Chile – Government Tables New Tax Reform Project

More Details

• Limitation on Tax Exemption for Real Estate Sales: The proposed changes will limit the tax exemption benefit on the first 8,000 Development Units (hereinafter "UF”) – approximately CLP 313,432,080, equivalent to USD 329,488 – obtained from the profits of real estate sales exclusively for individuals who have domicile or residence in Chile.

Limiting the tax exemption benefit to individuals with domicile or residence in Chile can significantly impact taxpayers in several ways: 

1. Increased Tax Liability: Nonresident taxpayers who previously benefited from the exemption on the first 8,000 UF in real estate sales will now face higher tax liabilities, as they will no longer qualify for this tax benefit.
2. Investment Decisions: For potential investors, especially foreign nationals, the removal of this exemption could make Chilean real estate less attractive, influencing their investment decisions and potentially leading to a decrease in foreign investment in the property market.
3. Financial Planning: Taxpayers, particularly those planning to sell real estate, may need to reassess their financial strategies and plans to account for the increased tax burden, potentially affecting their financial decisions and outcomes.
4. Market Participation: Nonresident individuals might reconsider their participation in the Chilean real estate market, which could lead to changes in market dynamics, such as reduced demand and potential impacts on property values.

In general, this change could generate higher costs for nonresident taxpayers and influence broader market trends, affecting both individual financial situations and the real estate sector.

• Extension of the Maximum Tax Rate: The application of the maximum rate of 40 percent in the Second Category Tax and Global Complementary Tax is extended.
  • Second Category Tax 
    • The current tax rates are as follows:

Source: KPMG in Chile

*UTM (Unidad Tributaria Mensual/ Monthly Tax Unit): 1 UTM equivalent to CLP 68,923 as at July 2025.

Exchange Rate CLP/USD: 948.93

• The new tax rates proposal is as follows: 

Source: KPMG in Chile

*UTM (Unidad Tributaria Mensual/ Monthly Tax Unit): 1 UTM equivalent to CLP 68,923 as at July 2025.

Exchange Rate CLP/USD: 948.93

• Global Complementary Tax
  • The current tax rates are as follows:

Source: KPMG in Chile

*UTA (Unidad Tributaria Anual/ Annual Tax Unit): 1 UTM equivalent to CLP 827,076 as at July 2025.

Exchange Rate CLP/USD: 948.93

• The new tax rates proposal is as follows:

Source: KPMG in Chile

*UTA (Unidad Tributaria Anual/ Annual Tax Unit): 1 UTM equivalent to CLP 827,076 as at July 2025.

Exchange Rate CLP/USD: 948.93

• Deduction of rental expenses: Deductions from one’s taxable gross income in respect of the Second Category Tax or Global Complementary Tax of the payment of housing rent during the respective calendar year are authorized.

The reform outlines the conditions under which individuals can deduct this expense.  The key points include:

1. Eligibility: The deduction applies to rent paid for housing used by the taxpayer.  For the calendar years 2026 and 2027, it will be applied gradually, using the lesser amount between 8 Annual Tax Units (UTA), equivalent to CLP 6,616,608 / USD 6,973, or 30 percent of the actual payment made.  Starting from calendar year 2028, it will be applied in full.
2. Limitations: The deduction is only allowed for one property per taxpayer per calendar year, unless multiple leases do not overlap.  In such cases, deductions are based on the portion of rent paid for each lease.
   • The benefit is fully available to individuals with annual incomes of up to 90 UTA, equivalent to CLP 74,436,840 / USD 78,443, and it gradually decreases proportionally above this income level.  It is not available to individuals with annual incomes exceeding 150 UTA, equivalent to CLP 124,061,400 / USD 130,738.
3. Multiple Leases: If a taxpayer has multiple qualifying leases in a year, he/she must deduct the highest rent amount, adhering to the specified limits.
4. Joint Tenancy: In leases with multiple tenants, the lease must specify which tenant can claim the deduction.
5. Exclusive Choice: Taxpayers eligible for deductions under both this provision and mortgage interest (Article 55 bis) must choose only one deduction to apply.
6. Reporting: Taxpayers must provide the tax authority with information on rent payments as required.
7. Exclusions: The benefit is not available to individuals owning three or more properties.

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