Brazilian property tax legal and legislative developments

Legal and legislative developments regarding property taxation in Brazil have emerged across different sectors.

In the rural sector, the Brazilian Economic Affairs Commission (CAE) approved a bill allowing owners of rural properties to suspend Rural Territorial Property Tax (ITR) payments if the land is totally or partially invaded and economic exploitation is prevented. To qualify, owners must provide a police report and notify the federal tax administration. Additionally, the bill proposes changes to the determination of Bare Land Value (VTN), allowing taxpayers to submit their own reports if they disagree with official tables.

In the urban sector, the Brazilian Supreme Federal Court (STF) unanimously ruled that municipalities are prohibited from setting higher Property and Territorial Urban Tax (IPTU) rates based solely on a property’s physical size or area. While the court noted that progressive rates are permitted based on value, location, or usage, it clarified that square footage is not a valid constitutional criterion for increasing the tax rate percentage. The ruling specifies that while larger properties may still result in higher tax amounts due to market value, the rate itself cannot be increased simply because a building is larger.