Brazil Supreme Court expands ITBI tax immunity for real estate companies

The Brazilian Supreme Federal Court (STF) has ruled that real estate companies are exempt from paying the Property Transfer Tax (ITBI) when transferring assets to form or increase their social capital.

Under the Constitution, ITBI is generally charged on onerous transfers of real estate, such as sales. However, an exception exists for assets incorporated into a legal entity's equity. The central legal controversy was whether this immunity applies to companies whose primary business activity is the buying, selling, or leasing of real estate.

The Court ruled in favor of the real estate sector, establishing a general repercussion thesis. The decision states that ITBI immunity for capital integration is unconditional and remains valid regardless of whether the company's predominant activity is real estate, provided there is no evidence of simulation or fraud intended to illicitly obtain the immunity. Justice Edson Fachin, the rapporteur, cited the constitutional principles of free enterprise and economic order to support the decision.