The Brazilian Tax Reform represents one of the biggest changes to the country’s tax system in recent decades. With the creation of the IBS (Tax on Goods and Services) and the CBS (Contribution on Goods and Services), the current system will be gradually replaced by a new consumption-based taxation model.

For the real estate market, the change deserves special attention. The legislation established a specific regime for transactions involving properties, with its own rules for buying and selling, leasing, real estate development, subdivision projects, construction, and brokerage and property management services.

But after all, how will Tax Reform affect the real estate market?

What is Tax Reform?

Tax Reform aims to simplify and reorganize consumption taxation in Brazil.

Among the main changes is the gradual replacement of current taxes with a system based on the VAT — Value Added Tax model.

The main new taxes are:

• CBS — Contribution on Goods and Services, under federal jurisdiction;

• IBS — Tax on Goods and Services, jointly administered by States, Municipalities, and the Federal District;

• Selective Tax (IS), applied to certain goods and services.

The transition to the new system will be gradual and is scheduled to take place between 2026 and 2033.

Tax Reform: what changes for the real estate market?

The real estate market under Tax Reform will have specific treatment.

This is because properties have different economic characteristics from other assets and because a single transaction may involve several stages, such as land acquisition, construction, development, financing, sale, and the provision of real estate services.

For this reason, the legislation established specific rules for the sector.

Among the main points are:

• reduced rates for certain real estate transactions;

• specific rules for property leasing;

• differentiated treatment for real estate development;

• rules for subdivision projects;

• reductions applicable to certain transactions;

• changes in the taxation of real estate services;

• new tax and electronic filing obligations.

IBS and CBS: how will property taxation work?

One of the main points of Tax Reform and real estate is the creation of IBS and CBS.

The real estate sector will have specific reductions compared with the standard rate.

For certain real estate transactions, a 50% reduction in IBS and CBS rates is предусмотрed.

For leasing, paid assignment, and property leasing agreements, the expected reduction is 70%.

This means it is not correct to simply apply the future general VAT rate to all real estate transactions.

The sector has a specific regime, with its own calculation mechanisms.

Tax Reform and property rental

Tax Reform on rental income is one of the issues that raises the most questions among property owners and investors.

The new legislation establishes criteria to determine when an individual who carries out real estate transactions may be classified as a taxpayer of IBS and CBS.

In the case of leasing, the criteria set out include annual revenue and the number of properties involved in the transactions.

This means that not every property owner who receives rent will automatically be treated in the same way as a company in the real estate sector.

Tax classification depends on the characteristics of the activity and the criteria established by law.

For investors who own multiple properties intended to generate income, keeping track of these rules will be especially important.

Individual or corporate ownership: what changes for the real estate investor?

Tax Reform also increases the importance of real estate tax planning.

Investors with a significant property portfolio may need to assess more carefully the structure used to manage their assets.

Points that should be analyzed include:

• number of properties;

• annual rental income;

• property purchases and sales;

• maintenance costs;

• property management;

• taxation;

• asset structure;

• estate planning;

• individual or corporate ownership.

It is important to note that there is no single structure that is best for all investors.

The choice between holding properties as an individual or through a legal entity should take into account each case’s asset and tax situation.

Tax Reform for developers and builders

Developers and builders are among the companies that will need to follow the changes most closely.

The legislation established specific rules for:

• real estate development;

• construction;

• unit sales;

• land subdivision;

• land acquisition;

• tax calculation;

• tax credits;

• reductions.

One relevant mechanism is the so-called adjustment reduction, which may take into account certain values related to property acquisition.

There is also the social reduction, provided for in certain real estate transactions.

In practice, the tax analysis of a project will need to consider much more than just the tax rate.

Will Tax Reform increase property prices?

This is one of the main questions about the impacts of Tax Reform on the real estate market.

It is not possible to say that all properties will become more expensive or cheaper because of the reform.

The impact may vary according to:

• property type;

• location;

• land price;

• construction cost;

• company tax regime;

• tax credits;

• developer margin;

• supply and demand;

• buyer profile;

• ability to pass on costs.

For this reason, each project must be analyzed individually.

In some cases, tax changes may increase certain costs. In others, credits and reduction mechanisms provided by law may offset part of this effect.

And what about resale properties?

The used property market also deserves attention, but its treatment should not be confused with that of large real estate developments.

An occasional sale made by an individual has different characteristics from a company that regularly buys and sells properties.

The number of transactions, the nature of the activity, the acquisition history, and the characteristics of the assets may influence the tax treatment.

Therefore, owner and buyer should analyze the transaction as a whole before concluding that a specific tax impact will apply.

Tax Reform and real estate agents

Tax Reform will also affect real estate agents and agencies.

The legislation includes property management and brokerage services in the new system.

For agents operating as legal entities, some points become especially important:

• proper issuance of invoices;

• accounting organization;

• taxation of commissions;

• service agreements;

• business expenses;

• tax credits;

• adopted tax regime.

For real estate agencies, the need to adapt systems and processes tends to be even greater.

Agents do not need to become accountants or tax specialists, but understanding the basic concepts of the reform can improve the quality of the guidance offered to clients.

The importance of invoicing in the new scenario

Digitalization is another important aspect of Tax Reform in the real estate sector.

With the implementation of the new system, companies will need to adapt their invoicing systems and internal processes.

The use of specific electronic tax documents for real estate transactions will also be part of this transformation.

For real estate agencies, property managers, developers, and other companies in the sector, this means that tax organization will become even more important.

The Brazilian Real Estate Registry (CIB)

Another important topic for the Brazilian real estate market is the Brazilian Real Estate Registry (CIB).

The CIB aims to establish a national identifier for properties and expand the integration of territorial and tax information.

This process is linked to the Sinter — National Territorial Information Management System.

The trend is toward greater integration among information:

• tax;

• registry;

• territorial;

• title;

• real estate.

For property owners and real estate professionals, this reinforces the importance of keeping property data up to date and consistent.

Tax Reform and premium properties

The premium and luxury property segment may also feel the effects of the reform.

This market has particular characteristics, such as:

• high transaction value;

• greater investor participation;

• more complex asset transactions;

• higher added value;

• differentiated acquisition structures.

For this reason, tax issues may become more important in decision-making.

In a high-value transaction, small differences in the structure of the deal can represent significant amounts.

For this reason, buyers, sellers, and investors should consider not only the property price, but also the costs and tax structure involved in the transaction.

What changes for those who invest in rental properties?

For those who use properties as a source of income, the reform makes it even more important to calculate the net return on real estate investment.

It is not enough to look only at the rental amount.

It is necessary to consider:

Gross rent − vacancy − condo fees − maintenance − management − taxes = net income.

In addition, the investor should consider the number of properties and the income earned, as these factors may be relevant for tax classification.

The analysis of real estate investment therefore tends to become more sophisticated.

The real estate agent as an advisor

The tax change may also represent an opportunity for real estate professionals.

A client buying a high-value property, investing in income-producing properties, or selling a significant asset may need to understand much more than location and price.

The agent can add value to the service by understanding concepts such as:

• real estate taxation;

• rental income;

• acquisition costs;

• asset planning;

• documentation;

• deal structure;

• differences between individual and corporate ownership.

The goal is not to replace the accountant or lawyer, but to know when the client needs specialized advice.

What should owners and investors do?

Tax Reform is still in the transition phase. For this reason, now is the time to prepare.

Some measures can help owners, investors, and companies:

1. Organize property documentation

Keep contracts, deeds, records, and acquisition receipts organized.

2. Check registry data

Address, deed/registry number, owner, and other information must be consistent.

3. Follow the CIB

The Brazilian Real Estate Registry will play an increasingly important role in integrating information.

4. Review contracts

Lease, management, and brokerage agreements may need to be adjusted.

5. Assess the asset structure

Investors with multiple properties may need to compare the consequences of holding assets as an individual or through a legal entity.

6. Simulate scenarios

Before buying, selling, or launching a project, it is important to analyze the specific tax impact of the transaction.

7. Follow the new regulations

The transition to the new system will be gradual and will continue to require monitoring of supplementary rules.

What can the real estate market expect until 2033?

The Tax Reform transition will happen gradually.

This means the real estate market will have several years to adapt processes, contracts, systems, corporate structures, and business models.

By 2033, professionals in the sector will need to keep up with a series of changes.

For the real estate market, the main topics will be:

IBS + CBS + leasing + development + construction + investments + documentation + CIB + tax planning.

The final impact will not be the same for all market participants.

Each real estate transaction has its own characteristics and should be analyzed individually.

Conclusion

Tax Reform and the real estate market will become increasingly connected in the coming years.

The changes affect owners, investors, developers, builders, real estate agencies, property managers, and real estate agents.

Among the main points are the creation of IBS and CBS, the specific regime for real estate transactions, rate reductions, new leasing rules, reduction mechanisms, the digitalization of tax obligations, and the implementation of the Brazilian Real Estate Registry.

Rather than simply tracking new rates, it will be necessary to understand how the reform affects each type of real estate transaction.

For professionals in the sector, basic tax knowledge may become an important competitive advantage.

For investors, planning and analyzing net return will become increasingly important.

And for buyers, understanding the costs involved in the transaction can help them make more informed decisions.

Tax Reform is not just a change in how taxes are collected. It may gradually transform the way the real estate market structures, prices, and manages its transactions.