Tax reform: what taxes look like for rental properties

Tax reform: what taxes look like for rental properties

Base text provides that the incidence of tax on rented properties will depend on whether the property owner meets the criteria to obtain tax exemption

Patrick Fuentes
collaboration for CNN, São Paulo

The basic text of the tax reform provides that the incidence of tax on rented properties will depend on whether the owner of the property meets the criteria to obtain tax exemption.

A person who owns more than three rented properties with annual revenue exceeding R$240,000, or R$20,000 per month, may be taxed with Goods and Services Tax (IBS) and Contribution on Goods and Services (CBS). Otherwise, the landlord will be exempt.

On the other hand, the text makes it clear that if a person earns rental income exceeding R$288,000 per year, or R$24,000 per month, they will have to pay tax on the rent, regardless of the number of properties.

The plenary of the Chamber of Deputies approved this Tuesday (17) the tax reform regulation project. The text now goes to the sanction of President Luiz Inácio Lula da Silva (PT).

"In leasing operations there will be an impact as long as the limits of the tax reform are respected. As a rule, the tax will be borne by the person who pays the rent and collected into the public coffers by the person who owns the property", explains Marcos Correia Piqueira Maia, partner specializing in tax law at the firm Maneira Advogados.

The responsibility for collecting taxes will be the responsibility of the lessor, while the lessee will bear the tax burden, similar to the purchase of products purchased at the supermarket, for example.

In the current model, individual and legal tenants do not pay ICMS and ISS, contributions at state and municipal levels respectively. The income from these properties is paid only through Income Tax, which is levied on rental income or PIS/Cofins.

(Image: Freepik)