Federal Revenue extends income tax exemption on property sales

Those who sell a property now have one more alternative to be exempt from Income Tax (IR) on what they profited from the business.

Without fanfare, the Internal Revenue Service published a rule that authorizes tax exemption for those who use the proceeds from this sale to pay off, in whole or in part, previously contracted real estate financing.

To be entitled to the benefit, the discharge must be made within six months after the sale of the first property.

As a rule, those who sell a property pay a rate of 15% to 22% on the capital gain, that is, the difference between what they paid and how much they received for the sale of the house or apartment.

In 2005, to stimulate civil construction and the real estate sector, the government exempted from income tax on capital gains anyone who used the money, within six months, to buy a new property.

The IRS, however, required that the new contract be signed only after the sale of the first property to grant the benefit.

This led many taxpayers to seek justice to not pay the tax in the discharge of a property previously financed – requests that were being answered by judges.

“Most people, when they sell a property, are to buy another one to live in. Hardly anyone sells their house before buying another one, because they don’t want to be left without a place to live”, explains lawyer Luca Salvioni, partner in the tax area at Cascione Advogados.

In addition to benefiting individuals, the change can help to heat up the real estate market. The president of the Brazilian Chamber of Construction Industry (CBIC), José Carlos Martins, said that the measure is “extremely positive” and tends to help boost the sector’s recovery.

“The government opens up the possibility to use the capital gain in other ways.”

On the other hand, he is concerned about the mismatch between the purchasing capacity of families and the sale price of real estate, given that the sector’s inflation was higher than general inflation.

The Brazilian Association of Real Estate Developers (Abrainc) says that the measure is beneficial to taxpayers, “as it presents another possibility of exemption from capital gain in the sale of real estate”.

“However, it would also be necessary to adopt more measures in favor of the taxpayer who buys real estate, one of them would be the possibility of using the financing interest in the IRPF deduction.”

Sought, the Revenue says that the “recognition of the exemption was based on pacified jurisprudence of the Superior Court of Justice (STJ)”.

The information is from the newspaper. The State of São Paulo.