Following the approval of tax reform in Brazil—though some practical guidelines are still pending—taxpayers naturally began to wonder how these legislative changes would actually affect their lives. Whether regarding specific instances or routine matters, questions became frequent, such as: “What invoices should I issue now?”, “By when do I need to get organized?”, “I’d like to transfer my assets early: is there a deadline?”, or “What are the new ITCMD rates?”
The texts are not only lengthy but not always clear to every reader—even though they are intended for the general public. As questions arise, so does the need for explanations.
Our previous month’s newsletter also focused on tax reform—specifically, legislative changes to taxation for taxpayers operating in the real property sector. That article addressed key points for anyone who, in one way or another, holds real property assets and operates directly in the field.
Although that text focused on the reform’s perspective regarding consumption, it served as a useful bridge to connecting the same topic with the angle of estate planning. Even though the legal language refers to the “real property sector”—a term that might suggest the scope is limited to large real property agencies or developers—the legislation classifies even individuals who trade properties on a recurring basis as taxpayers subject to IBS/CBS (provided certain requirements are met).
Classifying individuals who engage in the recurring rental and/or buying and selling of properties as taxpayers for these new taxes (IBS/CBS) results in a significant increase in their effective tax burden. Regarding rental income, the combined tax rate for individuals—currently 27.5%—could rise to 35.6%. Meanwhile, for the sale of real property, the rate on capital gains—currently ranging from 15% to 22.5%—could reach as high as 36%.
This raises a common question: what about using a legal entity (a corporation or LLC)? Is it worth it? Should I place my properties into a real estate holding company?
The recommendation is to conduct a case-by-case analysis, as the specific nature of each family’s assets means there is no one-size-fits-all answer. Despite the variety of situations, numerical simulations show that real property holding companies remain tax-efficient for families owning such assets.
Even though the tax burden on revenue generated by these companies — whether from leasing or selling real property — has increased, holding assets within a legal entity remains advantageous.
However, if a family decides to transfer personally held assets to a real property holding company, the Real Estate Transfer Tax (ITBI) applies. This is where an opportunity arises: taxpayers can still rely on current legislation, which sets the ITBI calculation base as the transaction value (which may be the assessed value), or they can adopt the Supreme Federal Court’s current stance and argue that no ITBI is payable at all in this scenario (Legal Issue No. 796, currently under review via Legal Issue No. 1,348). Due to the enactment of Supplementary Law 227/2026—which allows municipalities to base the ITBI (Real Estate Transfer Tax) calculation on the transaction value — the tax payable on such a transfer could be significantly higher.
Taking it a step further: once the legal entity is established, if the owners wish to transfer their quotas or shares to the next generation, they can do so at current ITCMD (Inheritance and Gift Tax) rates and based on a valuation lower than what the new legislation mandates. Families still have four months to weigh their options and implement measures that could ensure tax optimization before the tax reform scheduled for 2027 takes effect.