analyzes the impact that might have the tax reform on investment in Chile through a neoclassical general equilibrium model, extended as to include taxes on capital and to consider compensations through tax benefits for investment in physical capital. The simulations lead to conclude, as expected, that after a permanent change of taxes we observe a reduction in the capital stock and a decline in investment, whereas consumption increases during the transition to the new equilibrium. Alternative scenarios introduce two different types of capital subsidies, which in the transition dynamics allow smaller deviations on investment when compared to the baseline scenario (without subsidies). This allows the conclusion that the tax benefits, though transitory, can help reducing the distorting effects of the tax. An analysis of parameter’s sensitivity was carried out, which proved model stability and showed differences in the magnitudes of the results with respect to the benchmark case.