Chile Forum

Hello all,

A friend of mine (we are both American) is going to sell me her Santiago home. Both she and my money are in the U.S., so we'd like to do the transaction there, in dollars. Is that OK to do, as far as the IRS and SII are concerned? What type of documentation of the funds transfer might we need for either government?

Saludos

If I read this correctly you are saying that the transaction will take place in the US, so there is no money transfer to Chile.

As far as Chile is concerned you need to go to a Notaria and ask them what kind of paperwork will it be require to get the deed on your name in Chile, since the paperwork from the transaction will be US issued you them need to have it notarize as valid at the Chilean Embassy or nearest consulate in the US, and in Santiago at the Ministry of Exterior so they can validate the documents in Chile, they are only open in the mornings BTW

Hi Hugh, thanks for replying.

As far as the paperwork goes, I think I'm all set. The owner left a power of attorney with another friend, and my lawyer has confirmed that this other friend can legally sell me the house.

My question is about the legal/tax implications of the transaction itself ocurring in the U.S. rather than in or to/from Chile. When I bought an apartment here, my check was held at the notary until the escritura came through. This time there will be no check, no payment of any kind in Chile. If I just say that I paid her X dollars, is that enough?

And the transaction in the U.S... I'm going to be writing her a huge check, does she just tell the IRS that it's proceeds from the sale of a foreign property? Does she need to document the sale for the IRS?

You have to declare at the time of sale the real value for the Chilean IRS or the registry will not / can not accept it (they are obligated by law), but there is no problem doing the transaction in the U.S. or in other currencies.

We do out of country transactions for clients all the time involving property payments between foreigners and foreign bank accounts. We in general avoid it whenever possible because of the problem you mentioned regarding securing the registration and the funds. You are not depositing a bank counter check at a notary in escrow to protect you until the registration goes through.

If for some reason the title is not accepted for registration (e.g. prohibition on sale, already sold to someone else, not the owner, so on), you will have a very serious international legal mess on your hands that could very easily cost you more to fix than the property is worth. Think long and hard about just how good of friends you are, and how good a friends you would like to continue to be should something go wrong. Make sure your lawyer is conducting a full title search. Your friend might have made a mistake in her purchase.

As for the U.S. you will have to check with your accountant, but as long as you declare they should not care where it happens. Don't quote me on this, but I recall seeing some sort of provision that exempts oversees real estate transfers. Again, I might be completely wrong about that.

Remember however, the buy / sale agreement MUST be done at a Chilean notary or the Chilean consulate (not recommended because they make lots of errors). Make very very sure all your Chilean powers of attorney are in order for everyone signing at a notary in Chile, and whom ever is handling the registration has the powers to do so.