4/12/2022
According to the current taxation rules, those who earn income from capital gains from the sale of real estate are subject to income tax, with the application of progressive tax rates from 15% to 22.5%.
However, there some cases of exemption from this tax, as provided in Normative Instruction n. 599/2005, which establish, in its article n. 2, that the gain earned by an individual residing on Brazil on the sale of residential real estate is exempt from Income Tax, as long as the seller, within 180 days of signing the sale contract, applies the proceeds (partial or full) to the acquisition, in their name, of residential real estate located in Brazil.
On March 17, 2022, the Federal Revenue has published the Normative Instruction n. 2.070/2022, which done changes to the Normative instruction n. 599/2005, extending the exemption provided, so that it would also apply to cases in which there’s a sale of a residential property for the purpose of settling, in whole or in part, within 180 days, the remaining debt from a term or installment purchase of residential property already owned by the seller.
In other words, with the edition of Normative instruction n. 2070/2022, the Federal Revenue formally extends the list of Income Tax exemptions on gains earned on the sale of residential real estate by individuals, on order to regulate an understanding that already had precedents favorable to taxpayers in the Brazilian courts.
The measure edited by the Special Secretary of the Federal Revenue, besides bringing benefits to individuals, can boost the recovery of the real estate sector.
Our tax team is available to provide more information and guidance on these and other topics.
Coauthors: Thais Ribeiro Bernardes Casado and Guilherme Rodrigues de Matos Nascimento
