Interview for InvestNews. Read the full text
When you sell a property at a profit, you have to pay Income Tax. The tax is levied on the appreciation of the property which, in economic jargon, has a name: capital gain. It is the difference between the purchase value and the market value at the moment when the sale of the property takes place. And it starts at 15%.
But a law, approved in September, changed the rules of the game. Now, the appreciation of a property can be anticipated (without the need to sell the home) by paying a fixed rate of only 4%.
It works like this. If you paid R$ 100 thousand for your apartment in the distant past, the correct thing was to have declared this value every year in your Income Tax return ever since – it does not matter that the market value of the apartment has risen to R$ 1 million. It is declared as being worth R$ 100 thousand.
And then… When you sell it for R$ 1 million, you will pay 15% on R$ 900 thousand.
Under the new law (14,973/2024), you can update the value of the property to R$ 1 million, pay 4% on R$ 900 thousand, and that’s it. If you sell it later on for R$ 1 million, you will not pay tax on the capital gain (it is more complex than that, in fact – continue reading this text to better understand the fine print of the law).
The measure exists because it is good for the government. Instead of waiting until the moment of sale to take 15%, it earns 4% already in your 2025 return. A bird in the hand rather than two in the bush.
And the taxpayer who is after this tax benefit needs to hurry: they have until December 16 to carry out the procedure.
See how the levy of tax works without and with the application of the new tax measure on properties:
Rates without the reduction:
Individuals: From 15% to 22.5% of Income Tax, levied on the capital gain earned from the property.
Legal entities: the rates add up to 34% (depending on the taxation regime).
Rates with the reduction:
Individuals bear a rate of 4% of Income Tax;
Legal entities now have two rates: 6% of Corporate Income Tax (IRPJ) and 4% of Social Contribution on Net Profit (CSLL).
For whom is it worthwhile?
Now, the fine print of the law. If you sell your apartment within 36 months (3 years), you will have to pay the full 15% of Income Tax on the capital gain – in addition to having already paid the 4%… A terrible deal.
This is because the calculation formula provided for in the new legislation begins with a deduction of 0% for sales occurring within 3 years. Afterward, the cut in the tax on capital gain gradually increases. Only after a long 180 months (15 years) does it reach 100% – that is, the moment at which there is no longer any tax on the capital gain.
Finance
New law may reduce the income tax on the sale of a property from 15% to 4%
Just be careful with the fine print: you will only obtain 100% of the benefit if you keep the apartment for another 15 years
by Dhiego Maia
October 1, 2024
7 min
When you sell a property at a profit, you have to pay Income Tax. The tax is levied on the appreciation of the property which, in economic jargon, has a name: capital gain. It is the difference between the purchase value and the market value at the moment when the sale of the property takes place. And it starts at 15%.
But a law, approved in September, changed the rules of the game. Now, the appreciation of a property can be anticipated (without the need to sell the home) by paying a fixed rate of only 4%.
It works like this. If you paid R$ 100 thousand for your apartment in the distant past, the correct thing was to have declared this value every year in your Income Tax return ever since – it does not matter that the market value of the apartment has risen to R$ 1 million. It is declared as being worth R$ 100 thousand.
And then… When you sell it for R$ 1 million, you will pay 15% on R$ 900 thousand.
Under the new law (14,973/2024), you can update the value of the property to R$ 1 million, pay 4% on R$ 900 thousand, and that’s it. If you sell it later on for R$ 1 million, you will not pay tax on the capital gain (it is more complex than that, in fact – continue reading this text to better understand the fine print of the law).
The measure exists because it is good for the government. Instead of waiting until the moment of sale to take 15%, it earns 4% already in your 2025 return. A bird in the hand rather than two in the bush.
And the taxpayer who is after this tax benefit needs to hurry: they have until December 16 to carry out the procedure.
See how the levy of tax works without and with the application of the new tax measure on properties:
Rates without the reduction:
Individuals: From 15% to 22.5% of Income Tax, levied on the capital gain earned from the property.
Legal entities: the rates add up to 34% (depending on the taxation regime).
Rates with the reduction:
Individuals bear a rate of 4% of Income Tax;
Legal entities now have two rates: 6% of Corporate Income Tax (IRPJ) and 4% of Social Contribution on Net Profit (CSLL).
For whom is it worthwhile?
Now, the fine print of the law. If you sell your apartment within 36 months (3 years), you will have to pay the full 15% of Income Tax on the capital gain – in addition to having already paid the 4%… A terrible deal.
This is because the calculation formula provided for in the new legislation begins with a deduction of 0% for sales occurring within 3 years. Afterward, the cut in the tax on capital gain gradually increases. Only after a long 180 months (15 years) does it reach 100% – that is, the moment at which there is no longer any tax on the capital gain.
As José Luiz Ribeiro Brazuna, a tax attorney and founder of the Bratax firm, says: “The benefit will be ensured in its entirety only if the holder keeps the asset under their ownership for 15 years.”
For tax attorney Georgios Anastassiadis, partner at Gaia Silva Gaede, the measure is advantageous for those who have owned a property for a long time, registered in their Income Tax return at a low value, but which has appreciated.
“There must be an expectation of continuous appreciation of the property. If there is a risk of depreciation, anticipating the tax may be a mistake, since the taxpayer would end up paying a tax that would not need to be paid in the future,” he says.
READ MORE: Is it more worthwhile to buy or rent a property?
Anastassiadis also points out that the taxpayer needs to have liquidity (cash on hand) to carry out the transaction. “This is because the person is not selling the property at the moment, only updating the value in order to pay less tax in the future. Without a sale, there is no inflow of money from the buyer, so it is necessary to have resources available to pay the tax.”
For whom is it not worthwhile?
Taxpayers also need to compare the new legislation with the exemption provisions that already exist and know when they are going to sell the property in order to calculate whether the discounts are worthwhile.
The new measure, for example, is not worthwhile for those who sell a property and buy another within an interval of up to 180 days because, in this case, there is a tax exemption. This mechanism may be used every five years, according to Article 39 of Law 11,196/2005 and Normative Instruction 599/2005 of the Federal Revenue Service.
The exemption is also guaranteed to the owner who possesses a single property and sells it for up to R$ 440 thousand.
Inherited property
The new legislation also reaches properties undergoing asset succession processes. Each heir may update the share of the property that corresponds to them.
Tax attorney Juliana Assolari, of the Lassori Advogados firm, understands that co-owners are not required to carry out the update jointly.
“If an individual receives, for example, 50% of a property worth R$ 100 thousand and wishes to update the value to R$ 500 thousand, I understand that it is possible, even if the co-owner decides not to carry out the update,” says Assolari. “The [requirement] to obtain the benefit is that the taxpayer has declared the property in their Income Tax return.”
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