Corporate tax is reduced for real estate and family holding companies that sell real estate previously used as profitable rental property.
This is also true for companies that have prevailing real estate activity (their corporate object must include real estate and renting activities as a main activity). That is the current understanding of the Brazilian Federal Revenue.
There is a tax advantage if these properties are eventually sold and the company subject to the estimated profit method has prevailing real estate activity, even if they are not in inventory but are part of their “noncurrent assets” (long term investments). The real estate profit is considered revenue (rates 8% and 12% as IRPJ and social contribution on net income), and is not subject to capital gains tax (withholding income tax at rates that vary from 15% to 22.5%, depending on earnings, and 12% of social contribution on net income).
To estimate the taxes, it is important to analyze the corporate and accounting standards to identify whether the real estate property is considered an investment or is considered essential for the maintenance of the company’s activities (for example, company headquarters). If it comes to the sale of the company headquarters, for example, the real estate profit will necessarily be subject to capital gains taxes.
Tax planning is crucial in such context. Capital subscription is often paid up with real estates and companies often buy real estate as a long-term investment. And the real estate often becomes a source of rental income to the company. The fact that such real estate properties may eventually be sold should be disregarded.
