Chile Property Tax law 101: Real Estate Tax (Contribuciones)

Property tax in Chile is payed over the governments' assessment of the value of the property called "avalúo fiscal". The government value of each property is determined by the Chilean Tax Bureau, according to the rules as regulated in the Real Estate Tax Law or "Ley Sobre Impuesto Territorial" The tax you pay is also known as your "contribuciones" in Chile. The tax rate is based on the official value of the property as set by the Chilean Tax Bureau or Chilean IRS. The IRS in Chile is also known as "SII" or "Servicio de Impuestos Internos".

Let us warn you, the official value of the property "avalúo fiscal" DOES NOT represent the market value of the property. It is set by the Chilean Tax Bureau (SII) taking into consideration objective sources such as real estate prices for sales, size, constructions, quality of the construction, year of the construction, use of the property. It is often typically less than the market value in many areas, and should not be used as any sort of measure of the market value of property when attempting to purchase a property or determine the real value of a property.

The rules for assessing the tax differ depending on the use of the land. The major categories are: urban and agricultural property. Urban properties also have different categories based on if it has commercial or residential status. This does not mean that the land is necessarily zoned for say construction or is even being used in that way. It is simply a tax use designation. The construction zoning is regulated on county by county bases by the Municipalities.

Property Tax Exemptions in Chile:

For urban property, all houses or apartments with an official value below CLP $14,655,788 DO NOT PAY Property Tax. This applies to buildings in general, but does not include lots located in urban areas with no construction on them. All agricultural Land is exempt up to CLP $5,306,642.

The Chilean Tax Rate for Property and Real Estate as of 2006

Urban Properties: non agricultural - non commercial land:

1% from $14,655,788 to $52.342.100 CPL

More than $52.342.100 CPL 1,2%

Less than $ 14.655.788

0.00%

between $ 14.655.788 and $ 52.342.100

1.00%

more than $ 52.342.100

1.20%

Commercial property (non agricultural)

pay 1,2% plus an additional 0,025% tax.

(NOTE: Property taxes in Chile as of 2009, must be paid on a per semster basis and can no longer be paid in advance for the entire year)

How to find the property tax rate for a particular piece of property:

So, you are looking at buying a piece of real estate or own a piece of real estate in Chile and you want to know the taxes. This is what you need to do. To check for the taxes a property must pay in Chile, you can ask at the Chilean Department of Treasury (Tesorería General de la República) for a Debt Certificate. In order to get this certificate you will have to have the Property Tax Identification Number or "Rol de Avalúo" to track the property.

Also, if you want to know the official legal tax value of the property (avalúo fiscal) you can get a certificate from the Chilean Tax Bureau or "Certificado de Avalúo Fiscal". This certificate is issued by the Chilean Tax Bureau (SII) and registers the legal value of the property, official address, name of the owner as registered by IRS, and any tax exemptions the property might have.

This certificate DOES NOT however constitute a legal document to prove ownership of the property. The only document that does this is the ownership certificate or "Certificado de Dominio Vigente" issued by the Registry or "Conservador de Bienes Raíces" where you registered your property title in Chile.

You can get this certificate of legal value online at the Chilean Tax Bureau website www.sii.cl , if you have the Property Tax Identification Number or "Rol de Avalúo".

What does the new 2006 property tax law in Chile mean for you?

In January 2006 the Chilean Tax Bureau re-evaluated all urban property in the country. As a result, all property taxes experienced a considerable increased. Many properties in Chile had been undervalued for years. Because of this, the new tax rate will be applied in a phased manner to reduce the burden on land owners. All property in Chile that experienced a tax increase will pay a 25% increase in the first semester of 2006, and then a 10% increase each semester after that until reaching the new rate.

Please also be aware that during this nation wide revaluation, many of the new values were contested by land owners. Not all of the claims have been ruled on yet by the Chilean IRS.

Every time you purchase a property the notary must inform the Chilean Tax Bureau, and check that all taxes have been payed. Without the proper tax certificate free of any debt you cannot purchase the property. There is no exceptions to this rule, and you should check when negotiating the purchase of a property that the owner is able to clear the tax debt on the property before buying.

Let us repeat again, you should talk to an expert and find assistance. The tax law in Chile is in many ways very simple, but it is still the law and should be handled carefully. Mistakes can be costly, and properties are auctioned off in Chile for failure to pay taxes everyday.

About the Author:

Zandra Valenzuela is a Chilean attorney and head of the legal department for Spencer Global. She is a graduate of the University of Chile Law School, studied Public International Law in Europe. She is currently a professor of International Law at several law schools in Chile.