The Brazilian Internal Revenue Service (Receita Federal) has introduced a set of new rules that authorize the update of property values owned by individuals and legal entities.
This measure allows properties to be adjusted according to their current market value, providing, as an incentive, the application of reduced tax rates on the difference between the original acquisition value and the adjusted value.
However, to benefit from these provisions, attention must be paid to certain requirements established in the legislation. Below, we highlight the key points:
1. Rates for Individuals: The income tax rate will be 4% on the difference in the value of properties declared in the DAA (Annual Adjustment Declaration), significantly lower than the normal rates, which range from 15% to 22.5%.
2. Rates for Legal Entities: The update of non-current asset properties in financial statements will be taxed at a rate of 6% for Corporate Income Tax (IRPJ) and 4% for Social Contribution on Net Income (CSLL), instead of the combined rate of 34%.
3. Deadline for Enrollment: Taxpayers have until December 16, 2024, to opt for the update of their property values under the new legislation.
4. Mandatory Declaration: It is necessary to submit the Dabim (Declaration of Option for the Update of Property Assets), which is already available in the e-CAC.
5. Properties Abroad: Properties located abroad can also be updated, including those already adjusted through the Declaration of Option for the Update of Assets and Rights Abroad (Abex). Additionally, properties of controlled entities outside the country and trust assets can be updated, provided that the responsibility for the declaration lies with the individual taxpayer.
Taxpayers should be aware that if the property is sold before 15 years, the capital gain calculation will be adjusted in proportion to the time that has passed since the update. In this scenario, there will be no tax exemption for sales made in the first 36 months. Taxation will be progressively reduced over time, reaching full exemption only after 180 months from the date of update.
