Brazilian Supreme Court Recognises ITBI Tax Exemption on Property Contributions to the Share Capital of Real Estate Companies: Implications for Wealth and Succession Planning

On 19 October, Brazil’s Supreme Federal Court (STF) ruled that contributions of real estate to a company’s share capital are exempt from Real Estate Transfer Tax (ITBI), regardless of the company’s business activities. Adopted by a majority in the judgment of Theme 1,348 under the general repercussion system, the ruling also applies to asset-holding companies, property rental companies, real estate developers and special purpose entities (SPEs).

The exemption remains limited to the amount allocated to share capital, as previously established under Theme 796, and does not extend to transactions in which the municipality can demonstrate fraud or sham arrangements.

From Ruling to Practice

The legal precedent established by the STF must be followed by the courts, although its administrative implementation may require municipalities to adjust their procedures. Many local laws reproduce Article 37 of the Brazilian National Tax Code (CTN), which extends the predominant business activity test to capital contributions. Amendments to these laws are not required for the exemption to apply, although administrative adjustments may take time.

If a municipality continues to levy ITBI on the grounds of a company’s real estate activities, it may be necessary to seek judicial relief through a writ of mandamus (mandado de segurança) to secure recognition of the exemption.

What to Consider in 2026

The ruling comes amid significant changes to Brazil’s Inheritance and Gift Tax (ITCMD). Constitutional Amendment No. 132/2023 introduced mandatory progressive taxation, subject to the maximum rate of 8% established by the Federal Senate. Complementary Law No. 227/2026, in turn, established new general rules for the tax, including the valuation of shares in privately held companies at no less than their adjusted net asset value, reflecting the market value of assets and liabilities, plus the market value of goodwill.

The impact of these ITCMD changes will depend on each state’s legislation and, where tax increases are introduced, compliance with the annual and 90-day waiting periods before they take effect. Depending on the implementation timetable in each state, there may be opportunities to make gifts before more onerous rules become applicable.

Against this backdrop, the ITBI exemption, which may reduce the cost of implementing these structures, reinforces the importance of assessing or revisiting wealth and succession planning arrangements during 2026, taking into account the specific circumstances of each case.

For Those Who Have Already Paid the Tax

Taxpayers who have paid ITBI on property contributions covered by the STF’s ruling may, in principle, seek a refund, generally subject to a five-year limitation period calculated from the date of each payment.

The scope of this right may be affected by any prospective limitation of the ruling’s effects. Any exceptions for ongoing proceedings will depend on the relevant cut-off date and conditions that the Court may establish. It is therefore advisable to assess, without delay, whether the transaction falls within the scope of the exemption, the applicable deadlines and the most appropriate strategy for recovering amounts paid.

BVA continues to monitor developments closely and remains available to assist with the assessment of wealth and succession planning structures, securing recognition of the ITBI exemption before municipal authorities and the courts, and evaluating potential tax refund claims.