What are the legal risks for property owners if a Chilean city uses tax increment financing to fund redevelopment?

We have received your inquiry regarding the proposed redevelopment in your neighborhood and your concerns about the potential use of Tax Increment Financing (TIF) and subsequent property tax increases.

To properly protect your commercial investment, it is crucial to first clarify a fundamental difference in the Chilean legal system: Municipalities in Chile do not have the legal authority to increase property taxes (Contribuciones) to fund local bonds or redevelopment projects.

The Internal Revenue Service (SII) is the sole agency responsible for all tax administration and enforcement in Chile. Therefore, the power to appraise property and set the tax base resides exclusively with this central government agency. While the Municipality cannot unilaterally raise your taxes, the redevelopment itself exposes you to a significant future risk: a technical Revaluation (Reavalúo) by the SII, which could increase your tax burden based on new market conditions.

Understanding that your inquiry appears to be preventive and that no tax increase may have been notified yet, we propose preparing a Detailed Legal Memorandum.

This document will provide a comprehensive overview of how the Chilean property tax system functions, the specific risks associated with the redevelopment affecting your property, and the legal defenses available to you. This proactive step will ensure you are fully informed and prepared to act immediately should the authorities modify your tax assessment in the future.

Future Defense Strategy: If a tax increase is notified, current Chilean tax legislation gives property owners specific rights to challenge these assessments. However, the defense must be built on technical and legal discrepancies rather than simple disagreement with the value.

Our firm can represent you by executing a two-stage defense strategy when the time comes:

• 
  

  Administrative Defense: Filing an administrative challenge with the Chilean Tax Authority to correct technical errors.

  
  


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  Judicial Litigation: If necessary, litigating before the Tax and Customs Courts (TTA), challenging the legality of the assessment based on specific technical grounds provided by law.

  
  

Why being prepared is critical: Even though this is a preventive stage, it is vital to have counsel ready. The law establishes fatal deadlines to file claims once a notification is issued—ranging from 30 days for administrative reviews to 180 days for judicial claims. Missing these windows will make any new tax assessment permanent.

Request for Information To prepare the Legal Memorandum and establish a baseline for your property's current status, we require the following information:

1. 
   

   Property Roll Number (Rol de Avalúo): This is the unique tax ID for the real estate.

   
   


2. 
   

   SII Tax Password (Clave Tributaria): If possible, providing access to the property owner's account on the SII website would be extremely helpful. This would allow us to directly download the detailed technical certificates and review the full tax history without delay.

   
   


3. 
   

   Detailed Assessment Certificate (Certificado de Avalúo Detallado): If you cannot provide the SII Password, please send us this certificate (available via the SII portal).

   
   


4. 
   

   Notifications or Communications: Any notification, brochure, or document received from the Municipality, the Internal Revenue Service (SII), other public agencies, or private entities regarding the redevelopment plan or potential tax implications.

   
   


5. 
   

   Context of the Inquiry: Please provide more details regarding the current situation known to you. For example, have you received a specific alert, or is this inquiry based on general market news or rumors?

   
   

Once we receive this information, we will be able to prepare a service and fee proposal for the Legal Memorandum, and schedule a brief call to discuss the best way to monitor and protect your investment.

Best regards,