Tax Reform and Its Impacts on Real Estate, Inheritance, and Rental Income

1. General Context

The Tax Reform approved in 2023 and regulated throughout 2024 and 2025 will bring significant changes starting in 2026, with direct effects on property owners, heirs, and landlords. The package of measures includes the modernization of real estate registries, the introduction of progressive ITCMD (Inheritance and Gift Tax) rates, and the inclusion of rental income within the new dual VAT model (IBS and CBS).

 

2. Property Tax (IPTU) and the Brazilian Real Estate Registry (CIB)

• Creation of the Brazilian Real Estate Registry (CIB), integrated with SINTER, which will function as a “CPF for properties.”
• Integration of data from municipalities, notary offices, and the Federal Revenue Service, enabling automatic data cross-checking.
• Practical consequence: revision of the assessed value of properties, aligning it more closely with market value.
• Impact: trend toward higher IPTU (urban property tax) in large cities, as well as increased oversight and reduction of undeclared property information.

 

3. ITCMD – Inheritance and Gift Tax

• Beginning in 2025, progressive tax rates (2% to 8%) will apply according to the value of the transfer.
• Possibility of taxing assets located abroad if either the donor or heir resides in Brazil (subject to state-level regulations).
• Impact: increase in tax burden for high-value estates and donations.
• Recommendation: implement estate planning using family holding companies, gradual donations, and wills to mitigate ITCMD liabilities.

 

4. Taxation of Real Estate Rentals

• Starting in 2026, rental income will no longer be taxed exclusively under the Individual Income Tax (IRPF) and will become subject to IBS and CBS.
• The new rule applies to individuals who:
  • own more than three rental properties, or
  • earn annual rental income above R$ 240,000.
• Transition regime:
  • 2026–2027: symbolic rates;
  • 2028–2032: gradual substitution;
  • 2033: full implementation of the new system.
• Available deductions:
  • 70% reduction in the taxable base for residential rentals;
  • 40% reduction for short-term rentals (Airbnb, Booking, etc.);
  • social deduction of R$ 600 per residential property per month.
• Impact: substantial increase in the overall tax burden, estimated at up to 27%, with direct effects on rental prices.

 

5. Mitigation Strategies

• Registry review: ensure regularity of property records with municipalities, notary offices, and the Federal Revenue Service.
• Asset and succession planning: establish family holding structures, and consider advance donations and wills.
• Portfolio restructuring: evaluate forming a legal entity to manage rental operations.
• Contract review: include tax pass-through clauses to tenants where legally permissible.
• Continuous legal and accounting monitoring: essential for compliance and adaptation throughout the transition period up to 2033.

 

6. Conclusion

Taxpayers should begin preparing now for the changes brought by the Tax Reform, by updating property records, restructuring contracts, and adopting succession and corporate planning strategies that ensure the mitigation of financial impacts and the preservation of legal certainty.