The foreigner’s guide to property taxes in Chile: what you need to know

Buying real estate in a foreign country can be intimidating, especially when it comes to navigating a completely new tax system. For US citizens and foreign investors looking at the booming real estate market in southern Chile or the Patagonia region, understanding the local tax landscape is just as crucial as finding the perfect piece of land.

The good news? Chile’s property tax system is generally simple and, in many cases, highly favorable compared to the crushing property tax rates found in many US states. However, making a mistake with the Servicio de Taxes Internos (SII), the Chilean equivalent of the IRS, can lead to costly penalties and freeze your ability to sell or develop the land later.

The main property tax in chile: "contributions"

In the United States, you are likely used to paying thousands of dollars annually in local county property taxes. In Chile, the equivalent is called contribuciones (or Impuesto Territorial).

Here is how contributions work in Chile:

• Low rates: The annual tax rate for residential and agricultural properties is usually a fraction of a percent (often between 1% and 1.2% of the fiscal assessed value, not the commercial market value). Because the fiscal value is typically much lower than the current market price, your tax bill is usually surprisingly low.
• Quarterly payments: Instead of one massive annual bill, contributions are paid in four equal installments throughout the year (April, June, September, and November).
• Exemptions for rural land: Many rural and agricultural properties in southern Chile are completely exempt from paying contributions if their fiscal value falls below a certain threshold. It is entirely possible to own a beautiful 5,000m² (1.2 acres) plot of land in Patagonia and pay $0 in annual property taxes.

Taxes when buying: vat and stamp tax

When closing the deal, foreign buyers often ask about transfer taxes or VAT (Value Added Tax, or IVA in Chile, which is 19%).

Do you have to pay 19% VAT when buying land? Generally, no. If you are buying a used property or raw, undeveloped land from an individual seller, the transaction is exempt from VAT. VAT usually only applies if you are buying a brand-new construction directly from a real estate development company (a "constructora").

If you are buying the property entirely in cash (which is the most common route for foreigners, as getting a Chilean mortgage without local income is practically impossible), there is no heavy "transfer tax" or "stamp tax" on the deed of sale itself. The Stamp Tax (Impuesto de Timbres y Estampillas) only applies to credit operations, such as mortgages.

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