There are a series of specific circumstances in which you can take advantage of tax advantages when buying a home. These are cases with benefits at the tax level for the purchase of the real estate. Let’s see Tax Advantages of Rental Property below.
Reduction of interests in case of paying with mortgage credit
In the event that you acquire a property paying with a mortgage loan, you have the right to reduce the interest you pay from the gross taxable income. There are some limits, for example, that the maximum annual reduction that can be applied may not be greater than eight tax units (UTA) if the person’s basic income is not greater than 90 UTA. As it increases, the discount is reduced, and there is no discount for income greater than 150 UTA per year. In addition, there are a number of cases in which homes are exempt from VAT, such as:
If the seller is an unusual person
If a promise of sale was signed before 2015, or before 2021 the building permit was signed
- In case the house was acquired with the MINVU subsidy
- For the sale of undeveloped land
- Tax advantages for the DFL 2
Decree with Force of Law No. 2 entails a series of advantages in terms of taxes. On the one hand, the territorial tax is reduced, and there is also an exemption from inheritance taxes. In the case of re-selling the property, there are also tax exemptions applicable to the capital gains.
What is the DFL2 and what are its tax advantages?
Also known as Decree of Force of Law No. 2 (DFL2), framed in the Internal Revenue Service of Chile, it was promoted from the 1950s. The decree seeks to promote investment and marketing of low-cost housing.
Why low-cost housing?
It promotes real estate investments, to increase the supply and demand of housing for the middle and lower classes, which translates into lower rents. Promoting a decree, which protects this type of property under tax exemptions, makes its acquisition more attractive.
Real estate investment leverage
The DFL2 is without a doubt a decree to be taken into account, due to its great benefits in the payment of real estate taxes, such as tax-free rental income or a 50% reduction in contributions.
The legislative decree or decree with the force of law (DFL) is a legal norm with the rank of law, issued by the executive power. We speak of DFL2 to refer to the regulations that govern properties for residential use, those that have a constructed area of less than 140 square meters and are intended for natural persons. You can read more on the next page to find out which cases are within this decree with tax advantages.
First requirement: construction area
In order to know if the property you want to acquire, lease or sell falls within those governed by DFL2, the first point to take into account is the size of the real estate. The internal construction area is very important since the DFL2 has a limit for what it considers low-cost housing: 140 square meters. You must take this internal area into account if you plan to remodel the property in the future. A single square meter or more can make you lose the privileges of this decree.
How to know exactly how much space to include in the calculation?
In single-family homes, you should consider as an internal area all those rooms such as living room, bedrooms, bathrooms, kitchen, dining room and corridors.
The DFL2 does not include the basements and the garage as internal areas.
In the apartments, it is very important to take into account the terraces. They cannot be modified to be part of the dwelling as an internal area, or the benefits of the DFL2 decree will be lost immediately.
The use is essential to enter the DFL2
This decree only covers constructions intended for housing, for residential use. If you change its status to an office or commercial premises, you will immediately lose the benefits of the decree.
Who can be the beneficiary?
This decree only contemplates Tax Benefits for Rental Property and natural persons, that is, not legal entities or companies. The DFL2 only allows two properties of this type per owner. That is, from the third property onwards you no longer have the advantages of DFL2
What benefits does someone who invests in properties have and can take advantage of the DFL2?
- 50% discount on the Real Estate Conservator’s fee
- Reduction of 50% of the rate of stamps and stamps
- Inheritance and gift tax exemption
- Tax-free rental income
- Reduction of 50% of contributions
- No tax on capital gains in case of a sale, at least one year after purchase.
- Find out more about the tax advantages of the DFL2 in investing in properties.