Real estate leases entered into through Real Estate Investment Funds (FIIs) may be subject to IBS and CBS taxes as part of the consumption tax reform.
Under the current system, taxation of this income is concentrated at the stage of distribution to unit holders. At the fund level, there is no IRPJ, CSLL, PIS, or COFINS tax liability. Taxation occurs at the time of income distribution, with IRRF levied at a rate of 20%, in accordance with the regime applicable to real estate investment funds.
With the tax reform, this approach is partially altered. The leasing of real estate is now subject to IBS and CBS. FIIs may be taxed if they do not meet the exemption criteria set forth in LC 214/2025.
On this topic, we highlight 3 key points:
1. Application of the IBS and CBS to real estate leasing transactions:
Pursuant to Article 4, Paragraph 2, Item II, of LC 214/2025, the IBS and CBS apply to real estate leasing transactions.
2. Circumstances in Which FIIs Are Exempt from IBS and CBS:
An FII will be considered a taxpayer subject to IBS and CBS, except in the circumstances provided for in Article 26, Paragraph 5-A, Item I, of LC 214/2025.
In summary, eligibility depends on three sets of conditions:
(i) Market structure and shareholder dispersion: shares traded exclusively on a stock exchange or organized market, with a minimum of 100 shareholders;
(ii) Ownership concentration limits: no significant concentration by an individual or a group of related individuals, as well as restrictions on the ownership of legal entities with controlling power or a majority stake, except for pension funds;
(iii) Equivalent investment structures: funds with a predominant stake held by other qualified FIIs, pension funds, or investment vehicles with equivalent characteristics, as well as other funds with an exclusively financial portfolio, are also exempt from taxation.
3. Time of Tax Liability:
The taxable event for the IBS and CBS in lease transactions occurs at the time of payment, pursuant to Article 254, III, of LC 214/2025, with a direct impact on the fund’s cash flow.
4. Expected Reduction in the Tax Burden for the Sector:
Real estate leasing transactions are subject to a 70% reduction in the IBS and CBS tax rates, pursuant to Article 261, sole paragraph, of LC 214/2025. This reduction is applied to the system’s reference tax rate.
By reclassifying real estate leases within the scope of the IBS and CBS, the reform changes the taxation dynamics of FIIs, which are now subject to taxation both at the source of income and upon distribution to unitholders.
Although the fund regime remains intact, the economic effect results in a reduction in net returns to investors, requiring greater attention to the structuring and efficiency assessment of real estate investment vehicles.
Investors should closely monitor the classification rules and operational impacts of the reform to avoid surprises regarding the profitability of real estate assets structured through FIIs.
