On November 25, 2025, the law establishing the Special Regime for Asset Update and Regularization (REARP) was enacted, allowing taxpayers to update the value of real estate and other assets for Income Tax purposes to their actual market value, upon payment of a reduced tax rate. This represents a significant change in the capital gains tax framework, which until then had been based exclusively on the historical acquisition cost, often outdated after years or decades.
Under the new legislation, individual taxpayers may update the value of real estate by paying 4% on the difference between the declared value and the market value. For legal entities, taxation occurs through IRPJ and CSLL, totaling 8% on the same difference. After payment, the updated value becomes the new acquisition cost for purposes of a future sale, substantially reducing the taxable capital gain upon disposal of the asset.
REARP also provides for a regularization mechanism for lawfully acquired assets that were not declared or were incorrectly declared in prior years. This regularization is carried out under more favorable conditions than those applicable in a potential tax audit, shielding taxpayers from substantial penalties and prolonged tax disputes.
From a practical standpoint, the asset update is particularly advantageous for taxpayers who own very old or highly appreciated properties, as it avoids taxation on the accumulated appreciation over time, which market practice and legal doctrine often regard as a “notional gain” resulting merely from inflation. The measure also enhances asset transparency and legal certainty, by aligning declared values with actual market values.
Nevertheless, adherence to the regime requires caution. Taxpayers should assess their expected holding period, as the update entails immediate tax payment. In addition, it is advisable to obtain a reliable appraisal or valuation report to support the declared market value, ensuring consistency in the tax return and preventing future challenges.
In summary, the new law creates a relevant opportunity for lawful and expressly authorized tax planning, with the potential to significantly reduce the tax burden on future real estate transactions. The analysis, however, should be conducted on a case-by-case basis, taking into account the taxpayer’s asset profile, available documentation, and the intended use or sale of the property.