Tax reform has aroused great interest in the real estate development sector, as changes in the form of taxation can have significant impacts on this segment. In this article, we analyze the main changes suggested in the regulation of the reform that is being processed in the National Congress.
After years of debates, the consumption tax reform was approved in December 2023, with the enactment of Constitutional Amendment 132/23.
With the promise of simplifying and bringing transparency to the national tax system, the reform provides for the extinction of five taxes – ICMS, ISS, IPI, PIS and Cofins – which will be replaced by three new ones: the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS) – known as VAT-Dual (Value Added Tax) – and the Selective Tax (IS).
It will be up to the Union to collect the CBS and IS, replacing the contribution to PIS, Cofins and IPI. The competence for the collection of the IBS was assigned in a shared manner to the states, the Federal District and municipalities, replacing the ICMS and ISS, respectively.
The implementation of the tax reform will follow a gradual process, as established by the transition regime of Constitutional Amendment 132/23. This means that the introduction of the CBS and IBS will occur as the incidence of other taxes is reduced.
The regulation of the new taxes was the responsibility of a federal complementary law, which must be approved by the National Congress in a segmented manner, divided into more than one bill. The main one is the Complementary Bill 68/24 (PLP 68/24), responsible for establishing the CBS and the IBS.
PLP 68/24 was approved in the Chamber of Deputies, where it received more precise definitions. It is currently in progress in the Federal Senate. The President of the Republic had requested that the bill be processed as a matter of urgency, but withdrew the request on October 4.
The expectation is that PLP 68/24 will be voted on in the Senate later this year. The justification for the long schedule is the need for time for the text to be widely debated with all sectors of society. Public hearings have already been held in the Economic Affairs Commission (CAE) of the Federal Senate, in which representatives of various sectors were heard. The purpose of these hearings was to present the claims to the senators, so that they could be added to the bill through parliamentary amendments.
On October 29, the CAE presented the report of the public hearings held. For real estate developments, it is suggested to increase the reduction of the CBS and IBS rates from 40% to 60% and to adopt a specific regime transition rule for the real estate sector. The suggestions contained in the CAE report will be forwarded to the Constitution and Justice Commission (CCJ).
Main changes for the real estate development segment
Since 2004, real estate developments have been subject to the possibility of joining the Special Taxation Regime (RET), established by Law 10,931/04 and regulated by Normative Instruction RFB 2,179/24.
According to this legislation, developers would be subject to a rate of 4% on the monthly revenue received, which corresponds to the unified payment of IRPJ, CSLL, PIS and Cofins. This percentage of 4% considered 1.26% of IRPJ, 0.66% of CSLL, 0.37% of PIS and 1.71% of Cofins.
For the incorporation or construction of residential properties of social interest under the Minha Casa Minha Vida Program, whose gross family income falls within the Urban Range 1 (up to R$ 2,640), the unified rate provided for the RET fell to 1%.
With the tax reform and the extinction of the contribution to PIS and Cofins, much is questioned about the need to maintain the RET. As a consequence of the extinction of the contribution to PIS and Cofins, PLP 68/24 provided for changes in the RET legislation.[1] The changes exclude the reference to PIS and Cofins and maintains the regime only for IRPJ and CSLL.
The RET will no longer correspond to a rate of 4% referring to the contribution to PIS and Cofins, IRPJ and CSLL. It will have a rate of 1.92% – 1.26% corresponding to IRPJ and 0.66% corresponding to CSLL. For properties of social interest, the single rate will be reduced to 0.47%.
This change in the RET, as provided for in PLP 68/24, will take effect as of January 1, 2027, the date on which the PIS and Cofins contribution is expected to be extinguished.
In other words, the RET will remain in force, however, it will only correspond to the unified payment of IRPJ and CSLL. The provision on the contribution to PIS and Cofins was removed, since these taxes will be replaced by CBS and IBS, regulated by PLP 68/24, which provides, in its Chapter V, a specific regime for real estate.
Both the CBS and the IBS will be levied on the value of the sale of real estate, including those resulting from real estate development and land subdivision. The calculation basis for these taxes will be the value of the real estate disposal operation, with adjustment reducers, provided for in articles 251 to 253, and social reducers, provided for in articles 254 and 255.
In relation to the applicable rate, due to the provision of a specific regime, a reduction of 40% was established in relation to the modal rate – the one that will be applied to all other activities not included in specific or differentiated regimes.
The modal rate has not yet been defined. It will be calculated as the old taxes are replaced by the new ones, during the transition regime of the tax reform. However, based on studies presented by the Ministry of Finance, it is estimated that the modal rate should vary around 26.5% (adding the CBS and IBS rates).
Thus, when considering a modal rate of 26.5% and applying the 40% reduction resulting from the provision of the specific regime, the rate for real estate development operations would be around 15.9%.
According to the text approved by the Chamber of Deputies, PLP 68/24 also establishes that the payment of CBS and IBS will be due on each payment of the real estate unit, and credits related to IBS and CBS paid on the acquisition of goods and services used may be appropriated.
In the RET, the tax rates were applied in a unified manner on the monthly revenue, corresponding to the total revenues received by the developer from the sale of real estate units that make up each development submitted to the RET, as well as the financial revenues and monetary variations resulting from this operation. With the tax reform, the new taxes will be levied on each payment of the real estate unit.
Another important change is the possibility of appropriating credits from CBS and IBS. In other words, developers will be able to offset the credits appropriated in the production chain with the taking of services and acquisition of goods with the debts levied on their operations.
In addition, a point that draws attention is that there is no specific regime for incorporations intended for social programs, such as Minha Casa Minha Vida. These incorporations will be even more impacted by the tax reform.
It is undeniable that the reform will bring significant changes to the real estate development segment, directly impacting the operations and tax burden not only of developers, but also of real estate itself.
It brings challenges and opportunities arising from changes in applicable taxes. With the replacement of the RET by the new specific regime, companies in the sector will face a scenario of strategic adaptation and must remain attentive to regulations. Thorough analysis of the proposed changes and the implementation of appropriate strategies will be essential for companies in the sector to adapt and thrive in the face of tax changes.
Machado Meyer is closely following these changes and will be able to help developers understand and adapt to the implications of the reform.
[1] Article 483. Law 10.931, of August 2, 2004, comes into force with the following amendments: [...]
