Chile approves temporary VAT exemption for new home sales

Chile has approved a temporary 12-month VAT exemption for the first sale of new homes, a measure intended to stimulate a housing market currently holding approximately 100,000 new units. While the exemption applies to new properties with definitive municipal reception, experts note it does not equate to an automatic 19% price reduction. Because land is not subject to VAT and construction firms can use VAT paid on materials as tax credits, the actual benefit to buyers is estimated to be between 2% and 4% for typical apartment projects.

The Ministry of Finance estimates an average reduction of 6% to 7% when factoring in various project types. Beyond price, the measure may allow for lower down payments and monthly mortgage dividends. The policy arrives amid a challenging sector where roughly 500,000 families lack homeownership and the construction industry has seen a loss of approximately 180,000 jobs. The law awaits review by the Constitutional Court and official publication to take effect.