TAX ALERT - SEPTEMBER 2018 - REAL ESTATE SALE FOR INDIVIDUALS.

KEY IDEA: The profit obtained on the sale of real estate located in Chile by a natural person, regardless of the date on which they were acquired, could be subject to income tax if the seller is a taxpayer that obtained in said year effective income subject to the First Category tax.

The law order number 20.780 (Tax Reform) modified the tax treatment applicable to the profit obtained from the sale of a real estate located in Chile, made by natural persons. Under the current regulations, the profit may be released from taxation up to a ceiling of UF 8,000 for each taxpayer and the excess of the profit that exceeds this amount (either in the first sale or in the successive sales until consuming the UF 8,000 ) may be subject to a single tax, with a rate of 10%, as long as the following requirements are met: 

  • That the sale is made to an unrelated party and that the seller has no economic interest in said sale.
  • That more than one year has elapsed between the date on which the real estate was acquired and the subsequently selling.
  • In case of not fulfilling one of these requirements, the total of the gain on the sale will be taxed with Global Complementary tax, with a rate of up to 35%.

Notwithstanding the foregoing, the SII has interpreted in Circular N ° 44 of 2016 and later in Trades N ° 2,541 of 2017 and N ° 528 and N ° 1,527 of the year 2018, that for it to be applicable, the tax treatment described before, that in addition, it is necessary that the natural person who sells does not determine a First Category tax on effective rents. In other words, if in the year that the sale took place, the seller obtained income subject to First Category tax, such as, for example, real estate lease income or deposit interest, the profit obtained from the sale of the real estate could be subject to income tax.

It should be noted that this additional requirement established by the SII in its instructions is applicable to all real estate regardless of the date on which it was acquired.

Therefore, before a natural person carries out the sale of a real estate, it is necessary to analyze the particular situation of the seller, to determine if in the year that the sale is made, it will also generate effective rents subject to First Category tax.

Note: This document was prepared for informational purposes only and does not constitute legal advice.