Tax | Favorable Court Ruling on Real Estate Tax Planning in Brazil Allowing Refund and Reduction of Tax on Transfer of Assets

A recent decision by the Brazilian Superior Court of Justice (STJ) reduces taxation on Real Estate property transfer operations, benefiting property owners, real estate investment funds, and succession planning operations when real estate is paid into the assets of legal entities.  

The decision is a milestone, as, until now, the Municipality had decided on the amount of the tax (since the tax is Municipal), and the amount defined was generally much higher than the value of the purchase and sale transaction that actually took place. 

From now on, the tax base becomes the market value of the transaction that took place. This is because the taxpayer’s declaration on the market value is now presumed to be in good faith. In other words, the burden of proof to modify the assessment falls on the Municipal Tax Authority, and not on the taxpayer as it has been until now. 

This decision is important, as it was rendered in the repetitive appeals regime. In this way it binds the entire Judiciary that must obey the precedent. 

As the decisions of the STJ cannot undergo modulation of effects, the possibility of refunding amounts paid in excess in the past is now open.  This new understanding can open doors both for the refund of values, and can stimulate the realization of planning by reducing the cost of the tax due.


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