How Brazil’s Tax Reform Affects Rental Income and Property Sales for Expats
- Clivanir Cassiano de Oliveira
- Jan 19
- 5 min read
Brazil’s tax reform has introduced important changes for anyone who rents out or sells property in Brazil. If you are a property owner, investor, or foreigner with real estate assets in Brazil, this article explains — in a simple and practical way — how property taxation worked before the reform and how it will work starting in 2026, with a focus on rental income, property sales, and asset planning.
The goal is simple: to help anyone, even without a legal background, understand whether they may be affected by the new taxes.
1. How Property Taxation Worked Before the Tax Reform
Before the reform, taxation depended on who owned the property and how the activity was structured.
Sale of Property by an Individual (Private Owner)
An individual selling real estate paid Capital Gains Income Tax, calculated on the difference between the purchase price and the sale price, unless a legal exemption applied.
According to the Brazilian Federal Revenue progressive rates:
15% up to BRL 5 million
17.5% from BRL 5 to 10 million
20% from BRL 10 to 30 million
22.5% above BRL 30 million
In addition, the buyer pays ITBI, a municipal real estate transfer tax.
Sale of Property by a Legal Entity (Company)
Taxation depended on:
the type of entity (real estate holding company, operating company, trust-like structure, etc.); and
the tax regime chosen.
Presumed Profit Regime: The effective tax burden could reach around 6.73% of gross revenue, especially when sales exceeded BRL 750,000 per quarter.
Actual Profit Regime: Taxes were based on real profit, requiring more complex accounting and compliance.
Rental Income Received by an Individual
Rental income was subject to Personal Income Tax, with:
monthly calculation;
mandatory use of Carnê-Leão;
progressive rates that could reach 27.5%, depending on the amount received.
Rental Income Through a Company
The company paid several taxes, including:
Corporate Income Tax (IRPJ)
Social Contribution on Net Profit (CSLL)
PIS
COFINS
In many cases, the total burden ranged from 11% to 14%, depending on the structure. For this reason, many investors chose a real estate holding company, as it helped to:
organize assets;
facilitate inheritance planning;
and, in practice, reduce taxes compared to individual ownership (always with case-by-case analysis).
2. What Changes With Brazil’s Tax Reform?
Brazil is introducing a new VAT system, composed mainly of:
Before the Reform | After the Reform |
ICMS | IBS (state and municipal) |
ISS | |
IPI* | CBS (federal) |
PIS | |
COFINS |
Not every rental or property sale will be subject to IBS and CBS. The law sets objective criteria to determine who enters the new system.
3. Rental Income After the Reform:
When Does an Individual Become Subject to IBS and CBS?
There are two legal paths to determine whether an individual landlord becomes a taxpayer under the new VAT.
First Path: Analysis Based on the Previous Year
(Objective rule – Article 251, §1º, I of Complementary Law No. 214)
An individual landlord will be considered a taxpayer only if both conditions are met in the previous calendar year:
✔ Annual gross rental income above BRL 240,000 (about BRL 20,000 per month); and✔ Rental of more than three distinct properties.
If both criteria are met, taxation applies. The BRL 240,000 threshold will be updated by inflation (IPCA), as provided by law.
Second Path: Analysis During the Current Year
(Legal gray area – Article 251, §2º, II)
The reform also allows classification during the same calendar year, even if the thresholds were not exceeded in the previous year.
If rental income in the current year exceeds the BRL 240,000 limit by 20%, taxation may apply. ➡ This means BRL 288,000 per year.
Where Does the “BRL 24,000 per Month” Idea Come From?
Many articles online, especially from accounting sources, refer to BRL 24,000 per month plus more than three properties as a risk indicator. This comes from dividing BRL 288,000 by 12 months. However, from a legal perspective, it is essential to clarify:
The law does not establish a monthly limit of BRL 24,000.
The law does not clearly state whether the “more than three properties” rule applies again in this second path.
The legal text refers only to exceeding the annual limit, without explaining whether the analysis should be:
monthly,
cumulative,
per contract, or
based on a single payment event.
This creates room for interpretation and likely future disputes. Two interpretations are possible:
Taxpayer-friendly view: the “more than three properties” requirement remains implicit.
Government-friendly view: since the law did not repeat this requirement, it should not be added by interpretation.
This drafting choice is not neutral and will likely generate audits and court discussions. Future government regulations may clarify the Legislature’s intent on this issue, but administrative rules or judicial decisions may also challenge or destabilize the current interpretation of the law.
4. Property Sales After the Reform:
When Will IBS and CBS Apply?
The sale of real estate or assignment of property rights will only be taxed under the new VAT if all conditions below are met (Article 251, §1º, II):
Sale of more than three distinct properties in the previous calendar year;
The properties must have been held for at least five years;
In inheritance or donation cases, the previous owner’s holding period is considered;
Sale of more than one property built by the seller in the last five years.
In practice, the law targets activities similar to a business operation, not the typical individual owner.
5. Why Tax Planning Becomes Essential
With the reform, property owners will face:
monthly tax reporting;
automated tax calculations;
increased data cross-checking by tax authorities.
As a result, deciding:
whether to keep assets as an individual;
whether to use a company;
or whether structures such as a real estate holding or trust-like arrangement still make sense
becomes a legal and strategic decision, not merely an accounting one.
6. When Do These Rules Take Effect?
2026: testing and transition phase
Until 2033: full implementation of the new system
This makes now the ideal time to review structures, assess risks, and avoid future tax surprises.
Conclusion
Brazil’s tax reform does not aim to tax the small property owner, but it significantly changes the landscape for those who:
own multiple properties;
earn high rental income;
or sell real estate frequently.
Each case requires individual analysis — especially for expats in Brazil, who often combine Brazilian tax rules with those of their country of residence.
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If this content helped you understand tax residency rules in Brazil, feel free to share this article with other people who live, work or invest in Brazil.
Contact: taxforexpats@gmail.com
LinkedIn: advogadaclivanircassiano
This article is for informational purposes only and does not replace personalized legal advice. Each case must be analyzed individually based on the person’s country of residence and type of income. Reproduction or distribution of this article, in whole or in part, is permitted only with proper credit to the author. This material must mention Clivanir Cassiano de Oliveira, OAB nº 34.395B, as the original author.
Legal basis:
Complementary Law No. 214/2025 – Article 251
Official text: https://www.planalto.gov.br/ccivil_03/leis/lcp/lcp
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