Taxation under the RET until the sale of all real estate units

Law No. 13,970, published in a special edition of the Official Gazette of the Union (DOU) this past December 27, provides that taxation under the RET (Special Taxation Regime), applicable to real estate developments, will be applied until the full receipt of the value of the sales of all real estate units. Without depending on the date of sale.

Bearing in mind that the RET is the tax regime under which the real estate developers subject to it are bound, with respect to the affected development, to taxation of their monthly revenue through the application of a rate equivalent to 1% for development projects of low-income social housing (Minha Casa, Minha Vida) and 4% for other ventures, which comprises the unified payment of IRPJ, CSLL, PIS/Pasep and COFINS.

The original proposal, authored by Congressman Marcelo Ramos (PL-AM), was vetoed by President Jair Bolsonaro, but the National Congress overturned the veto this past December 17.

Taxation under the RET

This special taxation regime corresponds to a reduced rate (1% to 4%) that brings together four federal taxes (Cofins, PIS/Pasep, Corporate Income Tax and CSLL) and may be enjoyed by real estate developers under the mechanism of asset segregation.

With the mechanism, the land, the construction and the other assets and rights linked to it will be kept separate from the developer’s estate, preventing their use in the liquidation of the company if it goes bankrupt.

Law 10,931/04 permitted the payment of the unified tax of 1% for development projects of low-income social housing (low income) until December 31, 2018, provided that the construction of the projects began as of March 31, 2009.

Rate

The project maintains the rate of 1% for after that date, which will serve as a limit only for the registration of the development at the competent real estate registry or the signing of the construction contract. Thus, projects that had not yet gotten off the ground by the end of last year, but had been registered at the registry, may rely on the benefit as of the conversion of the project into law.

For all participants of the special taxation regime, which applies not only to real estate directed at low-income families but also to developments with asset segregation, the project provides for the validity of this unified collection of federal taxes until the full receipt of the sales of all units of the development, regardless of the date of their sale.

Real estate of up to R$ 100 thousand

In the specific case of real estate under the Minha Casa, Minha Vida program with a value of up to R$ 100 thousand, the law allows the construction company to pay the taxes involved at a rate of 1% until the full settlement of the property’s price.

Currently, Law 12,024/09 provides for the use of this lower rate until December 31, 2018.

Future works

For new works, as of January 1, 2019, the text provides for the rate of 4% (maximum) for a construction company that has been contracted or has works started, within the scope of Minha Casa, Minha Vida, of a value up to R$ 124 thousand.

The rate will apply to the monthly revenue earned under the construction contract, defined as the revenue obtained from the sale of the real estate units and the financial revenues and monetary variations arising from this operation.