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 deployment of Tax Increment Financing (TIF) and associated increases in property taxes.

To properly safeguard your commercial investment, it is crucial to first clarify a fundamental distinction in the Chilean legal system: Municipalities in Chile lack the legal authority to increase property taxes (Contribuciones) to finance local bonds or redevelopment initiatives.

The Internal Revenue Service (SII) is the exclusive agency responsible for all tax administration and enforcement in Chile. Therefore, the authority to appraise property and establish the tax base resides solely with this central government institution. While the Municipality cannot unilaterally increase your taxes, the redevelopment itself subjects you to a significant prospective risk: a technical Revaluation (Reavalúo) conducted by the SII, which could elevate your tax liability based on revised market conditions.

Understanding that your inquiry appears to be preventive in nature 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 the operation of the Chilean property tax system, the specific risks associated with the redevelopment affecting your property, and the legal defences available to you. This proactive measure will ensure that you are fully informed and prepared to act immediately should the authorities modify your tax assessment in the future.

Future Defence Strategy: If a tax increase is notified, current Chilean tax legislation affords property owners explicit rights to challenge those assessments. However, any defence must be grounded in technical and legal discrepancies rather than mere disagreement with the assessed value.

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

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  Administrative Defence: Filing an administrative challenge with the Chilean Tax Authority to rectify technical errors.

  
  


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  Judicial Litigation: If required, litigating before the Tax and Customs Courts (TTA), contesting the legality of the assessment on specific technical grounds established by law.

  
  

Why being prepared is critical: Even though this remains a preventive stage, it is vital to have counsel in readiness. The law establishes fatal deadlines for lodging claims once a notification is issued—ranging from 30 days for administrative reviews to 180 days for judicial claims. Failure to comply with these timelines will render any new tax assessment permanent.

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

1. 
   

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

   
   


2. 
   

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

   
   


3. 
   

   Detailed Assessment Certificate (Certificado de Avalúo Detallado): If you cannot provide the SII password, please forward this certificate (available through the SII portal).

   
   


4. 
   

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

   
   


5. 
   

   Context of the Inquiry: Please provide further details concerning the current situation known to you. For instance, have you received a specific alert, or is this inquiry grounded in general market information or rumours?

   
   

Once we receive this information, we will be able to prepare a proposal for services and fees regarding the Legal Memorandum, and schedule a brief call to discuss the most effective way to monitor and safeguard your investment.

Best regards,