Law No. 14,973/2024 allows individuals and legal entities to update the value of real estate assets, as follows:
INDIVIDUALS: Update the real estate assets to market value, subject to payment of Individual Income Tax (IRPF) at a rate of 4% on the difference between the market value and the declared acquisition cost.
LEGAL ENTITIES: Update the real estate assets to market value, subject to payment of Corporate Income Tax (IRPJ) at a rate of 6%, and Social Contribution on Net Profit (CSLL) at a rate of 4% on the difference between the market value and the declared acquisition cost.
The updated value shall not be treated as a depreciation expense for tax purposes.
Both individuals and legal entities must pay the taxes within 90 days of the publication of Law 14.973/2024 – i.e., by 15/12/2024.
Federal Revenue Service will regulate Law 14,973/2024.
CAPITAL GAIN IN CASE OF A FUTURE SALE:
The longer the time between the update of the real estate value and its sale, the lower the tax on capital gains. The calculation follows this formula:
Capital gain = sale value – [CAA + (DTA x %)], where CAA is the original cost of the property, and DTA is the updated value, adjusted by a rate ranging from 8% to 100%, depending on the time elapsed since the update.
However, the tax reduction will only occur if the sale is made after 3 years from the asset’s value update. After this period, progressive rates (from 8% to 100%) will reduce the tax base, resulting in tax savings for the taxpayer.