Many countries have special tax regimes (STRs) for small businesses. Even though these regimes may reduce compliance costs, they increase the complexity of the tax system and can be used by high-income individuals to avoid taxes. This paper uses administrative data from Chile to analyze whether the use of STRs is associated with strategic tax planning at the individual level. A descriptive analysis of the data finds three stylized facts that, taken together, are consistent with strategic behavior: STRs are used frequently, they are used mainly by high-income taxpayers, and high-income taxpayers are more likely to hold a portfolio of businesses filing taxes under STRs. We rationalize these facts with a simple model of small business creation and tax planning and test the model’s predictions. We find that following a reform that made a particular STR more restrictive, reported individual incomes from businesses filing under that STR decreased between 10 and 15%, while income reported from alternative sources increased. Overall Taxable Income increased between 4 and 7%. This increase is explained by the more restrictive scenario for avoiding taxes through STRs, consistent with individuals using these regimes for tax planning.