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Chamber of Construction Proposes to Eliminate VAT on Homes Below 4,500 UF (Unidad de Fomento)

Posted by Leanne Dudley on November 18, 2019
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This step of elimination, explains the union, would favour buyers of vulnerable, emerging and the middle groups. 80% of homes sold in the past eight years had sales price of less than or equal to 4,500 UF.

VAT will be exempted from the sale of homes of up to 4,500 UF (a unit of account in Chile), the Chilean Chamber of Construction (CChC)  proposed . This is intended to replace the current sectoral tax incentive provided for in the Government’s tax modernization project.

This measure, explains the union, would directly benefit the vulnerable, emerging and middle groups. It is also unlike the current proposal which could be seen as an incentive to build new properties.

Currently, the tax reform project proposes raising the cap on the cost of building a house that can access special credit from 2,000 UF to 3,000 UF. It is currently equivalent to 65% of VAT but with an amount equivalent to 45% of VAT.
This means that companies that build houses with a construction cost of up to 3,000 UF are entitled to a special credit. This corresponds to sales prices of 3,000 UF and 5,000 UF.

The current legislation exempts the payment of VAT to people who purchase a home with the support of a subsidy, where its price is up to 2,400 UF.

Specifically, the CChC proposes to extend the range of houses that can be considered as social interest. The benefit would be free from VAT from the current 2400 UF to 4500 UF; this raises their maximum selling price.
According to calculations by the union, 80% of the houses sold in Chile within the last 8 years had a sale price of less than or equal to 4500 UF. 

The measures proposed by the Chamber have a fiscal cost similar to government spending. This amounts to around 3.4 million UF per year.
“With the same resources one can make a more robust proposal,” says CChC president Patricio Donoso.

Subsidies

“The proposal involves eliminating the difference between houses that are bought with a subsidy and one bought without a subsidy. For the same housing, the one with subsidy is free from VAT, and the other is affected because it is unsubsidized. So, we have same housing that have different values, depending on the person; that’s discrimination. We propose, with the same use of tax resources, to declare houses up to the sale price of 4,500 UF, free from VAT, to be considered a social good housing,” he explains.

The benefit, the union calculates, is that eliminating the VAT would mitigate the significant increase in housing prices; the increase in housing prices are triple the average salary growth in the past decade.

 

Disclaimer:
Translated from ‘Cámara de la Construcción propone eliminar IVA a las viviendas de hasta 4.500 UF

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