Brazil's Supreme Court majority favors ITBI immunity for real estate firms

The Brazilian Supreme Federal Court (STF) has established a provisional majority of five votes to grant immunity from the Real Estate Transfer Tax (ITBI) for real estate companies during the process of capital social integralization.

Relator Edson Fachin argued that constitutional restrictions regarding predominant real estate activities should only apply to mergers, incorporations, spin-offs, or corporate extinctions, rather than the initial formation of capital. He was supported by ministers André Mendonça, Nunes Marques, Luiz Fux, and Cristiano Zanin. Zanin suggested that tax collection should be preserved if municipalities can prove fraud or simulation in the transaction.

Conversely, ministers Gilmar Mendes and Flávio Dino dissented. Dino argued that the Constitution allows for taxation of companies primarily engaged in buying, selling, or leasing property, noting that expanding immunity could reduce municipal revenues and pressure local governments to increase other taxes like IPTU and ISS.

The judgment, which carries general repercussion (Theme 348), was suspended on Wednesday following a request for review by Minister Alexandre de Moraes.