Real Estate Taxation
The tax reform levies real property using the same principles for movable property. This requires a redefinition for certain concepts such as “sale” or “seller”, in the sense that now a seller would be someone regularly devoted to the selling of personal and real property. In addition, it will be presumed that there is “habituality” when between the acquisition or construction and the transfer a period of less than or equal to one year elapses.
The sale of land will be exempted from VAT. The tax reform also establishes a reduction on the special VAT credit for construction companies.
2. Income Tax Law
The tax reform limits the exemption for the capital gain arising from the sale of real estate, which will be only available for individuals domiciled or resident in Chile. In these cases, the tax would be applied over the difference between the sale price and the cost of the real property, including in the cost of all improvements.
This exemption is limited to 8,000 UF (343,476 USD, approx.) regardless of the number of sales and real estates that the taxpayer owns. The excess is levied according to the general rules or with a sole 10% tax, on a cash basis, at the taxpayer’s election. If real estate was acquired before the tax reform’s enactment, for purposes of determining the capital gain, the taxpayer can choose between: (1) acquisition cost (including improvements) adjusted by inflation; (2) official tax valuation at January 1, 2017, adjusted by inflation between December, 2016 and the month before the sale, or (3) fair market value, proved by the taxpayer, at the date of the enactment of the law. If the real estate was acquired before January 1, 2004, the sale will be subject to the rules in force in 2014.