On October 31, 2023, Law No. 21.631 was published in Chile’s legal gazette (Diario Oficial de la República de Chile), establishing a tax benefit regarding the purchase of new properties financed with mortgage-backed loans.1
The law establishes a temporary and extraordinary benefit for the tax years 2024 through 2029 for the acquisition of residential housing, that meets certain criteria specified in the law itself, purchased by individuals with tax residence or domicile in Chile.
This new tax benefit may be attractive to individuals contemplating the purchase of a new residence. Provided the individual meets the conditions set out in the law, he or she will be able to apply for a tax credit, which can have the effect of lowering the individual’s tax liability.
It is not unusual for an assignee, especially a long-term assignee, to buy a home. International assignment program managers with assignees inbound to Chile – as well as assignees outbound from Chile but still subject to Chilean tax law – may wish to consider how this might be incorporated in their international assignment tax policies.
According to Law No. 21.631, individuals who acquire a residential property through a mortgage-backed loan with banks or financial institutions, will be able to apply for an annual tax credit up to 16 “Monthly Tax Units” (“Unidad Tributaria Mensual/UTM,” equivalent to approximately to CLP 1,023,360 as of November 2023). The credit will be applied against the Global Complementary Tax (annual tax) and/or Second Category Tax (employment income tax).
In cases where the income earned by an individual within a business year is not subject to taxes, he or she may still request a refund of the amount resulting from the annual tax return. Notwithstanding the foregoing, the annual credit to which a person is entitled will be the lesser of the annual mortgage payments to acquire the housing benefit within the respective business year or the amount equivalent to 16 UTM.
To access the benefit, individuals must meet the following requirements:
It is important to note that this benefit could only be applied to one property per taxpayer, without an earnings limit to access the benefit.
This benefit could have the effect of encouraging purchases of properties in Chile, which potentially would have a stimulating effect on the economy.
KPMG in Chile is available to advise on including the above-described benefit in the annual tax return of assignees or individuals so authorized by their companies – see the Contacts section.
1 See the text of Ley Num. 21.631 at: https://www.bcn.cl/leychile/navegar?idNorma=1197372 .
CLP 1 = EUR 0.00104
CLP 1 = USD 0.00114
CLP 1 = GBP 0.0009
CLP 1 = ARS 0.410
Source: www.xe.com
The information contained in this newsletter was submitted by the KPMG International member firm in Chile.
GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2024 KPMG Auditores Consultores Limitada, una sociedad chilena de responsabilidad limitada, y KPMG Servicios Chile SpA, una sociedad chilena por acciones, ambas firmas miembro de la organización global de firmas miembro de KPMG afiliadas a KPMG International Limited, una compañía privada inglesa limitada por garantía (company limited by guaranty). Todos los derechos reservados.
