The Tax Reform enacted at the end of 2023 is now a reality in Brazil. Among its numerous changes and new measures, its primary objective is to simplify the consumption taxation system, facilitating oversight and reducing tax evasion.
Based on the approved text, the main changes include:
(i) the elimination of ICMS and ISS, which will be replaced by the IBS (Tax on Goods and Services), under the jurisdiction of states and municipalities;
(ii) the elimination of PIS, COFINS, and IPI, which will be replaced by the CBS (Contribution on Goods and Services), managed by the federal government.
One sector significantly impacted by the Tax Reform is the real estate sector, which currently benefits from a substantial tax advantage through the RET – Special Tax Regime for Real Estate Developments.
The RET, established by Federal Law No. 10,931/04, allows real estate developments that meet the legal requirements to unify the payment of IRPJ, CSLL, PIS/Pasep, and Cofins with reduced rates. Currently, the rates are set at 1% for social housing projects and 4% for other developments.
For the allocation of the 1% rate, the distribution is as follows:
- 0.44% as Cofins;
- 0.09% as PIS/Pasep;
- 0.31% as IRPJ;
- 0.16% as CSLL.
For the 4% rate, the distribution is as follows:
- 1.71% as Cofins;
- 0.37% as PIS/Pasep;
- 1.26% as IRPJ;
- 0.66% as CSLL.
Currently, the RET provides a favorable tax structure for the real estate sector due to its reduced rates.
With the elimination of PIS and Cofins, debates have arisen regarding the need to preserve the RET. In response, Complementary Bill (PLP 68/2024), which regulates this reform, proposes changes to the RET legislation, removing references to PIS and Cofins while maintaining its application exclusively for IRPJ and CSLL.
Under the new rules, the RET will no longer apply the 4% rate previously allocated to PIS, Cofins, IRPJ, and CSLL. Instead, it will have a total rate of 1.92%, with 1.26% allocated to IRPJ and 0.66% to CSLL. For social housing projects, the unified rate will be reduced to 0.47%.
These changes will take effect on January 1, 2027, coinciding with the elimination of PIS and Cofins.
In summary, while the RET will remain in effect, it will only cover the unified payment of IRPJ and CSLL. References to PIS and Cofins contributions have been removed, as these taxes will be replaced by CBS and IBS, as regulated by PLP 68/2024, which establishes a specific regime for real estate assets.
PLP 68/2024 introduces IBS and CBS taxation for the following operations:
- Sale of real estate, including those resulting from real estate developments and land subdivision;
- Transfer or assignment of onerous real rights over real estate;
- Rental, leasing, or similar arrangements involving real estate;
- Real estate management and brokerage services;
- Construction services.
For certain real estate activities, PLP 68/2024 proposes a 40% reduction in IBS and CBS rates, while rates for activities such as leasing, renting, or similar transactions involving real estate will be reduced by 60%.
The real estate sector is set to undergo significant changes, directly impacting the tax costs of companies in the industry. It will be crucial to closely monitor regulatory updates to ensure a smooth transition to the new provisions.
This matter is still under legislative review and may be subject to further changes. For this reason, the Tax Law Team at Marins Bertoldi will continue to closely monitor all developments and is available to address any questions and provide tailored insights based on each business’s specific context.
