Tax reform and real estate
What changes in practice for property owners, investors and companies in the real estate sector.
The tax reform has brought significant changes to the real estate sector and requires attention from property owners, investors, asset holding companies, developers, subdividers, landlords and companies working with real estate. With the reform, various real estate operations are now expressly covered by the new IBS and CBS system, which tends to alter costs, margins, pricing and asset structures.
What requires more attention
Among the operations with the greatest potential impact are:
- Sale of properties
- Leasing, assignment and renting
- Real estate development
- Land subdivision and parceling
- Property administration and brokerage
- Non-onerous property transactions with partners and spouses
Additionally, other relevant taxes continue to exist, such as ITBI, ITCMD, IPTU, ITR and Income Tax. This means that the tax analysis of real estate will become even more strategic, as the same operation may involve taxation on consumption, property and income simultaneously.
Property rental: one of the most sensitive points
Property rental deserves special attention. Under the new system, it is now part of the specific regime for real estate, subject to IBS and CBS, albeit with a legal 70% rate reduction. In practice, this may directly affect:
- Asset holding companies
- Corporate leases
- Income-generating properties
- Real estate investment structures
- Real estate funds, depending on applicable classification
An optional simplified taxation regime has also been created for certain leases, with a 3.65% rate on gross revenue, subject to specific legal and contractual conditions.
Reducers and specific regimes
The new legislation provides mechanisms to reduce the tax impact on real estate:
These mechanisms can represent significant tax relief, but their application depends on the type of operation, the taxpayer's profile and the correct legal classification.
What we recommend at this time
Given this new scenario, it is advisable to review in advance:
- Lease, rental and built-to-suit contracts
- Asset holding company structures
- Property purchase and sale operations
- Development, subdivision and real estate projects
- Asset and succession planning involving properties
- Pricing models and tax burden pass-through
Our assessment
The tax reform does not eliminate the importance of real estate planning — on the contrary, it makes this planning even more necessary.
More than identifying whether there is a tax incidence, it will be essential to understand which tax applies, at what moment, on what basis, with what reductions and with what effective economic impact.