Law No. 18,795 on the Promotion of Social Interest Housing (LVIS) of 2011 and its regulatory decrees, are the framework that to date has stimulated private sector investment in the construction of social interest housing, through obtaining tax benefits and exemptions.
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Last Friday, April 16, the Executive Power issued Decree 129/020, by means of which several articles of the current regulations of the Promoted Housing Regime (formerly Social Interest Housing) were modified. According to the explanatory memorandum of the aforementioned Decree, the purpose of these amendments is to stimulate private sector investment in promoted housing, in order to favorably affect the conditions of access to housing for the low, medium-low and middle-income sectors of the country. The following are the main changes brought about by the new Decree.
Characteristics of the dwellings
Single-room apartments with living areas equal to or greater than 25 square meters and equal to or less than 40 square meters are included in the housing projects that may be declared promoted, as long as they comply with the corresponding departmental regulations.
Investment characteristics
The limitation on the number of dwellings (100 units) to be promoted in construction, recycling, renovation or expansion projects is eliminated.
Tax benefits for construction, recycling, refurbishment or expansion
The following benefits have been added to the current ones, which are still in effect:
– The Wealth Tax exemption will include not only the fiscal year of completion of the works -previous wording-, but will be extended for the three fiscal years following the year in which the works are completed.
– The refund of Value Added Tax will be allowed on those goods or services incorporated to the civil work, up to two years after the work has been completed.
– The exemption from the Income Tax on Economic Activities (IRAE) on certain rents is increased from 40% to 60% of the income generated.
– The computation of the full IRAE exemption on leases is extended, as long as the related rental guarantees comply with certain requirements of amounts and maximum income.
Acquisition tax benefits for leases
It is added that the benefits of the regime will be available during the entire term of the exemption period of the Promotional Declaration. As regards IRAE, Personal Income Tax and Non-Resident Income Tax, the following amendments are made:
– 100% exemption with no rental price cap in certain areas, or when the lease is made through the MVOTMA Rental Guarantee Fund or other qualified guarantees.
– For the remaining cases, the exemption is increased from 40% to 60% of the income generated.
Completion of work
The possibility of granting partial completion of works is enabled for projects promoted with different stages or sectors.
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