Companies, investors, and individuals have greater certainty regarding the calculation of the real estate transfer tax (ITBI) now that the declared value is maintained as the basis for the tax.
The discussion gained prominence following Complementary Law nº. 227/2026, which amended the ITBI rules set forth in the National Tax Code and introduced new criteria for determining the market value of real estate.
The legislative change sparked debate over whether municipalities could automatically use values estimated by the Tax Administration to calculate the tax, thereby disregarding the value declared by the taxpayer.
Early rulings by the São Paulo Court of Justice (TJSP) indicate that the new legislation did not authorize the automatic substitution of the value declared by the taxpayer.
This ruling reinforces that the technical criteria set forth in Complementary Law No. 227/2026 may be used to determine any discrepancy between the declared value and the market value, provided that the proper procedure is followed and the taxpayer’s right to be heard is respected.
Regarding this topic, we highlight 3 key points:
1. The value declared by the taxpayer remains the benchmark for ITBI: The Superior Court of Justice (STJ), in its ruling on Precedent 1.113, reaffirmed the understanding that the value declared by the taxpayer is presumed to be consistent with market value and may only be disregarded by the tax authorities through a specific administrative procedure. Following the enactment of Complementary Law No. 227/2026, a debate arose regarding whether this understanding might be superseded. The initial rulings by the São Paulo State Court of Appeals (TJSP), however, indicate that the new wording of Article 38 of the National Tax Code did not authorize the automatic adoption of values estimated by the municipality in lieu of the value declared by the taxpayer.
2. Technical criteria may assist in tax audits, but do not permit automatic assessment: Complementary Law No. 227/2026 now provides that the market value must take into account technical criteria, such as prices prevailing in the real estate market, information provided by notary and registry services, characteristics of the property, and other parameters used in real estate appraisals. Although these criteria may assist the Tax Administration in determining market value, early precedents from the São Paulo State Court of Appeals (TJSP) indicate that they do not, by themselves, authorize the automatic substitution of the value declared by the taxpayer. Any discrepancy between the reported value and the market value must be demonstrated in a technical manner, through a specific procedure, ensuring the taxpayer’s right to contest the assessment, to a fair hearing, and to a full defense.
3. Transactions conducted prior to the new legislation must be evaluated: Complementary Law No. 227/2026 does not apply retroactively. Therefore, real estate transactions conducted before it took effect remain subject to the legal regime applicable at the time the taxable event occurred. Taxpayers who paid ITBI based on amounts higher than those declared or based on criteria adopted by the municipality without following the proper procedure may consider seeking a review of the assessments. The analysis must take into account the specific details of each transaction, including the date of transfer, the calculation basis used, the criteria applied by the tax authorities, and the existence of any administrative proceedings to reject the amount reported by the taxpayer.
The initial rulings by the São Paulo State Court of Appeals (TJSP) reinforce that Complementary Law No. 227/2026 did not eliminate taxpayers’ safeguards in the calculation of the ITBI. The Tax Administration’s use of technical criteria must adhere to certain limits and does not authorize the automatic substitution of the declared value.
For companies, investors, and individuals, the current landscape requires careful attention both in new real estate transactions and in the review of deals already completed. Analyzing the criteria used to calculate the tax can help identify risks, opportunities, and tax planning strategies.
