With the tax reform that the new Government sent to the National Assembly and which must be processed in about thirty days, the price of a new home could be reduced by 3 or 4 percent for the buyer.

Although it is not the incentive that was initially offered to the construction sector, it will affect the price and better implementation, according to the Vice President of Constructores Positivos, Joan Proaño. “If I have lower costs, with all the competition out there, what we’re going to do is lower prices.”

What changes does the new tax reform proposed by Daniel Noboa bring?

President Daniel Noboa’s offer was to reduce the value added tax (VAT) from 12% to 5% for construction materials and finally in the presented tax reform he establishes a refund:

“We think that we will be able to reduce the final price of homes to the end consumer, if we will have lower costs, if we will have a refund of VAT, that VAT is not what will increase our profits. We will transfer this VAT refund directly to the end consumer, that is, we will have homes that are more affordable,” says Proaño.

The former director of SRI Francisco Briones criticizes the article on tax reform and points out that it includes the proposal of free zones that the Government of Guillermo Lasso did not adopt

He explains that the reduction will not be 12%, which is the VAT rate, because the building material is only part of the direct costs, which includes labor, and that both items correspond to 60% of the price, and the other 40% to indirect costs and the price of the land .

To give you an idea, comment that 35% to 40% of the total cost of the project is the cost of construction materials. “The final price of homes with this measure could be reduced between 3% and 4%”, and that percentage is quite a lot, he comments. And, for example, in a $90,000 house, the loss would be about $3,600.

The original idea of ​​reducing the tax rate “was also supposed to affect the consumer, but we saw it as very difficult, that reduction of all 12% was a very big impact on the fiscal coffers. In this case, however, it will have a direct impact on the consumer. We will have a bigger market, more demand, we will create a better offer and we will need to hire more staff.” And this is added to the second incentive of the law, so that “the more people we employ, the greater the possibility of income tax deduction. “These are measures that directly begin to contribute to the reactivation of the construction sector.

Tax reform: additional reduction of up to 90% of income tax for companies employing 12 to 500 young people

One disadvantage is that it only benefits real estate projects, the reduction of VAT to 5% covers more sectors, someone who builds or remodels himself, for example. But Proaño believes that it was very difficult to see the results at the end of the chain because the construction material producer processes other inputs that would continue with 12%.

While in favour, it is also noted that the proposed return encourages the formalization of real estate projects as well as control.