By Carlos Tapia, Director of the Corporate Tax Area at CCL Auditores Consultores.
Read the column in La Tercera-Pulso.
The Executive’s initiative, which establishes a temporary and extraordinary tax benefit for the purchase of new homes—consisting of a refundable credit of up to 16 UTM—and which will become law, seeks to address the weakened construction sector, however, in the view of some, it would be a temporary measure that will not resolve the structural problems of the industry.
Concerns reemerge from voices that, since the entry into force of Law No. 20,780 in 2014 and subsequent tax reforms, have warned that some of the changes imposed on the construction and real estate sector—such as the elimination of the VAT credit for homes costing more than 2,000 UF, and the elimination of the VAT exemption for home improvements, among others—would lead to a scenario like the current one, characterized by rising housing prices and greater difficulties for individuals in accessing financing.
Nevertheless, we must acknowledge that there is an effort by the Executive to address the situation, assuming a fiscal cost of CLP 32 billion according to some sources. It is also noteworthy that this measure to reactivate the industry is structured based on a credit that can be offset against personal income tax, as it represents a benefit methodology for taxpayers that could also be extended to other sectors or areas of economic interest, such as healthcare.
Regarding the specifics of the project, it is established that, in order to access the benefit in question, certain “cumulative” requirements must be met. One of these is that the purchase agreement must be executed from the date the law comes into force, and the acquired property must be registered in the beneficiary’s name with the respective Real Estate Registry before July 1, 2024. Notwithstanding the above, in the case of a home purchase made by a beneficiary of a housing subsidy granted by the Ministry of Housing and Urbanism, it will only be necessary for the respective purchase agreement to have been signed between the date of entry into force of the law and the aforementioned date.
In the first case, there is no doubt that the timeframe is quite limited, considering the time required for purchase decisions and the financing process with a financial institution or bank. It should also be noted that we are only a few months away from the start of the 2024 tax year, meaning that many individuals may not be able to take advantage of this benefit in the short term.
We hope that the Executive’s future law, developed with a sectoral approach, will be one of many measures that help revive the construction sector in our country and serve as a prelude to deeper changes and positive developments for the benefit of the industry.