With regard of the issuance of Law No. 18,630 of 1987, which incorporated construction activity into VAT, the so-called Special Credit for Construction Companies (“CEEC”, for its initials in Spanish) was included in Decree Law No. 910 of 1975, which originally allowed the deduction of 0.65 of the VAT tax debit that the company had to determine in the respective month for: 1) the sale of residential properties whose value does not exceed 2,000 UF with a limit of 225 UF each; or 2) General Construction Contracts (“CGC”, for its initials in Spanish) for said homes; or 3) the sale of homes whose value does not exceed 2,200 UF and that is exempt from VAT because it is made to beneficiaries of housing subsidy, in which case the amount of credit would be equivalent to 0.1235 of the value of the sale (given that there is no tax debit), with a limit of 225 UF; or 4) with respect to CGC held by certain charitable entities indicated in article 21 of Decree Law No. 910 of 1975.

Over the years, the CEEC benefit has been restricted on different occasions, a process that culminated with the issuance of Law No. 21,420 of 2022, which definitively eliminated, as of January 1^st, 2025, article 21 of Decree Law No. 910 of 1975 and the first paragraph of No. 6 of article 23 of the Law on Sales and Services Tax, the regulatory basis of the CEEC.

Subsequently, in order to complement and modify the provisions of Law 21,420, Laws Nos. 21,462 and 21,558 were approved, which establish and regulate a new transition regime until the complete elimination of the CEEC, an issue that was postponed until on January 1^st, 2027.

The Chilean Internal Revenue Service, through Circular No. 37 of 2023, issued new instructions establishing its definitive interpretation regarding the elimination of the CEEC and the regulation of its transitional regime.

In accordance with current legal regulations and administrative interpretation, the transitional regimes for using the CEEC would be the following:

CEEC BENEFIT FOR GENERAL CONSTRUCTION CONTRACTS OTHER THAN ADMINISTRATION (LUMP SUM)
Hipothesis	Building permit	CGC Celebration	Start of works	Benefit
1	Requested before 04/30/2023	Any time	Any time	Full use of the CEEC (0.65 general rule or 0.1235 in homes with housing subsidy).
2	Requested as of 04/30/2023 and obtained before 01/01/2025	Between 01/01/2023 and 12/31/2024	Before 01/01/2025	General rule 0.325 and 0.06175 homes with housing subsidy.
3	Requested as of 04/30/2023 and obtained before 01/01/2027	Between 01/01/2025 and 12/31/2026	Before 01/01/2027	General rule 0.1625 and 0.030875 with housing subsidy.
4	As of 01/01/2027	As of 01/01/2027	As of 01/01/2027	CEEC benefit eliminated, unless requirements are met Hypothesis No. 1.

CEEC BENEFIT SALES OF REAL ESTATE CORPORATE PROPERTY FOR ROOMS
Hipothesis	Building permit	Start of works	Benefit
1	Requested before 04/30/2023	Any time	Full use of the CEEC (0.65 general rule or 0.1235 in homes with housing subsidy).
2	Requested as of 04/30/2023 and obtained before 01/01/2025	Before 01/01/2025	General rule 0.325 and 0.06175 homes with housing subsidy.
3	Requested as of 04/30/2023 and obtained before 01/01/2027	Before 01/01/2027	General rule 0.1625 and 0.030875 with housing subsidy.
4	As of 01/01/2027	As of 01/01/2027	CEEC benefit eliminated, unless requirements are met Hypothesis No. 1.

In this way, to the extent that the requirements contemplated in the current regulations are met, taxpayers who request their building permits during the current period (hypothesis No. 2 requested as of 04/30/2023 and obtained before 01/01/2025) may deduct 0.325 of the VAT debit regarding taxable or CGC sales or 0.06175 of the value of the sale of real estate or CGC when dealing with VAT-exempt operations, by application of Letter F of article 12 of the Law on Sales and Services Tax.

It is a complex matter, so if you have any questions about the application of the transition regimes, we are available to answer them.