A matter of great relevance and frequent debate in the tax arena concerns the incidence of the Tax on the Transfer of Real Estate (ITBI) in corporate operations that involve the transfer of real estate, based on article 156, section I, and paragraph 2 of the Federal Constitution of Brazil.
Legal Contextualization: ITBI is a municipal tax, established according to article 156, section I, of the Federal Constitution, whose collection competence is exclusive to the municipalities. The incidence of ITBI occurs in the transmission of property of real estate, by onerous act, inter vivos.
Exception in Corporate Operations: However, according to paragraph 2 of article 156 of the Constitution, the non-incidence of ITBI is applicable in some specific corporate operations. This constitutional provision stipulates that the tax does not apply to the transmission of assets or rights incorporated into the assets of a legal entity in capitalization, nor to the transmission of assets or rights resulting from merger, incorporation, split-off, or extinction of a legal entity, except if, in these cases, the predominant activity of the acquirer is the purchase and sale of such assets or rights, leasing of real estate, or leasing. This understanding is reinforced by judicial and administrative decisions, which interpret that the purpose of the rule is not to burden operations that do not represent an effective transfer of real estate property in a commercial or speculative sense. Thus, corporate operations involving the contribution of real estate for the formation or increase of a company’s capital, or those resulting from corporate reorganizations, such as mergers and splits, as a rule, are not subject to ITBI.
Limitations and Precautions: It is important to highlight that the non-incidence of ITBI in these cases is not absolute. The immunity does not apply if the receiving company of the real estate has as its predominant activity the commercialization or leasing of properties. In addition, it is necessary to observe specific municipal legislations, which may detail or restrict the terms of this non-incidence. Another point of attention refers to the judgment of Extraordinary Appeal No. 796.376, in which it was decided that “the immunity in relation to ITBI, provided in section I of paragraph 2 of article 156 of the Federal Constitution, does not reach the value of the assets that exceed the limit of the capital to be integrated”.
Thus, if the value of the real estate integrated is greater than the company’s capital stock, the difference will be taxed by ITBI. Therefore, this regulation favors corporate reorganizations and capital contributions without the additional burden of the tax, as long as the applicable legal conditions and limitations are observed, representing a significant consideration in the tax planning of companies.